1
EXHIBIT 99.1
WESTERN DIGITAL
INVESTOR PRESENTATION
JANUARY 31, 2001 - FEBRUARY 2, 2001
Matt Massengill
President & CEO
Terry Hopp
Senior Vice President & CFO
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THIS PRESENTATION, AND THE ANSWERS TO YOUR QUESTIONS, WILL CONTAIN
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS RELATING TO; THE COMPANY'S
VISION AND STRATEGY; NEW BUSINESS OPPORTUNITIES; EXPECTED GROWTH IN THE HDD
INDUSTRY FINANCIAL TARGETS AND BUSINESS OBJECTIVES; EXPECTED FUTURE FINANCIAL
RESULTS; AND THE COMPANY'S FUTURE BUSINESS MODEL. 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; SUCCESSFUL PRODUCT DEVELOPMENT BY CONNEX AND MARKET
ACCEPTANCE OF ITS PRODUCTS; THE PACE OF GROWTH OF THE HOME ENTERTAINMENT
PRODUCTS INCORPORATING HARD DRIVES; SUCCESS IN OBTAINING EXTERNAL FINANCING FOR
THE COMPANY'S NEW BUSINESS VENTURES; OVERALL SUPPLY AND CUSTOMER DEMAND IN THE
HARD DRIVE INDUSTRY; SUCCESS IN THE COMPANY'S PRODUCT DEVELOPMENT PROGRAMS;
CHANGES IN PRODUCT AND CUSTOMER MIX; AVAILABILITY OF PRODUCT COMPONENTS; AND
OTHER FACTORS LISTED IN THE COMPANY'S RECENT SEC FILINGS. THE COMPANY UNDERTAKES
NO OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF.
[WESTERN DIGITAL LOGO]
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AGENDA
- - THE NEW WD
- - STRATEGY
- - PC & HDD MARKET OUTLOOK, INDUSTRY STRUCTURE
- - WD HDS PERFORMANCE
- - Q2 HIGHLIGHTS & FINANCIALS
[WESTERN DIGITAL LOGO]
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THE NEW WD
[X] NEW MANAGEMENT TEAM
[X] NEW FOCUS AND COMMITMENT
[X] NEW BOARD
[X] NEW HEADQUARTERS
[X] NEW MANUFACTURING STRATEGY
[WESTERN DIGITAL LOGO]
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WD MANAGEMENT TEAM
Matt E. Massengill
President &
Chief Executive Officer
Arif Shakeel Teresa A. Hopp
Executive V.P. & G.M. Senior V.P., and
Hard Drive Solutions Chief Financial Officer
W. Michael Williams Charles W. Frank, Jr.
President V.P., R & D
Connex Chief Technical Officer
Jeff Erle Michael A. Cornelius
President V.P., Law & Administration,
SageTree Secretary
Russell M. Krapf David C. Fetah
President V.P., Human Resources
Keen Personal Media
[WESTERN DIGITAL LOGO]
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BOARD OF DIRECTORS
Thomas E. Pardun
Chairman,
Western Digital Corporation
Chairman and CEO, edge2net
Matthew E. Massengill (*) Henry T. DeNero (*)
President and CEO, Former Chairman and CEO,
Western Digital Corporation HomeSpace, Inc.
Roger H. Moore (*)
Peter D. Behrendt President and CEO,
Former Chairman and CEO, Illuminet, Inc.
Exabyte Corporation
I.M. Booth Kathleen A. Cote (*)
Former Chairman and CEO, President, Seagrass Partners
Polaroid Corporation Former President and CEO,
Computervision
(*) New since Jan. 2000
[WESTERN DIGITAL LOGO]
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THE NEW WD: BACKBONE OF THE DIGITAL UNIVERSE
[FLOWCHART]
HELPING PEOPLE COLLECT, BUILD AND MANAGE THEIR DIGITAL UNIVERSE.
