BAD NEWS
uesday December 2, 7:35 am Eastern Time
Company Press Release
SOURCE: Western Digital
Western Digital Announces Actions to Address Industry's Sustained
Oversupply and Aggressive Pricing Conditions
Sharpens Focus on Desktop, Enterprise Storage; Second Quarter, Full-Year Forecasted
Operating Results Impacted
IRVINE, Calif., Dec. 2 /PRNewswire/ -- Western Digital Corporation (NYSE: WDC - news) today announced a
series of actions designed to lessen its exposure to sustained oversupply and higher-than-normal competitive
pricing pressures in the hard drive industry's distribution channel and to sharpen the Company's focus and
resources on its desktop and enterprise storage businesses. The Company will:
further reduce production of desktop hard drives from previously announced levels;
further accelerate its transition to desktop and enterprise hard drives featuring magneto-resistive head
technology;
exit the 3-inch portable hard drive business and re-deploy resources into its leadership desktop storage
business and the expanding opportunity in its enterprise storage business; and
plan to take one-time charges in the second quarter totaling in the range of $85-$95 million.
The Company had previously announced plans for a one-time charge of between $15 to $30 million associated
with its accelerated transition from production of drives with thin film heads. This charge has increased to $85-$95
million, primarily due to a further reduction of unit volumes of desktop hard drives with TFI heads and from the
Company's decision to exit the 3-inch portable hard drive business.
Impact on Operating Results
As a result of the continued pricing pressures and the reduction in unit volumes of desktop drives, the Company
indicated that its currently-forecasted operating results (before the planned one-time charges) would be
break-even for the second fiscal quarter ending December 27, 1997 and modestly profitable for its full fiscal year.
Western Digital indicated that the yields, production ramp, and customer acceptance of its new desktop and
enterprise hard drives featuring MR heads were progressing extremely well. Based on the Company's revised
build plans, its production of hard drives with MR heads will exceed 75% of total drives shipped as the Company
exits the June, 1998 quarter.
Chuck Haggerty, chairman, president and chief executive officer of Western Digital, stated: ''The conditions
leading to our current financial performance have been painful in the near term. We are taking the lead in further
reducing production volumes in response to oversupply in the distribution channel and extremely aggressive
pricing, principally by Japanese and Korean competitors. We intend to maintain our position as one of the world's
most efficient suppliers of high-quality disk drives to leading PC and Enterprise- class customers. These
steps--production cutbacks, accelerated transition to MR head technology and sharpening our focus and
resources -- will better enable us to prosper sooner once the current industry cycle runs its course.''
This release contains forward-looking statements based on current management expectations, including
statements related to current and anticipated industry supply and pricing trends, the transition from thin film to
MR, the planned exit from the 3-inch portable hard drive business, the estimate of the planned one-time charges,
and projected operating results. The forward looking statements are based on current management expectations,
and actual results may differ materially as a result of several factors, including: pricing trends and other
competitive factors, including overall supply in the hard drive industry; success in the accelerated transition to
magnetoresistive-head drives; business conditions and growth in the personal and enterprise computing
industry; changes in customer order patterns, successful reductions in future costs and expenses, and other
factors discussed in our form 10-K for the year ended June 28, 1997, our form 10-Q for the quarter ended
September 27, 1997, and our other SEC filings. Western Digital undertakes no obligation to update
forward-looking statements to reflect events or circumstances occurring after the date of such statements.
SOURCE: Western Digital
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