Document and Entity Information (USD $) In Billions, except Share data, unless otherwise specified	12 Months Ended
	Jul. 02, 2010	Aug. 04, 2010	Dec. 31, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	WESTERN DIGITAL CORP
Entity Central Index Key	0000106040
Document Type	10-K
Document Period End Date	Jul. 02, 2010
Amendment Flag	false
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--07-02
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 10.1
Entity Common Stock, Shares Outstanding (actual number)		229,321,305

Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jul. 02, 2010	Jul. 03, 2009
Current assets:
Cash and cash equivalents	$ 2,734	$ 1,794
Accounts receivable, net	1,256	926
Inventories	560	376
Other current assets	170	134
Total current assets	4,720	3,230
Property and equipment, net	2,159	1,584
Goodwill	146	139
Other intangible assets, net	88	89
Other non-current assets	215	249
Total assets	7,328	5,291
Current liabilities:
Accounts payable	1,507	1,101
Accrued expenses	281	247
Accrued warranty	129	95
Current portion of long-term debt	106	82
Total current liabilities	2,023	1,525
Long-term debt	294	400
Other liabilities	302	174
Total liabilities	2,619	2,099
Commitments and contingencies (Notes 4 and 5)
Shareholders' equity:
Preferred stock, $.01 par value; authorized - 5 shares; issued and outstanding - None	0	0
Common stock, $.01 par value; authorized - 450 shares; issued and outstanding - 231 and 225 shares, respectively	2	2
Additional paid-in capital	1,022	896
Accumulated other comprehensive income	11	2
Retained earnings	3,674	2,292
Total shareholders' equity	4,709	3,192
Total liabilities and shareholders' equity	$ 7,328	$ 5,291

Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Jul. 02, 2010	Jul. 03, 2009
Shareholders' equity:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5	5
Preferred stock, shares outstanding	0	0
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	450	450
Common stock, shares outstanding	231	225
Common stock, shares issued	231	225

Consolidated Statements of Income (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Jul. 02, 2010	Jul. 03, 2009	Jun. 27, 2008
Consolidated Statements of Income [Abstract]
Revenue, net	$ 9,850	$ 7,453	$ 8,074
Cost of revenue	7,449	6,116	6,335
Gross margin	2,401	1,337	1,739
Operating expenses:
Research and development	611	509	464
Selling, general and administrative	265	201	220
Acquired in-process research and development		14	49
Restructuring and other, net		94
Total operating expenses	876	818	733
Operating income	1,525	519	1,006
Other income (expense):
Interest income	4	9	27
Interest and other expense	(9)	(27)	(52)
Total other expense, net	(5)	(18)	(25)
Income before income taxes	1,520	501	981
Income tax provision	138	31	114
Net income	$ 1,382	$ 470	$ 867
Income per common share:
Basic	$ 6.06	$ 2.12	$ 3.92
Diluted	$ 5.93	$ 2.08	$ 3.84
Weighted average shares outstanding:
Basic	228	222	221
Diluted	233	226	226

Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jul. 02, 2010	Jul. 03, 2009	Jun. 27, 2008
Cash flows from operating activities
Net income	$ 1,382	$ 470	$ 867
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	510	479	413
Stock-based compensation	60	47	37
Deferred income taxes	27	24	(2)
Loss on investments		10	13
Acquired in-process research and development		14	49
Non-cash portion of restructuring and other, net		63
Changes in:
Accounts receivable, net	(330)	92	(194)
Inventories	(148)	88	8
Accounts payable	270	(33)	114
Accrued expenses	67	23	38
Other assets and liabilities	104	28	56
Net cash provided by operating activities	1,942	1,305	1,399
Cash flows from investing activities
Purchases of property and equipment	(737)	(519)	(615)
Proceeds from the sale of property and equipment		29
Acquisitions, net of cash acquired	(253)	(63)	(927)
Purchases of investments			(105)
Sales and maturities of investments	4	2	326
Net cash used in investing activities	(986)	(551)	(1,321)
Cash flows from financing activities
Issuance of stock under employee stock plans	79	28	65
Taxes paid on vested stock awards under employee stock plans	(17)	(5)	(5)
Increase (decrease) in excess tax benefits from employee stock plans	4	(24)	89
Repurchases of common stock		(36)	(60)
Repayment of acquired convertible debentures			(250)
Proceeds from debt			1,510
Repayment of debt	(82)	(27)	(1,023)
Net cash provided by (used in) financing activities	(16)	(64)	326
Net increase in cash and cash equivalents	940	690	404
Cash and cash equivalents, beginning of year	1,794	1,104	700
Cash and cash equivalents, end of year	2,734	1,794	1,104
Supplemental disclosure of cash flow information:
Cash paid for income taxes	7	11	11
Cash paid for interest	8	14	33
Supplemental disclosure of non-cash investing and financing activities:
Acquired convertible debentures			$ 248

Consolidated Statements of Shareholders Equity and Comprehensive Income (USD $) In Millions	Total	Common Stock	Treasury Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Total Comprehensive Income
Beginning Balance at Jun. 29, 2007	$ 1,716	$ 2	$ (51)	$ 811	$ (1)	$ 955	$ 0
Beginning Balance, Shares at Jun. 29, 2007		225	(3)
Employee stock plans	58		89	(31)
Employee stock plans, Shares			4
Stock based compensation	37			37
Increase (Decrease) in excess tax benefits from employee stock plans	89			89
Repurchase of common stock	(60)		(60)
Repurchase of common stock, Shares			(2)
Net income	867					867	867
Unrealized gain (loss) on foreign exchange contracts	(11)				(11)		(11)
Ending Balance at Jun. 27, 2008	2,696	2	(22)	906	(12)	1,822	856
Ending Balance, Shares at Jun. 27, 2008		225	(1)
Employee stock plans	25		58	(33)
Employee stock plans, Shares			2
Stock based compensation	47			47
Increase (Decrease) in excess tax benefits from employee stock plans	(24)			(24)
Repurchase of common stock	(36)		(36)
Repurchase of common stock, Shares			(1)
Net income	470					470	470
Unrealized gain (loss) on foreign exchange contracts	14				14		14
Ending Balance at Jul. 03, 2009	3,192	2	0	896	2	2,292	484
Ending Balance, Shares at Jul. 03, 2009		225	0
Employee stock plans	62			62
Employee stock plans, Shares		6
Stock based compensation	60			60
Increase (Decrease) in excess tax benefits from employee stock plans	4			4
Net income	1,382					1,382	1,382
Unrealized gain (loss) on foreign exchange contracts	9				9		9
Ending Balance at Jul. 02, 2010	$ 4,709	$ 2	$ 0	$ 1,022	$ 11	$ 3,674	$ 1,391
Ending Balance, Shares at Jul. 02, 2010		231	0

Organization and Summary of Significant Accounting Policies

12 Months Ended

Jul. 02, 2010

Organization and Summary of Significant Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies


Note 1.	Organization and Summary of Significant Accounting Policies

Western Digital Corporation (the “Company” or “Western Digital” or “WD”) designs, develops, manufactures and sells hard drives. A hard drive is a device that stores data on one or more rotating magnetic disks (“magnetic media”) to allow fast access to data. The Company sells its products worldwide to original equipment manufacturers (“OEMs”) and original design manufacturers for use in computer systems, subsystems or consumer electronics (“CE”) devices, and to distributors, resellers and retailers. The Company’s hard drives are used in desktop computers, notebook computers, external storage appliances, enterprise applications, such as servers, workstations, network attached storage, storage area networks and video surveillance equipment, and CE applications, such as digital video recorders and satellite and cable set-top boxes.