[WESTERN DIGITAL LOGO]
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WD CORPORATE STRATEGY
- - DEVELOP PRODUCTS UTILIZING CORE IP TO STORE, MANAGE AND COMMUNICATE DIGITAL
CONTENT
- - BUILD ON AND GROW POSITION AS ONE OF 3 MAJOR DESKTOP PC HDD SUPPLIERS
- - LEVERAGE EXPERTISE TO GROW NON-TRADITIONAL IDE HDD BUSINESS IN EVOLVING
CONSUMER AND COMMERCIAL MARKETS
- - DEVELOP NEW HIGH-MARGIN BUSINESSES IN NAS/SAN, BROADBAND MEDIA, SOFTWARE
ANALYTICS
[WESTERN DIGITAL LOGO]
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NEW VENTURE FOCUS
Personal Web & SAN
Storage Networked Management
[IMAGE] Storage [IMAGE]
[IMAGE]
Supply Chain Home
Intelligence Entertainment
[IMAGE] [IMAGE]
[Western Digital Logo]
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NEW VENTURE MILESTONES
[5 LOGOS]
- - SAGETREE INVESTMENT FROM AND PARTNERSHIP WITH NCR
- - CONNEX RECENT NAS APPLIANCE DEAL WITH MAJOR PC OEM
- - KEEN PERSONAL MEDIA PARTNERSHIP WITH SCIENTIFIC ATLANTA, RECENT BRIDGE
FINANCING
[SageTree Logo] [NCR Logo]
[Connex Logo]
[Keen Personal Media Logo] [Scientific Atlanta Logo]
[Western Digital Logo]
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CONTINUED HIGH-GROWTH AHEAD FOR THE HDD INDUSTRY
[GRAPH]
1998 1999 2000 2001 2002 2003 2004
------- ------- ------- ------- ------- ------- -------
PC 142.14 172.196 200.395 232.443 264.92 296.622 331.544
Non-PC 1.508 1.63 2.896 6.319 14.142 25.08 41.68
Traditional - Includes desktop, notebook, workstation, server & multi-user
systems
Non-Traditional - Includes home entertainment, gaming consoles, etc.
Source: Dataquest
[Western Digital Logo]
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CURRENT PC MARKET TRENDS
- - Worldwide market still growing, despite slower US and Europe
- - Certain OEMS' sluggishness masks still decent US growth
- - White box manufacturers remain significant players
- - PC remains best computing and web experience device
[Western Digital Logo]
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Worldwide Q4 Desktop PC Shipments Increased
6.3% to 28.7M Year-to-Year
[GRAPH]
Q4 '99 Q4 '00
------ ------
US Total 9905 9623
Europe 7578 7463
Japan 1689 1900
Asia 3499 4666
ROW 4320 5040
Source: IDC Preliminary CYQ4 '00 Results
[Western Digital Logo]
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Markets Beyond the U.S. & Europe Are Showing Good Growth
Q4'00 % Year-to-Year Growth Rates
[GRAPH]
% Y-to-Y Growth
---------------
Japan All 12.5
Japan Other 42.2
A/P All 20.2
A/P Other 33.4
ROW All 9.8
ROW Other 16.7
Note: "Other" indicates all desktop shipments beyond top 10 OEMs
Source: IDC Preliminary CYQ4 '00 Results
[WESTERN DIGITAL LOGO]
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U.S. Downturn? Look Again...
CYQ4 '99 to Q4 '00 Top 10 Growth Rates
[GRAPH]
All Excluding Apple & eMachines
----- ---------------------------
-0.5% 8.9%
Source: IDC Preliminary CYQ4 '00 Results
[WESTERN DIGITAL LOGO]
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Consolidation in the HDD Industry Creates
An Opportunity For Industry to Control Its Destiny
- - Seagate private [SEAGATE LOGO]
- - Maxtor/Quantum merger [QUANTUM LOGO]
- - Consolidation means share [MAXTOR LOGO]
opportunity and greater supplier
value for WD
- - Industry poised for emerging [WESTERN DIGITAL LOGO]
consumer growth markets
[WESTERN DIGITAL LOGO]
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WD HDS January 2000 Objectives
[X] Reduce cost structure through opex focus and manufacturing efficiencies
[X] Regain time-to-market, time-to-volume and time-to-quality leadership
[X] Sharpen flexibility in dealing with customers' changing requirements
[X] Improve desktop HDD product mix with higher gross margin, new
configurations
[X] Generate cash, improve the balance sheet
[WESTERN DIGITAL LOGO]
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Actions Taken to Improve Profitability of HDD Business
[X] April 1999 - Sale of media plant to Komag, Inc.
[X] October 1999 - Closure of Singapore operations and transfer of
manufacturing to Malaysia.
