Exhibit 99.1
A Commitment to Make the Right Investments
- Head operation requires annual capital investment in the range of $70M to $90M and an annual R&D investment of ~$45M
- This investment plan provides capability to achieve near-term goals and to meet needs for foreseeable future
Commitment to make R&D investments geared toward achieving competitive next-generation technologies
Head Integration Summary
- Execution of head integration is on plan
- Solidly accretive to December quarter financial performance
- Realizing unique advantages from co-location of manufacturing, R&D
- All OEM customers have qualified WD heads
- WD head operation currently focused on high-volume 80 GB per platter production
- Continue to work with merchant head suppliers on significant part of the business
- On target to have capability of producing up to 30M heads quarterly by June 2004
The WD Advantage - Focus and Discipline
Wafer Fab improvements
- 90% reduction of product configurations
- 75% reduction in process recipes
- 70% reduction in masks
- 100% reduction in schedule changes
- Wafer fab metric improvements
- Wafer capacity increased 80%
- R&D wafer allocation increased 400%
- FY'04Q2 wafer cost 25% below last meaningful RR baseline
- Wafer scrap lowest ever achieved (December record setting)
- Wafer yield in FY'04Q2 best ever for this fab under any management
Slider/HGA/HSA Improvements in Thailand
- Space and asset utilization improvements through working pattern, work cell and process flow revisions
- 42% increase in asset utilization (capacity / $ invested)
- Units per person improvement: HGA 73%, HSA 104%
- Units per sq ft improvement: HGA 50%, HSA 260%
- Labor cost savings through pay structure/benefits, and headcount revisions
- Reduction of 25% on average direct labor $/hour
- Exempt/non-exempt pay adjusted 16% from 'fixed' to 'variable'
- Reduced exempt/non-exempt count by 11%
WD Head Technology Status
- Next generation (120+ GB/platter)
- Based on solid current design platform
- WD is well positioned to support next areal density point
- Comparable with best-in-class merchant head vendor
- Competitive Assessment
| Overall Technology Readiness | x | ||||
| Performance | Ø | Ø | Ahead of Competition | ||
| Manufacturability | Ø | x | On par | ||
| Time-to-Market | x | ¨ | Behind Competition | ||
| Integration into Drive | x |
- Overall assessment
- In most key attributes superior or on par performance
- Significant progress made since Aug. 2003
Perpendicular Recording Head Development
- Overcome writeability challenge by increasing write field at the disk
- System level change
- Synchronized development with the leading disk supplier
- Commercialization expected at 120/160 GB/platter and beyond
- Extendable to 500 GB/platter - 1000 GB/platter
- Current head development focus is design for performance and manufacturability
- Focus on two design options
- Significant WD intellectual property on design and process
- Drive integration effort launched
Perpendicular Recording Head Development
- Competitive assessment
- Perpendicular Recording Head competitive positioning
| Performance | Ø |
| |||
| Manufacturability | x | Ø | Ahead of Competition | ||
| Time-to-Market | x | x | On par | ||
| Integration into Drive | ¨ | ¨ | Behind Competition |
- Milestones
- Drive system integration plan in place to close the gap
- 80 GB/platter in drive read/write data function complete
- 160 GB/platter head demonstrated at component level
FY'04Q3 Guidance Provided on January 22, 2004
- Revenue of between $715M and $750M
- Gross margin of approximately 16.5%
- Operating income of between $46M and $50M
- Net income of between $44M and $48M
- EPS of between $0.20 and $0.22
WD's New Business Model
| Old Model | New Model | |
Gross margins | 14% - 18% | 18% - 22% |
Operating margins | 4% - 8% | 7% - 11% |
Inventory turns | 20 - 22 | 18 - 20 |
Cash conversion cycle | -7 days to -10 days | -4 days to -7 days |