The Company also designs, develops, manufactures and sells solid-state drives and media players. A solid-state drive is a storage device that uses semiconductor, non-volatile media, rather than magnetic media and magnetic heads, to store and allow fast access to data. The Company sells its solid-state drives worldwide to OEMs and distributors for use in the embedded systems and client PC markets. A media player is a device that connects to a user’s television, the Internet or home theater system and plays digital movies, music and photos from any of the Company’s WD^®-branded external hard drives, other USB mass storage devices or content services accessed over the Internet. The Company sells its media players worldwide to resellers and retailers under the WD^® brand.

The Company has prepared its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and has adopted accounting policies and practices which are generally accepted in the industry in which it operates. The Company’s significant accounting policies are summarized below.

Fiscal Year

The Company has a 52 or 53-week fiscal year. The 2010 fiscal year which ended on July 2, 2010 consisted of 52 weeks. The 2009 and 2008 fiscal years, which ended on July 3, 2009 and June 27, 2008, respectively, consisted of 53 and 52 weeks each, respectively.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounts of foreign subsidiaries have been remeasured using the U.S. dollar as the functional currency. As such, gains or losses resulting from remeasurement of these accounts from local currencies into U.S. dollars are reflected in the results of operations. These gains and losses were immaterial to the consolidated financial statements.

On June 30, 2010, the Company acquired the magnetic media sputtering operations of Hoya Corporation and Hoya Magnetics Singapore Pte. Ltd (“Hoya”). On March 27, 2009, the Company acquired SiliconSystems, Inc. (“SiliconSystems”) and on September 5, 2007, the Company acquired Komag, Incorporated (“Komag”). The acquisitions are further described in Note 14. The results of operations of Hoya, SiliconSystems, and Komag since the dates of their acquisitions are included in the consolidated financial statements.

Cash and Cash Equivalents

The Company’s cash equivalents represent highly liquid investments in money market funds which are invested in U.S. Treasury securities, U.S. Treasury bills and U.S. Government agency securities with original maturities when purchased of three months or less.

Investments

The Company’s investments consist of auction-rate securities, which are primarily backed by insurance products with original maturities greater than three months. The Company has classified these investments as available-for-sale securities and they are carried at fair value within other non-current assets in the consolidated balance sheets.

Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, investments, accounts payable and accrued expenses approximate fair value for all periods presented because of the short-term maturity of these assets and liabilities or, in the case of investments, these are recorded using appropriate market information. The carrying amount of debt approximates fair value because of its variable interest rate.

Concentration of Credit Risk

The Company sells its products to computer manufacturers, resellers and retailers throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral. The Company maintains allowances for potential credit losses, and such losses have historically been within management’s expectations. At any given point in time, the total amount outstanding from any one of a number of its customers may be individually significant to the Company’s financial results. At July 2, 2010 and July 3, 2009, the Company had reserves for potential credit losses of $6 million and $14 million, respectively, and net accounts receivable of $1.3 billion and $926 million, respectively. The Company also has cash equivalent and investment policies that limit the amount of credit exposure to any one financial institution or investment instrument and requires that investments be made only with financial institutions or in investment instruments evaluated as highly credit-worthy.

Inventory

The Company values inventory at the lower of cost (first-in, first out and weighted average methods) or net realizable value. The first-in, first-out (“FIFO”) method is used to value the cost of the majority of the Company’s inventories, while the weighted-average method is used to value precious metal inventories. Weighted-average cost is calculated based upon the cost of precious metals at the time they are received by the Company. The Company has determined that it is not practicable to assign specific costs to individual units of precious metals and, as such, precious metals are relieved from inventory based on the weighted-average cost of the inventory at the time the inventory is used in production. The weighted average method of valuing precious metals does not materially differ from a first-in, first-out method. As of July 2, 2010 and July 3, 2009, 82% of the inventory was valued using the FIFO method with the remainder valued using the weighted average method. Inventory write-downs are recorded for the valuation of inventory at the lower of cost or net realizable value by analyzing market conditions and estimates of future sales prices as compared to inventory costs and inventory balances.

The Company evaluates inventory balances for excess quantities and obsolescence on a regular basis by analyzing estimated demand, inventory on hand, sales levels and other information, and reduces inventory balances to net realizable value for excess and obsolete inventory based on this analysis. Unanticipated changes in technology or customer demand could result in a decrease in demand for one or more of the Company’s products, which may require a write down of inventory that could materially affect operating results.

Property and Equipment

The cost of property and equipment is depreciated over the estimated useful lives of the respective assets. The Company’s buildings are being depreciated over periods ranging from fifteen to thirty years. The majority of the Company’s equipment is being depreciated over periods of three to seven years. Depreciation is computed on a straight-line basis. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease terms.

Goodwill and Other Long-Lived Assets

The total purchase price in a business combination is allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding the fair values being recorded as goodwill. Goodwill is not amortized. Instead, it is tested for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that goodwill may be impaired. The Company did not record any impairment of goodwill during 2010, 2009 or 2008.

Other intangible assets consist primarily of technology acquired in business combinations. Acquired intangibles are amortized on a straight-line basis over their respective estimated useful lives. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The Company did not record any impairments to long-lived assets during 2010 or 2008. The Company recorded impairments to certain long-lived assets during 2009. See Note 13.

Revenue and Accounts Receivable

Revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred, or services have been rendered, the sales price is fixed or determinable and collectability is reasonably assured. The Company establishes provisions against revenue and cost of revenue for estimated sales returns in the same period that the related revenue is recognized based on existing product return notifications. If actual sales returns exceed expectations, an increase in the sales return accrual would be required, which could materially affect operating results.

In accordance with standard industry practice, the Company provides distributors and retailers (collectively referred to as “resellers”) with limited price protection for inventories held by resellers at the time of published list price reductions, and the Company provides resellers and OEMs with other sales incentive programs. At the time the Company recognizes revenue to resellers and OEMs, a reduction of revenue is recorded for estimated price protection until the resellers sell such inventory to their customers and the Company also records a reduction of revenue for the other programs in effect. The Company bases these adjustments on several factors, including anticipated price decreases during the reseller holding period, reseller’s sell-through and inventory levels, estimated amounts to be reimbursed to qualifying customers, historical pricing information and customer claim processing. If customer demand for hard drives or market conditions differ from the Company’s expectations, the Company’s operating results could be materially affected. The Company also has programs under which it reimburses qualified distributors and retailers for certain marketing expenditures which are recorded as a reduction of revenue. Sales incentive and marketing programs are recorded as a reduction of revenue.