[X] January 2000 - Exit from enterprise hard drive business, closure and
sale of Rochester design center.
[X] CY2000 - Improved areal density TTM and performance
[X] January 2001 - HQ relocated to low-cost, more productive Lake Forest
facility
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The HDD Machine: 24x7
- - KL Malaysia: Site for WD PC and PE HDDs
- - HDD industry pace-setter in time to volume and quality
- - LOH reduced by more than 50% over 2 years
- - Improved total supply chain management in collaboration with vendors
- - Enough capacity through 2002
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In Five Quarters WD Has Earned Back
Major Desktop HDD Share
CYQ3'99 - Low Point 10% Share
Fujitsu IBM Maxtor Quantum Samsung Seagate WD
------- --- ------ ------- ------- ------- ---
Q3'99 13% 7% 19% 22% 6% 23% 10%
CYQ4'00 - Present 16% Share
Fujitsu IBM Maxtor Quantum Samsung Seagate WD
------- --- ------ ------- ------- ------- ---
Q2'00 9% 10% 20% 16% 8% 21% 16%
Source: IDC, TrendFOCUS
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The Payoff from Focus on High-Performance Desktop:
WD Earns Top Slot in 7200 RPM Desktop HDD Shipment Revenue
"Western Digital has earned the No. 1 industry position for revenue from the
7200 RPM performance-desktop segment during CQ400... This success is largely due
to the company's superior execution on its 20 GB-per-platter product family."
TrendFOCUS, Jan. 2001
Preliminary Total CYQ4 DT HDD 7200 RPM Revenue
WD 223
IBM 220
Maxtor 214
Quantum 150
- - WD first to market, volume 10 & 20 GB/Platter 7200 RPM
- - Nearly 40% of Q2 unit mix 7200 RPM
- - Alignment with PC OEMs focused on technology leadership
Source: Press releases, analyst calls, Western Digital, and TrendFOCUS
estimates.
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The Performance Behind WD's Desktop HDD Recovery
Sustained Leadership in Time-to-Market, Time-to-Volume , Time-to-Quality
5400 RPM
OCT-99 NOV-99 DEC-99 JAN-00 FEB-00 MAR-00
10 WESTERN(R) Fujitsu Samsung Seagate
GB DIGITAL Quantum
MAXTOR
AUG-00 SEP-00 OCT-00 NOV-00 DEC-00 JAN-01
20 WESTERN(R) Seagate Fujitsu
GB MAXTOR DIGITAL IBM
Quantum
JAN-01
30 WESTERN(R)
GB DIGITAL
7200 RPM
JAN-00 FEB-00 MAR-00 APR-00
10 WESTERN(R) Maxtor Quantum Seagate
GB DIGITAL Fujitsu
SEP-00 OCT-00 NOV-00 DEC-00
20 WESTERN(R) Maxtor IBM Quantum & Fujitsu
DIGITAL Seagate not yet in volume
Source: WD, Industry Reports, TrendFOCUS
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Core HDD Recovery Drives Q2 Results
- - Return to profitability by HDD business- $10.2M operating profit
- - Richer product mix, favorable supply/demand drive improved gross margin
- - Strong sequential revenue and unit growth despite component constraints
- - HDD business generating cash, improving cash position
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Western Digital
Financial
Performance
January 2001
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SUMMARY OPERATING RESULTS - BY FISCAL QUARTER
Q1'00A Q2'00A Q3'00A Q4'00A Q1'01A Q2'01A Target
HDD OPERATIONS
Market 31,243 35,706 36,090 34,977 37,642 37,500
Share 10% 14% 15% 15% 14% 16% 16-18%
Volume 3,129 5,136 5,240 5,168 5,140 5,825
ASP $ 104 $ 101 $ 97 $ 90 $ 86 $ 91
Revenue $ 325,600 $517,300 $508,000 $464,000 $439,800 $530,600
