Western Digital Corp. 10-K Summary (Fiscal Year Ended July 1, 1995)
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended July 1, 1995. Western Digital Corporation is a leading independent manufacturer of hard drives for the personal computer (PC) market, ranking among the top five globally. The company also designs and sells microcomputer products (MCP), including integrated circuits and board products for graphics and input/output functions. Effective July 1, 1994, the company changed its fiscal year-end from June 30 to the Saturday nearest June 30.
Key Financial Metrics
Revenue:
- Hard Drive Products: $1.9 billion (1995), $1.4 billion (1994), $1.0 billion (1993).
- Microcomputer Products: $191.0 million (1995), $160.0 million (1994), $178.0 million (1993).
Profitability:
- Net Income (1995): $123.3 million.
- Net Income (1994): $73.1 million.
- Net Loss (1993): $(25.1 million).
- Primary Earnings Per Share (1995): $2.56.
- Fully Diluted Earnings Per Share (1995): $2.47.
Other Metrics:
- Outstanding Common Shares (as of Sept 1, 1995): 50,647,861.
- Market Value of Voting Stock held by non-affiliates (as of Sept 1, 1995): $1.0 billion.
- Allowance for Doubtful Accounts (July 1, 1995): $9.3 million.
Note: Specific data regarding total cash flow, debt levels, and gross margins are incorporated by reference to the Annual Report to Shareholders and are not explicitly detailed in the provided text.
Material Changes vs. Prior Period
The company experienced significant growth in fiscal 1995 compared to 1994. Hard drive revenues increased by approximately 36% (from $1.4 billion to $1.9 billion), and microcomputer product revenues rose by roughly 19% (from $160 million to $191 million). Net income improved substantially, rising from $73.1 million in 1994 to $123.3 million in 1995, reversing the net loss of $25.1 million recorded in 1993. This turnaround occurred despite a market characterized by intense price competition and price erosion.
Outlook, Risks, and Management Commentary
Strategy: Management focuses on increasing market share through time-to-market leadership with new products while minimizing fixed costs. The company leverages commonality in component parts (specifically control and communication electronics) to reduce costs and inventory risk.
Key Risks:
- Supply Chain Disruptions: The company relies on external suppliers for silicon wafers and finished ICs following the sale of its fabrication facility to Motorola in 1993. Disruptions in these supplies could have a material adverse impact.
- Component Shortages: Rapid industry demand has occasionally caused shortages of key hard drive components.
- Market Volatility: The hard drive market is highly cyclical with significant price erosion and periodic rapid price declines due to over-capacity.
Operational Changes: During 1995, the company converted its Malaysia facility from IC assembly to hard drive manufacturing. The Caviar AC31600, a 1.6 GB drive, began initial volume shipments in May 1995.
Investor Verification Checklist
- Verify the full Consolidated Statements of Cash Flows and Balance Sheets in the 1995 Annual Report to Shareholders to assess liquidity and debt positions.
- Confirm the status of silicon wafer supply agreements with Motorola and other vendors to evaluate supply chain stability.
- Review the "Selected Financial Data" in the Annual Report for historical trend analysis beyond the three-year summary provided.
- Assess the impact of the Malaysia facility conversion on manufacturing capacity and cost structures.
- Monitor the competitive landscape for further price erosion in the 3.5-inch hard drive segment.