The Company records an allowance for doubtful accounts by analyzing specific customer accounts and assessing the risk of loss based on insolvency, disputes or other collection issues. In addition, the Company routinely analyzes the different receivable aging categories and establishes reserves based on a combination of past due receivables and expected future losses based primarily on its historical levels of bad debt losses. If the financial condition of a significant customer deteriorates resulting in its inability to pay its accounts when due, or if the Company’s overall loss history changes significantly, an adjustment in the Company’s allowance for doubtful accounts would be required, which could materially affect operating results.

The Company establishes provisions against revenue and cost of revenue for sales returns in the same period that the related revenue is recognized. These provisions are based on existing product return notifications. If actual sales returns exceed expectations, an increase in the sales return accrual would be required, which could negatively affect operating results.

Warranty

The Company records an accrual for estimated warranty costs when revenue is recognized. The Company generally warrants its products for a period of one to five years. The warranty provision considers estimated product failure rates and trends, estimated repair or replacement costs and estimated costs for customer compensatory claims related to product quality issues, if any. A statistical warranty tracking model is used to help prepare estimates and assist the Company in exercising judgment in determining the underlying estimates. The statistical tracking model captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. Management’s judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited field experience with those products upon which to base warranty estimates. Management reviews the warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may materially affect operating results. Such changes are generally a result of differences between forecasted and actual return rate experience and costs to repair. If actual product return trends, costs to repair returned products or costs of customer compensatory claims differ significantly from estimates, future results of operations could be materially affected.

Litigation and Other Contingencies

The Company discloses material contingencies deemed to be reasonably possible and accrues loss contingencies when, in consultation with legal advisors, the Company concludes that a loss is probable and reasonably estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates. See Note 5.

Advertising Expense

Advertising costs are expensed as incurred. Selling, general and administrative expenses of the Company included advertising costs of $7 million, $5 million, and $3 million in 2010, 2009 and 2008, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting basis and the tax basis of assets and liabilities and expected benefits of utilizing net operating loss (“NOL”) and tax credit carryforwards. The Company records a valuation allowance when it is more likely than not that the deferred tax assets will not be realized. Each period, the Company evaluates the need for a valuation allowance for its deferred tax assets and adjusts the valuation allowance so that the Company records net deferred tax assets only to the extent that it has concluded it is more likely than not that these deferred tax assets will be realized.

The Company recognizes liabilities for uncertain tax positions based on a two-step process. To the extent a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the financial statements. If a position meets the more-likely-than-not level of certainty, it is recognized in the financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Interest and penalties related to unrecognized tax benefits are recognized on liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. The actual liability for unrealized tax benefit in any such contingency may be materially different from the Company’s estimates, which could result in the need to record additional liabilities for unrecognized tax benefits or potentially adjust previously recorded liabilities for unrealized tax benefits and materially affect our operating results.

Income per Common Share

The Company computes basic income per common share using net income and the weighted average number of common shares outstanding during the period. Diluted income per common share is computed using net income and the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include certain dilutive outstanding employee stock options, rights to purchase shares of common stock under the Company’s Employee Stock Purchase Plan (“ESPP”) and restricted stock unit awards.

The following table illustrates the computation of basic and diluted income per common share (in millions, except per share data):


	Years Ended
	July 2,		July 3,		June 27,
	2010		2009		2008

Net income	$	1,382	$	470	$	867

Weighted average shares outstanding:
Basic		228		222		221
Employee stock options and other		5		4		5

Diluted		233		226		226

Income per common share:
Basic	$	6.06	$	2.12	$	3.92

Diluted	$	5.93	$	2.08	$	3.84

Anti-dilutive potential common shares excluded*		1		6		1


*		For purposes of computing diluted income per common share, certain potentially dilutive securities have been excluded from the calculation because their effect would have been anti-dilutive.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The fair values of all stock options granted are estimated using a binomial model, and the fair values of all ESPP purchase rights are estimated using the Black-Scholes-Merton option-pricing model. Both the binomial and the Black-Scholes-Merton models require the input of highly subjective assumptions. The Company is required to use judgment in estimating the amount of stock-based awards that are expected to be forfeited. If actual forfeitures differ significantly from the original estimate, stock-based compensation expense and the results of operations could be materially affected.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income. The Company’s other comprehensive income (loss) is comprised of unrealized gains and losses on foreign exchange contracts.

Foreign Exchange Contracts

Although the majority of the Company’s transactions are in U.S. dollars, some transactions are based in various foreign currencies. The Company purchases short-term, foreign exchange contracts to hedge the impact of foreign currency exchange fluctuations on certain underlying assets, revenue, liabilities and commitments for operating expenses and product costs denominated in foreign currencies. The purpose of entering into these hedging transactions is to minimize the impact of foreign currency fluctuations on the Company’s results of operations. These contract maturity dates do not exceed 12 months. All forward exchange contracts are for risk management purposes only. The Company does not purchase forward exchange contracts for trading purposes.

The Company had outstanding forward exchange contracts with commercial banks for Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling with aggregate notional amounts of $1.1 billion and $583 million at July 2, 2010 and July 3, 2009, respectively. Malaysian Ringgit contracts are designated as cash flow hedges. Euro and British Pound Sterling contracts are designated as fair value hedges. Thai Baht contracts are designated as either cash flow or fair value hedges.

If the derivative is designated as a cash flow hedge, the effective portion of the change in fair value of the derivative is initially deferred in other comprehensive income (loss), net of tax. These amounts are subsequently recognized into earnings when the underlying cash flow being hedged is recognized into earnings. Recognized gains and losses on foreign exchange contracts entered into for manufacturing related activities are reported in cost of revenues. Hedge effectiveness is measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the underlying exposure’s terminal value. The Company determined the ineffectiveness associated with its cash flow hedges to be immaterial.

A change in the fair value of fair value hedges is recognized in earnings in the period incurred and is reported as a component of operating expenses. All fair value hedges were determined to be effective. The fair value and the changes in fair value on these contracts were not material to the consolidated financial statements for all years presented. See Notes 10 and 11 for additional disclosures related to foreign exchange contracts.

Use of Estimates

Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with U.S. GAAP. These estimates and assumptions have been applied using methodologies which are consistent throughout the periods presented. However, actual results could differ materially from these estimates.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which establishes a framework for measuring fair value under U.S. GAAP and expands disclosures about fair value measurement. In February 2008, FASB issued ASC 820-10-65-1, “Fair Value Measurements and Disclosures — Transition and Open Effective Date Information,” which delayed the effective date of ASC 820 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008 and interim periods within those years, which for the Company was the first quarter of fiscal 2010. The Company’s adoption of the provisions of ASC 820 for non-financial assets and non-financial liabilities in the first quarter of fiscal 2010 had no impact on its consolidated financial statements.