Gross Profit (38,600) 19,200 46,000 42,000 27,100 66,500
Gross Margin -11.9% 3.7% 9.1% 9.1% 6.2% 12.5% 10-12%
Operating expenses 59,100 50,900 57,000 52,700 54,100 56,300
Opex % 18.2% 9.8% 11.2% 11.4% 12.3% 10.6% 10-11%
HDD OPERATING INCOME (LOSS) (97,700) (31,700) (11,000) (10,700) (27,000) 10,200 1-2%
$ (1.02) $ (0.26) $ (0.08) $ (0.08) $ (0.18) $ 0.06
ENTERPRISE (17,500) (24,500) -- -- -- --
$ (0.18) $ (0.20)
NEW VENTURES, NET (6,400) (6,800) (10,400) (15,400) (15,700) (19,400)
$ (0.07) $ (0.06) $ (0.08) $ (0.11) $ (0.11) $ (0.11)
OPERATING LOSS (121,600) (63,000) (21,400) (26,100) (42,700) (9,200)
$ (1.27) $ (0.52) $ (0.16) $ (0.19) $ (0.29) $ (0.05)
NET LOSS (126,900) (66,000) (22,600) (26,300) (44,700) (8,800)
$ (1.32) $ (0.55) $ (0.17) $ (0.19) $ (0.30) $ (0.05)
EBITDA (96,900) (40,200) (3,600) (12,600) (29,300) 3,400
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FORWARD LOOKING
EXPECTATIONS
/ / Hard Drive Operations
- Outlook for March quarter remains cautious
- Currently expect the following:
/ / Revenue of at least $500m but a slight decline from Q2 due to
potential volume and pricing softness
/ / Gross margin degradation due to pricing -- a reasonable range would
be 10.5% to 11.5%
/ / Operating expense expected to decline about $1.5m in Q3 from the
$56m in Q2
/ / For the March and June quarters, expect breakeven to slim
profitability, with positive cash flow from operations
/ / New Venture Activities
- For the March quarter, expect operating losses to be reduced to $16m to
$17m
/ / Consolidated Expectations
- Consolidated loss in Q3 of $13m to $17m, or $.07 to $.10 per share
- Cash balance for Q3 and Q4 to be maintained within our target range of
$150m to $200m
- Actual cash results within the range will depend significantly on the
cash utilization of, and external financing for, our new business
ventures
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Q2'01 COMPETITIVE ANALYSIS
QUANTUM MAXTOR WDC
--------- -------- --------
DESKTOP HDD OPERATIONS
Market Share .................... 16% 20% 16%
-5.9% 2.7% 1.9%
Volume .......................... 6,100 7,400 5,825
(2,275) 900 685
ASP ............................. $ 85 $ 97 $ 91
$ 7 $ 3 $ 5
Revenue ......................... $ 518,000 $721,285 $530,600
(138,000) 54,185 90,808
Gross Profit .................... 52,836 103,367 66,500
Gross Margin .................... 10.2% 14.3% 12.5%
7.2% 4.3% 6.3%
Operating expenses* ............. 77,500 93,484 56,300
Opex % .......................... 15.0% 13.0% 10.6%
OPERATING LOSS .................. (24,664) 9,883 10,200
- ----------------------
o Opex allocated based on revenue for Quantum
o Red -- change from preceding quarter
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WD CLOSES THE GROSS MARGIN GAP
FQ1'00 FQ2'00 FQ3'00 FQ4'00 FQ1'01 FQ2'01
------ ------ ------ ------ ------ ------
WESTERN DIGITAL -12% 3.7% 9.1% 8.8% 6.2% 12.5%
INDUSTRY* -2% 8.4% 12.7% 11.7% 6.5% 12.4%
* Includes WDC, Maxtor, Seagate and Quantum
Source: Industry reports, WDC
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HDD MODEL SCENARIOS
Gross Margin %
----------------------------------------------
9% 12% 15%
-------------- ------------- -------------
P/L EBITDA P/L EBITDA P/L EBITDA
------ ------ ----- ------ ----- ------
