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Hitachi Global Storage Technologies Holdings Pte. Ltd. ("HGST") Acquisition
On March 8, 2012 (the "Closing Date"), we, through Western Digital Ireland ("WDI"), our indirect wholly-
owned subsidiary, completed the acquisition (the "Acquisition") of all the issued and outstanding paid-up share capi-
tal of Viviti Technologies Ltd., known until shortly before the Acquisition as HGST, from Hitachi, Ltd. ("Hitachi"),
pursuant to a Stock Purchase Agreement, dated March 7, 2011, among us, WDI, Hitachi and HGST. The Acquisition
is intended over time, and subject to compliance with the regulatory conditions discussed below under "Maintenance
of Competitive Requirement," to result in a more efficient and innovative customer-focused storage company. We do
not expect to achieve significant operating expense synergies while the regulatory conditions are in effect.
The aggregate purchase price of the Acquisition amounted to approximately $4.7 billion. The purchase price
consideration originally included preliminary estimates of the working capital assets acquired and liabilities assumed.
Based on a final post-closing adjustment, the cash portion of the purchase price decreased by a net $27 million as a
result of $37 million we received during 2013 for a post-closing adjustment related to changes in the working capital
of HGST, partially offset by $10 million we paid during 2013 for a post-closing assumed pension adjustment. The
purchase price was finalized prior to March 8, 2013, which was the final date of the 12 month measurement period
following the date of the Acquisition.
Toshiba Transactions
In connection with the regulatory approval process of the Acquisition, we announced on May 15, 2012 that we
had closed a transaction with Toshiba Corporation ("Toshiba") to divest certain 3.5-inch hard drive assets and to pur-
chase Toshiba Storage Device (Thailand) Company Limited ("TSDT"), a wholly owned subsidiary of Toshiba that
manufactured hard drives prior to the Thailand flooding. The net impact of these two transactions was immaterial to
our consolidated financial statements. In August 2013, we received a $45 million insurance recovery related to facili-
ties acquired in connection with the acquisition of TSDT.
Maintenance of Competitive Requirement
In connection with the regulatory approval process of the Acquisition, we agreed to certain conditions required
by the Ministry of Commerce of the People's Republic of China ("MOFCOM"), including adopting measures to main-
tain HGST as an independent competitor until MOFCOM agrees otherwise (with the minimum period being two
years from the Closing Date). We worked closely with MOFCOM to finalize an operations plan that outlines in more
detail the conditions of the competitive requirement.
Pending Acquisition of sTec
On June 24, 2013, we entered into a definitive merger agreement under which sTec will be acquired by HGST.
The aggregate purchase price is estimated to be approximately $340 million in cash. This represents approximately
$207 million in enterprise value, net of sTec's cash as of March 31, 2013. The pending acquisition when completed
will augment HGST's existing solid-state storage capabilities, accelerating its ability to expand its participation in the
rapidly growing area of enterprise SSDs. The pending acquisition, which is subject to closing customary conditions, is
expected to be completed in the third or fourth calendar quarter of 2013.
Results of Operations
Fiscal 2013 Overview
In accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), operating
results for HGST, which was acquired on March 8, 2012, are included in our operating results only after the date of
its acquisition.
In 2013, our net revenue increased by 23% to $15.4 billion on hard drive shipments of 242 million units as
compared to $12.5 billion and 202 million units in 2012. In 2013, 50% of our net revenue was derived from non-PC
(personal computer) markets, which include enterprise applications, branded products and CE products, as compared