In December 2007, the FASB issued ASC 805, “Business Combinations” (“ASC 805”). ASC 805 establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. ASC 805 also provides guidance for recognizing and measuring the goodwill acquired in the business combination or a gain from a bargain purchase and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. ASC 805 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which for the Company was the first quarter of fiscal 2010. ASC 805 impacted the Company’s consolidated financial statements for business combinations with an acquisition date on or after adoption in the first quarter of fiscal 2010. For business combinations in which the acquisition date was before the adoption date, the provision of ASC 805 requires changes in the amount of income tax uncertainties to be recognized in earnings rather than as an adjustment to the accounting for prior business combinations. The Company’s adoption of ASC 805 in the first quarter of fiscal 2010 did not have a material impact on its consolidated financial statements.

In April 2008, the FASB issued ASC 350-30-65-1, “General Intangibles Other than Goodwill — Transition and Open Effective Date Information” (“ASC 350-30-65-1”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350, “Intangibles — Goodwill and Other.” ASC 350-30-65-1 is effective for fiscal years beginning on or after December 15, 2008, which for the Company was the first quarter of fiscal 2010. The Company’s adoption of ASC 350-30-65-1 in the first quarter of fiscal 2010 had no impact on its consolidated financial statements.

In September 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”), and ASU 2009-14, “Certain Revenue Arrangements That Include Software Elements” (“ASU 2009-14”). ASU 2009-13 amends the revenue guidance under Subtopic 605-25, “Multiple Element Arrangements,” and addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration shall be measured and allocated to the separate units of accounting in the arrangement. ASU 2009-14 excludes tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of Subtopic 985-605, “Revenue Recognition.” ASU 2009-13 and ASU 2009-14 are effective for fiscal periods beginning on or after June 15, 2010, which for the Company is the first quarter of fiscal 2011. The Company is currently evaluating the impact that ASU 2009-13 and ASU 2009-14 will have on its consolidated financial statements.

- Definition

Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

Debt

12 Months Ended

Jul. 02, 2010

Debt [Abstract]

Debt


Note 3.	Debt

Long-term debt consisted of the following as of July 2, 2010 and July 3, 2009 (in millions):


	2010			2009

Term loan	$	400		$	481
Capital lease obligations		—			1

Total debt		400			482
Less amounts due in one year		(106	)		(82	)

Long-term debt	$	294		$	400

Credit Facility

In February 2008, Western Digital Technologies, Inc. (“WDTI”), a wholly-owned subsidiary of the Company, entered into a five-year Credit Agreement that provided for a $750 million unsecured loan consisting of a $500 million term loan facility (“Term Loan”) and a $250 million revolving credit facility. The Company voluntarily terminated the $250 million revolving credit facility during its fourth fiscal quarter of 2010. As of July 2, 2010, the Term Loan had a variable interest rate of 1.63% and a remaining balance of $400 million, which requires principal payments totaling $106 million in 2011, $144 million in 2012 and $150 million in 2013. The Term Loan has a maturity date of February 11, 2013. The Credit Facility requires WDTI to comply with a leverage ratio and an interest coverage ratio calculated on a consolidated basis for the Company and its subsidiaries. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict WDTI’s and its subsidiaries’ ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and enter into certain speculative hedging arrangements. As of July 2, 2010, WDTI was in compliance with all covenants.

Commitments and Contingencies

12 Months Ended

Jul. 02, 2010

Commitments and Contingencies [Abstract]

Commitments and Contingencies


Note 4.	Commitments and Contingencies

Lease Commitments

The Company leases certain facilities and equipment under long-term, non-cancelable operating leases. The Company’s operating leases consist of leased property that expire at various dates through 2020. Rental expense under these operating leases, including month-to-month rentals, was $22 million, $21 million and $18 million in 2010, 2009 and 2008, respectively. Future minimum lease payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at July 2, 2010 are as follows (in millions):


2011	$	15
2012		13
2013		14
2014		12
2015		10
Thereafter		35

Total future minimum payments	$	99

Product Warranty Liability

Changes in the warranty accrual for 2010, 2009 and 2008 were as follows (in millions):


	2010			2009			2008

Warranty accrual, beginning of period	$	123		$	114		$	90
Charges to operations		183			126			106
Utilization		(138	)		(111	)		(73	)
Changes in estimate related to pre-existing warranties		2			(6	)		(9	)

Warranty accrual, end of period	$	170		$	123		$	114

Accrued warranty also includes amounts classified in non-current other liabilities of $41 million at July 2, 2010 and $28 million at July 3, 2009.

Long-term Purchase Agreements

The Company has entered into long-term purchase agreements with various component suppliers. The commitments depend on specific products ordered and may be subject to minimum quality requirements and future price negotiations. The Company expects these commitments to total approximately $529 million for 2011, $634 million for 2012, and approximately $3 million a year for 2013 through 2015.

Legal Proceedings

12 Months Ended

Jul. 02, 2010

Legal Proceedings [Abstract]

Legal Proceedings


Note 5.	Legal Proceedings

The Company discloses material loss contingencies deemed to be reasonably possible and accrues for loss contingencies when, in consultation with the Company’s legal advisors, the Company concludes that a loss is probable and reasonably estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates.

Intellectual Property Litigation

On December 8, 2008, plaintiffs MagSil Corporation and the Massachusetts Institute of Technology filed a complaint in the District of Delaware against the Company and seven other companies in the disk drive industry alleging infringement of U.S. Patent Nos. 5,629,922 and 5,835,314. The complaint sought unspecified monetary damages and injunctive relief. The asserted patents allegedly relate to tunneling magneto resistive technology. MagSil and the Company executed a Confidential Settlement Agreement on June 22, 2010. The parties filed a Stipulation of Dismissal in July 2010. The financial impact of the settlement was not material to the Company.

On June 20, 2008, plaintiff Convolve, Inc. (“Convolve”) filed a complaint in the Eastern District of Texas against the Company and two other companies alleging infringement of U.S. Patent Nos. 6,314,473 and 4,916,635. Plaintiff is seeking unspecified monetary damages and injunctive relief. On October 10, 2008, Convolve amended its complaint to allege infringement of only the ‘473 patent. The ‘473 patent allegedly relates to interface technology to select between certain modes of a disk drive’s operations relating to speed and noise. The Company intends to defend itself vigorously in this matter.

On April 7, 2009, plaintiff Gregory Bender filed a complaint in the Northern District of California against the Company and Seagate Technology LLC alleging infringement of U.S. Patent No. 5,103,188. Plaintiff is seeking unspecified monetary damages. The asserted patent allegedly relates to buffered transconductance amplifier technology. The Company intends to defend itself vigorously in this matter.

On July 15, 2009, plaintiffs Carl B. Collins and Farzin Davanloo filed a complaint in the Eastern District of Texas against the Company and ten other companies alleging infringement of U.S. Patent Nos. 5,411,797 and 5,478,650. Plaintiffs are seeking injunctive relief and unspecified monetary damages, fees, and costs. The asserted patents allegedly relate to nanophase diamond films. The Company intends to defend itself vigorously in this matter.