$50 $ (5.0) $ 7.5 $10.0 $22.5 $25.0 $37.5
Opex $55 $(10.0) $ 2.5 $ 5.0 $17.5 $20.0 $32.5
$60 $(15.0) $(2.5) $ 0.0 $12.5 $15.0 $27.5
ASSUMPTIONS
REVENUE $500.0
DEPRECIATION $ 12.5
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HDD MODEL SCENARIOS
Gross Margin %
------------------------------------------------------------
9% 12% 15%
------------------------------------------------------------
P/L EBITDA P/L EBITDA P/L EBITDA
----- ------ ----- ------ ----- ------
$50 $13.0 $28.0 $34.0 $49.0 $55.0 $70.0
Opex $55 $ 8.0 $23.0 $29.0 $44.0 $50.0 $65.0
$60 $ 3.0 $18.0 $24.0 $39.0 $45.0 $60.0
ASSUMPTIONS
REVENUE $700.0
DEPRECIATION $ 15.0
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CASH FLOW SUMMARY
Q2'00A Q3'00A Q4'00A Q1'01A Q2'01A
-------- -------- -------- -------- --------
BEGINNING CASH $185,100 $163,700 $202,100 $184,000 $166,900
Cash used for HDD operations (1,300) (500) 14,400 (32,900) 21,700
Cash used for New Ventures (6,800) (10,300) (14,600) (14,800) (16,900)
Cash used for restructurings (2,200) (8,700) (31,000) (18,900) (12,200)
-------- -------- -------- -------- --------
CASH USED IN OPERATIONS (10,300) (19,500) (31,200) (66,600) (7,400)
CAPEX (7,600) (3,300) (4,900) (10,600) (16,300)
DEBT REPAYMENTS (30,900) (16,600) -- -- --
REAL PROPERTY SALES 11,000 29,700 -- -- --
INVESTMENT ACTIVITY 2,900 -- (10,700) 15,000 --
EQUITY DRAW DOWN 17,400 44,300 18,000 42,100 30,600
VENTURE FUNDING -- -- 10,000 -- 5,000
OTHER (3,900) 3,800 700 3,000 600
-------- -------- -------- -------- --------
CHANGE IN CASH (21,400) 38,400 (18,100) (17,100) 12,500
-------- -------- -------- -------- --------
ENDING CASH $163,700 $202,100 $184,000 $166,900 $179,400
======== ======== ======== ======== ========
CONVERSION CYCLE 1.6 (3.4) (9.7) (8.5) (6.2)
WORKING CAPITAL $(11,500) $ 10,300 $ 6,300 $ 17,900 $ 33,500
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SUMMARY BALANCE SHEET HIGHLIGHTS
JUNE '99 JUNE '00 DEC. '00
---------- -------- --------
WORKING CAPITAL $ 131.4 $ 6.3 $ 33.5
TOTAL ASSETS $ 1,022.4 $ 615.6 $ 590.9
LONG TERM DEBT $ 544.1 $ 225.5 $ 113.2
SHAREHOLDER'S EQUITY $ (153.8) $ (109.8) $ 15.7
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FINANCIAL RESOURCES
AS OF DECEMBER 29, 2000
-----------------------
CASH BALANCE $180M
LINE OF CREDIT $125M
EQUITY DRAW DOWN $200M
INVESTMENTS $10-15M
NEW VENTURE FINANCINGS $20-50M
---------
TOTAL $535-570M
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THE STREET BEGINS TO TAKE NOTICE
"WE THINK WESTERN DIGITAL REMAINS WELL POSITIONED TO GAIN SOME OEM SHARE GIVEN
THE PENDING MAXTOR-QUANTUM MERGER."
PRU-SEC
"IN EXTREMELY IMPRESSIVE FASHION, WD'S PRODUCT MIX IMPROVED TO WHERE 76% OF
DRIVES WERE AT THE LEADING EDGE 20 GB/PLATTER CAPACITY POINT AND NEARLY 40% WERE
7200 RPM (WE BELIEVE THE INDUSTRY'S BEST)."
ING BARINGS
"WE BELIEVE WDC HAS MADE SIGNIFICANT STRIDES OVER THE PAST YEAR--RECOVERING
TIME-TO-MARKET/TIME-TO-VOLUME EXECUTION AND OEM SHARE, STREAMLINING OPERATIONS
AND IMPROVING ITS COST MODEL."
ING BARINGS
"WDC'S POSITION RELATIVE TO ITS COMPETITION...AND ITS BALANCE SHEET HAS IMPROVED
DRAMATICALLY OVER THE LAST YEAR."
WIT SOUNDVIEW
35
WESTERN DIGITAL
INVESTOR PRESENTATION
JANUARY 31, 2001 - FEBRUARY 2, 2001
MATT MASSENGILL
PRESIDENT & CEO
TERRY HOPP
SENIOR VICE PRESIDENT & CFO