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PART I
Item 1.
Business
General
We are an industry-leading developer and manufacturer of storage solutions that enable people to create, man-
age, experience and preserve digital content. We design and make storage devices and home entertainment products
under the HGST, WD and G-Technology brands. Our principal products today are hard drives that use one or more
rotating magnetic disks ("magnetic media") to store and allow fast access to data. Hard drives are today's primary
storage medium for digital content. Over the last 10 years, we have achieved consistent profitable growth, with rev-
enues up 19% and earnings per share up 16% on a compounded annual growth rate basis.
We believe we are well positioned to capitalize on an important long-term secular growth trend -- the ongoing
expansion in digital data -- which is linked directly to consumers' and commercial enterprises' increasingly ubiq-
uitous experience with digital data. We believe this growth will continue with total exabytes ("EB") shipped growing
from 600 EB in calendar 2012 to at least 5,900 EB by calendar 2020, representing a 34% compounded annual growth
rate. We believe EB growth is the most relevant measure of the growth potential for the industry and our company.
The growth in the global market for digital data storage solutions is being driven by several factors including:
Proliferation of data. The proliferation of consumer electronics, computing devices, social media and cloud-
related infrastructure is driving rapid growth in the creation, sharing and retention of high definition video,
high resolution images, e-mail and big data files.
Evolution in data access and distribution. Increasing demand for data access and distribution anytime and any-
where, facilitated by rapidly improving network accessibility and higher bandwidth, is powering a dramatic
increase in the need for data storage at both the local level and in the off-site, network-accessed or "cloud" lev-
el.
Advancements in storage devices. Technological improvements in the capacity, size, performance, connectivity
and power requirements of storage devices continue to meet the demand for higher density and higher
performance storage in increasingly diverse applications.
Rapid growth in consumers' use of mobile computing and storage and use of digital content in the home.
Adoption of tiered storage architectures. With the significant increase in data storage demand, enterprises and
Internet cloud providers have adopted tiered storage architectures to improve storage performance and manage
the costs of this growth. Tiered storage architecture optimizes data storage to the most appropriate storage
device, driving increasing demand for high capacity and high performance hard drives, as well as flash-based
solid-state storage. Client PC providers are also adopting tiered storage with the deployment of dual drive
configurations and solid-state hybrid drives.
We are a market and customer driven company, focused on growth, innovation and value creation for our custom-
ers, employees and shareholders. We develop deep and collaborative relationships with customers, an approach that is
being manifested in our role as a trusted advisor and market maker in all served markets. We believe this approach is
one of the key factors that will help us continue to achieve strong business performance. We believe our platform is
powerful, with growth drivers and unique competitive advantages that will continue to provide us the opportunity to
expand our value-creation model within an evolving and growing storage market.
We operate our global business through two independent subsidiaries due to regulatory requirements -- HGST
and WD, both long-time innovators in the storage industry. As of June 28, 2013, we had approximately 9,200
engineers and one of the industry's largest patent portfolios with more than 6,000 active patents worldwide.
Our headquarters are located in Irvine, California. WDC was founded in 1970 as a specialized semiconductor
manufacturer and since entering the storage industry in 1988, its WD subsidiary has been a technology standard-
setter in the industry's highest volume markets. HGST, known as Hitachi Global Storage Technologies Holdings Pte.
Ltd. until shortly before its acquisition by WDC ("the Acquisition") in March 2012, was founded in 2003 through
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