On December 7, 2009, plaintiff Nazomi Communications filed a complaint in the Eastern District of Texas against the Company and seven other companies alleging infringement of U.S. Patent Nos. 7,080,362 and 7,225,436. Plaintiffs are seeking injunctive relief and unspecified monetary damages, fees, and costs. The asserted patents allegedly relate to processor cores capable of Java hardware acceleration. The Company intends to defend itself vigorously in this matter.

On January 5, 2010, plaintiff Enova Technology Corporation filed a complaint in the District of Delaware against the Company and Initio Corporation alleging infringement of U.S. Patent Nos. 7,136,995 and 7,386,734. Plaintiffs are seeking injunctive relief and unspecified monetary damages, fees, and costs. The asserted patents allegedly relate to real time full disk encryption application specific integrated circuits, or ASICs. The Company intends to defend itself vigorously in this matter.

Employment Litigation

On March 20, 2009, plaintiff Ghazala H. Durrani, a former employee of the Company, filed a putative class action complaint in the Alameda County (California) Superior Court. The complaint alleges that certain of the Company’s engineers have been misclassified as exempt employees under California state law and are, therefore, due unspecified amounts for unpaid hourly overtime wages and other amounts, as well as penalties for allegedly missed meal and rest periods. By court order dated April 24, 2009, the case was transferred to the Orange County (California) Superior Court, where it is now pending. On or about June 16, 2009, the Company was dismissed from the case without prejudice by stipulation, leaving WDTI as the sole remaining defendant. On or about June 4, 2009, WDTI filed its answer to the complaint, denying the substantive allegations thereof and raising several affirmative defenses. Formal discovery has commenced, and the court has set October 18, 2010, as the last date for the parties to schedule a hearing on whether the case should be certified as a class action. The parties participated in a mediation of the case on June 3, 2010 before a former federal magistrate, which may lead to a settlement of the case. No formal settlement agreement has been entered into, however, and there is no assurance that settlement will be reached. Any such settlement would require court approval before it can become final. If the matter is settled on the terms presently under consideration, the Company expects that the financial impact of the settlement would not be material to the Company. If the matter is not settled, and the Company is unsuccessful in its defense of this matter, potential liability could include unpaid wages, interest, penalties, attorneys’ fees and costs. Absent settlement, the Company intends to continue to defend itself vigorously in this matter.

Other Matters

In the normal course of business, the Company is subject to other legal proceedings, lawsuits and other claims. Although the ultimate aggregate amount of probable monetary liability or financial impact with respect to these other matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that any monetary liability or financial impact to the Company from these other matters, individually and in the aggregate, would not be material to the Company’s financial condition, results of operations or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company from these other matters could differ materially from those projected.

Business Segment, Geographic Information and Major Customers

12 Months Ended

Jul. 02, 2010

Business Segment, Geographic Information and Major Customers [Abstract]

Business Segment, Geographic Information and Major Customers


Note 6.	Business Segment, Geographic Information and Major Customers

Segment Information

The Company operates in one reportable operating segment, the hard drive business.

Geographic Information

The Company’s operations outside the United States include manufacturing facilities in Malaysia, Singapore, and Thailand as well as sales offices throughout Asia, Canada, Europe, India, Japan, and the Middle East. The following table summarizes the Company’s operations by geographic area for the three years ended July 2, 2010 (in millions):


	2010		2009		2008

Net revenue(1):
United States	$	1,889	$	1,492	$	1,949
Asia		5,239		3,639		3,343
Europe, Middle East and Africa		2,260		2,008		2,344
Other		462		314		438

Total	$	9,850	$	7,453	$	8,074

Long-lived assets:
United States	$	1,173	$	1,043
Asia		1,379		954
Europe, Middle East and Africa		56		64

Total	$	2,608	$	2,061


(1)		Net revenue is attributed to geographic regions based on the ship to location of the customer.

Major Customer

For 2010 and 2008, no single customer accounted for 10%, or more, of the Company’s net revenue. For 2009, sales to Dell Inc. accounted for 10% of the Company’s net revenue.

Shareholders' Equity

12 Months Ended

Jul. 02, 2010

Shareholders' Equity [Abstract]

Shareholders' Equity


Note 8.	Shareholders’ Equity

Stock Incentive Plans

The Company maintains four stock-based incentive plans (collectively referred to as the “Stock Plans”): The amended and restated 2004 Performance Incentive Plan, the Employee Stock Option Plan, the Broad-Based Stock Incentive Plan and the Stock Option Plan for Non-Employee Directors. No new awards may be granted under the Employee Stock Option Plan, the Broad-Based Stock Incentive Plan or the Stock Option Plan for Non-Employee Directors (collectively referred to as the “Prior Stock Plans”). As of July 2, 2010, options to purchase 1.7 million shares of the Company’s common stock remain outstanding and exercisable under the Prior Stock Plans. Options granted under the Prior Stock Plans vested over periods from one to four years. Options granted under the Prior Stock Plans expire either five or ten years from the date of grant. There are no outstanding restricted stock awards under the Prior Stock Plans.

The types of awards that may be granted under the 2004 Performance Incentive Plan include stock options, stock appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash bonus awards. Persons eligible to receive awards under the 2004 Performance Incentive Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the Performance Incentive Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and stock appreciation rights under the 2004 Performance Incentive Plan is ten years after the grant date of the award.

As of July 2, 2010, the maximum number of shares of the Company’s common stock that was authorized for award grants under the 2004 Performance Incentive Plan was 37.2 million shares. Any shares subject to awards under the Prior Stock Plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will become available for other award grants under the 2004 Performance Incentive Plan. The 2004 Performance Incentive Plan will terminate on September 20, 2014 unless terminated earlier by the Company’s Board of Directors.

Employee Stock Purchase Plan

During 2006, the Company adopted the ESPP whereby eligible employees may authorize payroll deductions of up to 10% of their eligible compensation to purchase shares of the Company’s common stock at 95% of the fair market value of common stock on either the date of grant or on the exercise date, whichever is less. The date of grant of each offering period is June 1st or December 1st, except for the initial offering period, which began on December 15, 2005. Each offering period is 24 months and consists of four exercise dates. If the fair market value of the common stock is less on a given exercise date than on the date of grant, employee participation in that offering period is terminated and re-enrollment in the new offering period occurs automatically. The Company’s ESPP operates in the U.S. in accordance with Section 423 of the Internal Revenue Code.

Stock-Based Compensation Expense

The Company charged to expense $37 million, $24 million and $18 million for stock-based compensation related to options issued under stock option plans and the ESPP in 2010, 2009 and 2008, respectively. As of July 2, 2010, total compensation cost related to unvested stock options and ESPP rights issued to employees but not yet recognized was $52 million and will be amortized on a straight-line basis over a weighted average service period of approximately 2.1 years.

