Western Digital: Expanding Capacity

Rapidly expanding need for data storage driving profitability, vertical integration at tech manufacturer.

Western Digital Corporation, a Lake Forest, Calif.-based computer storage industry pioneer and IW50 Best Manufacturing Company is dedicated to providing business professionals and consumers with continually-shrinking products to reliably store their ever-increasing personal and/or professional data set.

Storage media is a profitable sector to be in these days of Sarbanes-Oxley and digital snapshots, and Western Digital (WD) is taking full advantage of both the expansion of its product capacity and the market for it. According to the company's July 26 year-end statement, WD's results for the fiscal year reflected strong year-over-year performance, with revenue of $5.5 billion and operating income of $415 million. Net income was $585 million, or $2.59 per share, compared to $395 million, or $1.76 per share for the prior year.

These results represented increases in revenue of 26% over the prior year's $4.3 billion and unit shipment growth of 32% from 73.3 million to 96.5 million. On a year-over-year basis, the company expanded its share of revenue from newer markets -- including hard drives for notebook PCs, consumer electronics, enterprise applications and WD-branded products -- from 29% to 43%.

Western Digital Corp.
At A Glance

Western Digital Corp.
Lake Forest, Calif.
Primary Industry: Computers & Other Electronic Products
Number of Employees: 24,750
2006 In Review
Revenue: $4.34 billion
Profit Margin: 9.09%
Sales Turnover: 2.09
Inventory Turnover: 19.62
Revenue Growth: 19.31%
Return On Assets: 24.84%
Return On Equity: 56.20%

This growth is funding a strategy of vertical integration, as WD announced an agreement in late June to acquire high-capacity, thin-film storage disk manufacturer (and former supplier) Komag for approximately $1 billion dollars. (The deal is expected to close this week, after the expiration of anti-trust waiting periods in the U.S. and China.)

According to company executives, this acquisition should strengthen their company's position as a highly-efficient hard drive maker by integrating storage media, one of the critical technology components of a hard drive, into WD's internal supply chain.

Tim Leyden, WD's executive vice president of finance, said in a company statement, "While the primary purpose of the acquisition is strategic in terms of access to technology and supply, we expect to realize meaningful cost benefits as we integrate Komag into our operations."

John Coyne, WD president and CEO, was just as bullish on the Komag acquisition, saying that it will "enable WD to optimize synergies through the integration of heads and media, secure our long-term supply of media, and sharpen our ability to deliver high quality, highly reliable and cost-effective products to our customers."


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