The Company granted approximately 1.2 million, 0.9 million and 0.9 million restricted stock units during 2010, 2009 and 2008, respectively, which are payable in an equal number of shares of the Company’s common stock at the time of vesting of the units. Restricted stock unit awards vest over periods ranging from one to five years from the date of grant. The aggregate market value of the shares underlying the restricted stock awards at the date of grant was $45 million, $19 million and $23 million in 2010, 2009 and 2008, respectively. These amounts are being recognized to expense over the corresponding vesting periods. For purposes of valuing these awards, the Company has assumed a forfeiture rate of 1.55% based on a historical analysis indicating forfeitures for these types of awards. The Company charged to expense $23 million, $23 million and $19 million related to restricted stock and restricted stock unit awards that vested during 2010, 2009 and 2008, respectively. As of July 2, 2010, the aggregate unamortized fair value of all unvested restricted stock unit awards was $51 million, which will be recognized on a straight-line basis over a weighted average vesting period of approximately 1.6 years.

Fair Value Disclosure — Binomial Model

The fair value of stock options granted during 2010, 2009 and 2008 was estimated using a binomial option-pricing model. The binomial model requires the input of highly subjective assumptions including the expected stock price volatility, the expected price multiple at which employees are likely to exercise stock options and the expected employee termination rate. The Company uses historical data to estimate option exercise, employee termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of stock options granted during the three years ended July 2, 2010 was estimated using the following weighted average assumptions:


	2010	2009	2008

Suboptimal exercise factor	1.73	1.73	1.61
Range of risk-free interest rates	0.31% to 3.40%	0.38% to 3.44%	1.57% to 4.38%
Range of expected stock price volatility	0.40 to 0.72	0.43 to 0.77	0.33 to 0.67
Weighted average expected volatility	0.57	0.55	0.48
Post-vesting termination rate	3.57%	4.02%	5.26%
Dividend yield	—	—	—
Fair value	$17.09	$9.05	$9.65

The weighted average expected term of the Company’s stock options for 2010, 2009 and 2008 was 4.6 years, 4.9 years and 5.3 years, respectively.

Stock Option Activity

The following table summarizes activity under the Stock Plans (in millions, except per share amounts and remaining contractual lives):


				Weighted Average		Remaining		Aggregate
	Number			Exercise Price		Contractual Life		Intrinsic
	of Shares			Per Share		(in years)		Value

Options outstanding at June 29, 2007		10.8		$	12.15
Granted		2.1			25.22
Exercised		(4.2	)		10.59
Canceled or expired		(0.7	)		29.34

Options outstanding at June 27, 2008		8.0		$	14.92
Granted		4.2			20.02
Exercised		(0.6	)		9.59
Canceled or expired		(0.3	)		20.10

Options outstanding at July 3, 2009		11.3		$	17.00
Granted		1.4			36.06
Exercised		(3.1	)		14.67
Canceled or expired		(0.2	)		22.78

Options outstanding at July 2, 2010		9.4		$	20.61		4.9	$	98

Exercisable at July 2, 2010		4.6		$	15.71		4.2	$	67

Vested and expected to vest after July 2, 2010		9.3		$	20.52		4.9	$	98

The aggregate intrinsic value is calculated based on the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock for those awards that have an exercise price below the quoted price on the date the intrinsic value is determined. As of July 2, 2010, the Company had options outstanding to purchase an aggregate of 7.9 million shares with an exercise price below the quoted price of the Company’s stock on that date resulting in an aggregate intrinsic value of $98 million. During 2010 and 2009, the aggregate intrinsic value of options exercised under the Company’s stock option plans was $72 million and $8 million, respectively, determined as of the date of exercise.

The following table summarizes information about options outstanding and exercisable under the Stock Plans as of July 2, 2010 (in millions, except per share amounts):


	Options Outstanding						Options Exercisable
			Remaining
Range of	Number		Contractual Life*		Weighted Average		Number		Weighted Average
Exercise Prices	of Shares		(in years)		Exercise Price		of Shares		Exercise Price

$ 2.10 – 13.76		2.1		3.1	$	8.39		2.1	$	8.38
13.95 – 16.85		1.9		5.5		16.69		0.5		16.59
16.96 – 23.78		3.0		5.1		22.42		1.6		21.85
23.97 – 35.75		2.2		5.6		31.82		0.4		26.74
37.65 – 40.66		0.2		6.3		38.75		0.0		38.55

		9.4		4.9	$	20.61		4.6	$	15.71


*		Represents the weighted average remaining contractual lives of the options outstanding.

Fair Value Disclosure — Black-Scholes-Merton Model

The fair value of ESPP purchase rights issued is estimated at the date of grant of the purchase rights using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until options are exercised. Purchase rights under the current ESPP provisions are granted on either June 1 or December 1 of each year.

The fair values of all ESPP purchase rights granted on or prior to July 2, 2010 have been estimated at the date of grant using a Black-Scholes-Merton option-pricing model with the following weighted average assumptions:


	ESPP
	2010			2009			2008

Option life (in years)		1.24			1.30			1.24
Risk-free interest rate		0.57	%		0.65	%		3.40	%
Stock price volatility		0.53			0.63			0.38
Dividend yield		—			—			—
Fair value	$	10.02		$	3.61		$	6.47

Stock Repurchase Program

The Company’s Board of Directors previously authorized the repurchase of $750 million of common stock in open market transactions under a stock repurchase program through March 31, 2013. Since the inception of this program in 2005, through July 2, 2010, the Company has repurchased 18 million shares for a total cost of $284 million. The Company expects stock repurchases to be funded principally by operating cash flows. The Company may continue to repurchase stock as the Company deems appropriate and market conditions allow. The Company did not make any repurchases of common stock under the authorized stock repurchase program during 2010. Subsequent to July 2, 2010 through August 13, 2010, the Company repurchased 1.8 million shares for a total cost of $50 million.

Stock Purchase Rights

On April 6, 2001, the Company adopted a plan to protect shareholders’ rights in the event of a proposed takeover of the Company. Under the plan, each share of the Company’s outstanding common stock carries one Right to Purchase Series A Junior Participating Preferred Stock (the “Right”). The Right enables the holder, under certain circumstances, to purchase Series A Junior Participating Preferred Stock of Western Digital at an exercise price of $50.00 per share ten days after a person or group publicly announces it has acquired or has tendered an offer for 15%, or more, of the Company’s outstanding common stock. The Rights are redeemable by the Company at $0.001 per Right. The 2001 Rights plan expires April 6, 2011.

Stock Reserved for Issuance

The following table summarizes all shares of common stock reserved for issuance at July 2, 2010 (in millions):


	Number
	of Shares

Maximum shares issuable in connection with:
Outstanding awards and shares available for award grants		27.9
ESPP		5.4

Total		33.3

Income Taxes

12 Months Ended

Jul. 02, 2010

Income Taxes [Abstract]

Income Taxes


Note 9.	Income Taxes

Pre-tax Income

The domestic and foreign components of income before income taxes were as follows for the three years ended July 2, 2010 (in millions):


	2010		2009		2008

Foreign	$	1,418	$	459	$	812
Domestic		102		42		169

Income before income taxes	$	1,520	$	501	$	981

Income Tax Provision

The components of the provision for income taxes were as follows for the three years ended July 2, 2010 (in millions):


	2010			2009			2008

Current:
Foreign	$	9		$	13		$	12
Domestic-federal		101			(7	)		103
Domestic-state		1			1			1
Deferred:
Domestic-federal		37			24			(2	)
Domestic-state		(10	)		—			—

Income tax provision	$	138		$	31		$	114

Remaining net undistributed earnings from foreign subsidiaries at July 2, 2010 on which no U.S. tax has been provided amounted to approximately $4.0 billion. The net undistributed earnings are intended to finance local operating requirements and capital investments. Accordingly, an additional U.S. tax provision has not been made on these earnings. The tax liability for these earnings would approximate $1.4 billion if the Company repatriated the $4.0 billion in undistributed earnings from the foreign subsidiaries.

Deferred Taxes

Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities as of July 2, 2010 and July 3, 2009 were as follows (in millions):


	2010			2009

Deferred tax assets:
Sales related reserves and accrued expenses not currently deductible	$	50		$	49
Accrued compensation and benefits not currently deductible		44			43
Domestic net operating loss (“NOL”) carryforward		52			50
Business credit carryforward		137			144
Other		47			52

Total deferred tax assets		330			338
Deferred tax liabilities:
Depreciation		(58	)		(30	)
Other		(11	)		(20	)

Total deferred tax liabilities		(69	)		(50	)

Deferred tax assets, net	$	261		$	288


	2010			2009

Deferred tax assets:
Current portion (included in other current assets)	$	81		$	80
Non-current portion (included in other non-current assets)		249			258

Total deferred tax assets		330			338
Deferred tax liabilities:
Current portion (included in other current assets)		(2	)		(11	)
Non-current portion (included in other non-current assets)		(67	)		(39	)

Total deferred tax liabilities		(69	)		(50	)

Deferred tax assets, net	$	261		$	288

In addition to the deferred tax assets presented above, the Company had additional NOL benefits related to stock-based compensation deductions of approximately $93 million and $76 million at July 2, 2010 and July 3, 2009, respectively. The increase in NOL benefits relates to the current year stock based compensation deductions which will result in a future benefit of $25 million, current year utilization of the stock based NOL of $4 million, and a reduction in the estimate of the prior year NOL utilization related to stock based compensation of $4 million. This $93 million will be recorded as a credit to shareholders equity when an incremental benefit is recognized after considering all other tax attributes available to the Company.

Effective Tax Rate

Reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows for the three years ended July 2, 2010:


	2010			2009			2008

U.S. Federal statutory rate		35	%		35	%		35	%
Tax rate differential on international income		(26	)		(30	)		(28	)
Tax effect of U.S. permanent differences		1			6			4
State income tax, net of federal tax		—			1			2
Income tax credits		(1	)		(8	)		(2	)
Other		—			2			1

Effective tax rate		9	%		6	%		12	%

Tax Holidays and Carryforwards

A substantial portion of the Company’s manufacturing operations in Malaysia and Thailand operate under various tax holidays and tax incentive programs which will expire in whole or in part at various dates through 2022. Certain of the holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentives was to increase the Company’s net earnings by $560 million ($2.40 per diluted share), $241 million ($1.07 per diluted share), and $391 million ($1.73 per diluted share) in 2010, 2009, and 2008, respectively.

As of July 2, 2010, the Company had federal and state NOL carryforwards of approximately $249 million and $73 million, respectively. In addition, the Company had various federal and state tax credit carryforwards of approximately $204 million combined. The loss carryforwards available to offset future federal and state taxable income expire at various dates from 2020 to 2029 and 2015 to 2019, respectively. Approximately $105 million of the credit carryforwards available to offset future taxable income expire at various dates from 2011 to 2028. The remaining amount is available indefinitely. NOLs and credits relating to Komag, which was acquired by the Company on September 5, 2007, are subject to limitations under Section 382 and 383 of the Internal Revenue Code. The Company does not expect these limitations to result in a reduction in the total amount of NOLs and credits ultimately realized.

Uncertain Tax Positions

The Company recognizes liabilities for uncertain tax positions based on a two-step process. First, the tax position is evaluated for recognition by determining if it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to be recognized in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Company’s balance sheet. Interest and penalties related to unrecognized tax benefits are recognized as liabilities recorded for uncertain tax positions and are recorded in the provision for income taxes. As of July 2, 2010, such interest and penalties were not material.

As of July 2, 2010, the Company had approximately $230 million of unrecognized tax benefits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year ended July 2, 2010 (in millions):


Unrecognized tax benefit at July 3, 2009	$	136
Gross increases related to prior year tax positions		—
Gross decreases related to prior year tax positions		(3	)
Gross increases related to current year tax positions		98
Settlements/lapse of statute of limitations		(1	)

Unrecognized tax benefit at July 2, 2010	$	230

The entire balance of unrecognized tax benefits at July 2, 2010, if recognized, would affect the effective tax rate.

The Company files U.S. Federal, U.S. state, and foreign tax returns. For both federal and state tax returns, with few exceptions, the Company is subject to examination for fiscal years 2006 through 2009. In foreign jurisdictions, with few exceptions, the Company is subject to examination for all years subsequent to fiscal 2005. The Company is no longer subject to examination by the Internal Revenue Service (“IRS”) for periods prior to 2006, although carry forwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authority if they either have been or will be used in a subsequent period.

The IRS is currently examining fiscal years 2006 and 2007 for the Company and calendar years 2005 and 2006 for Komag. In the year ended July 2, 2010, the local tax authorities completed, with no material adjustment, their examination of the Company’s French subsidiary for fiscal years 2003 through 2005.

Due to the risk that audit outcomes and the timing of audit settlements are subject to significant uncertainty, the Company’s current estimate of the total amounts of unrecognized tax benefits could increase or decrease for all open tax years. As of July 2, 2010, it is not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months. Any significant change in the amount of the Company’s unrecognized tax benefits would most likely result from additional information or settlements relating to the examination of the Company’s uncertain tax positions.

Fair Value Measurements

12 Months Ended

Jul. 02, 2010

Fair Value Measurements [Abstract]

Fair Value Measurements


Note 10.	Fair Value Measurements

Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities.

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of July 2, 2010, and indicates the fair value hierarchy of the valuation techniques utilized to determine such value (in millions):


	Fair Value Measurements at
	Reporting Date Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total

Cash equivalents
Money market funds	$	458	$	—	$	—	$	458
U.S. Treasury securities		—		385		—		385
U.S. Government agency securities		—		370		—		370

Total cash equivalents		458		755		—		1,213

Auction-rate securities		—		—		15		15
Foreign exchange contracts		—		17		—		17

Total assets at fair value	$	458	$	772	$	15	$	1,245

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of July 3, 2009, and indicates the fair value hierarchy of the valuation techniques utilized to determine such value (in millions):


	Fair Value Measurements at
	Reporting Date Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total

Cash equivalents
Money market funds	$	468	$	—	$	—	$	468
U.S. Treasury securities		—		197		—		197
U.S. Government agency securities		—		79		1		80

Total cash equivalents		468		276		1		745

Auction-rate securities		—		—		18		18
Foreign exchange contracts		—		5		—		5

Total assets at fair value	$	468	$	281	$	19	$	768

Money Market Funds. The Company’s money market funds are funds that invest in U.S. Treasury securities and are recorded within cash and cash equivalents in the consolidated balance sheets. Money market funds are valued based on quoted market prices.

U.S. Treasury Securities. The Company’s U.S. Treasury securities are investments in Treasury bills with original maturities of three months or less and are recorded within cash and cash equivalents in the consolidated balance sheets. U.S. Treasury securities are valued using a market approach which is based on observable inputs including market interest rates from multiple pricing sources.

U.S. Government Agency Securities. The Company’s U.S. Government agency securities are fixed income securities sponsored by the U.S. Government, have original maturities of three months or less and are recorded within cash and cash equivalents in the consolidated balance sheets. At July 3, 2009, the Company had $1 million in U.S. Government agency securities classified as available-for-sale securities recorded within other current assets in the consolidated balance sheets. U.S. Government agency securities are valued using a market approach which is based on observable inputs including market interest rates from multiple pricing sources.

Auction-Rate Securities. The Company’s auction-rate securities have maturity dates through 2050, are primarily backed by insurance products and are accounted for as available-for-sale securities. These investments are expected to be held until secondary markets become available and as a result, are classified as long-term investments and recorded within other non-current assets in the consolidated balance sheets. Auction-rate securities are valued using an income approach which is based on a discounted cash flow model or a credit default model. The inputs to the discounted cash flow model include market interest rates and a discount factor to reflect the illiquidity of the investments. The inputs to the credit default model include market interest rates, yields of similar securities, and probability-weighted assumptions related to the creditworthiness of the underlying assets.

Foreign Exchange Contracts. The Company’s foreign exchange contracts are short-term contracts to hedge the Company’s foreign currency risk related to the Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling. Foreign exchange contracts are classified within other current assets in the consolidated balance sheets. Foreign exchange contracts are valued using an income approach which is based on a present value of future cash flows model. The market-based observable inputs for the model include forward rates and credit default swap rates.

The following table presents the changes in Level 3 financial assets measured on a recurring basis (in millions):


	U.S.
	Government
	Agency			Auction-rate
	Securities			Securities			Total

June 27, 2008	$	3		$	28		$	31
Maturities		(2	)		—			(2	)
Other-than-temporary impairment recognized in earnings		—			(10	)		(10	)

July 3, 2009		1			18			19
Sales		—			(3	)		(3	)
Maturities		(1	)		—			(1	)

July 2, 2010	$	—		$	15		$	15

The Company had no liabilities that were re-measured and reported at fair value on a recurring basis during the years ended July 2, 2010 and July 3, 2009.

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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Foreign Exchange Contracts

12 Months Ended

Jul. 02, 2010

Foreign Exchange Contracts [Abstract]

Foreign Exchange Contracts


Note 11.	Foreign Exchange Contracts

As of July 2, 2010, the net amount of existing gains expected to be reclassified into earnings within the next twelve months was $11 million and the Company did not have any foreign exchange contracts with credit-risk-related contingent features. The Company opened $4.8 billion and $1.4 billion, and closed $4.1 billion and $1.8 billion, in foreign exchange contracts for the years ended July 2, 2010 and July 3, 2009, respectively. The fair value and balance sheet location as of July 2, 2010 and July 3, 2009 were as follows (in millions):

Asset Derivatives

Liability Derivatives

2010

2009

2010

2009

Derivatives Designated as

Balance Sheet

Hedging Instruments

Location

Fair Value

Location

Fair Value

Location

Fair Value

Location

Fair Value

Foreign exchange contracts

Other current assets

—

The impact on the consolidated financial statements during the years ended July 2, 2010 and July 3, 2009 were as follows (in millions):

Amount of Gain (Loss)

Location of Gain (Loss)

Amount of Gain (Loss)

Recognized in

Reclassified from

Accumulated OCI

Accumulated

Accumulated OCI into

Derivatives in Cash

on Derivatives

OCI into Income

Income

Flow Hedging Relationships

2010

2009

2010

2009

Foreign exchange contracts

(33

)

Cost of revenue

(47

)

The total net realized transaction and forward exchange contract currency gains and losses were not material to the consolidated financial statements during the years ended July 2, 2010 and July 3, 2009. See Notes 1 and 10 for additional disclosures related to the Company’s foreign exchange contracts.

Other Intangible Assets

12 Months Ended

Jul. 02, 2010

Other Intangible Assets [Abstract]

Other Intangible Assets


Note 12.	Other Intangible Assets

Other intangible assets consist primarily of technology acquired in business combinations and are amortized on a straight-line basis over the respective estimated useful lives of the assets. In 2010, the Company acquired $11 million of intangibles as a result of the Hoya acquisition, primarily related to a glass substrate supply agreement and existing technology. Intangible assets as of July 2, 2010 were as follows:


	Weighted Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Amount		Amortization		Amount
	(in years)		(in millions)		(in millions)		(in millions)

Existing technology		9	$	127	$	45	$	82
Supply agreement		2		6		—		6

Total			$	133	$	45	$	88

In 2009, the Company acquired $24 million of intangibles as a result of the SiliconSystems acquisition and recorded a $5 million impairment charge related to a customer relationship intangible asset acquired from Komag. Intangible assets as of July 3, 2009 were as follows:

Weighted Average

Gross Carrying

Accumulated

Net Carrying

Amortization Period

Amount

Amortization

Amount

(in years)

(in millions)

Existing technology

124

Amortization expense for intangible assets was $12 million, $11 million and $16 million for 2010, 2009 and 2008, respectively. As of July 2, 2010, estimated future amortization expense for intangible assets is approximately $17 million for 2011, $16 million for 2012, $13 million for 2013, $12 million for 2014, and $12 million for 2015.

Restructuring and Sale of Facility

12 Months Ended

Jul. 02, 2010

Restructuring and Sale of Facility [Abstract]

Restructuring and Sale of Facility


Note 13.	Restructuring and Sale of Facility

During 2009, the Company announced and completed a restructuring plan to realign its cost structure as a result of a softer demand environment. This resulted in the closure of one of the Company’s hard drive manufacturing facilities in Thailand, the disposal of its substrate manufacturing facility in Sarawak, Malaysia, and headcount reductions throughout the world of approximately 3,300 people. Restructuring costs totaled $112 million and consisted of $81 million of asset impairment charges, $27 million of employee termination benefits and $4 million of contract termination and other exit costs. Total cash expenditures related to the restructuring activities were approximately $31 million. The asset impairment charge of $81 million consisted of $76 million primarily related to the land, buildings, machinery and equipment at the manufacturing facilities in Thailand and Malaysia and $5 million related to a customer relationship intangible asset acquired from Komag. The impairment charge is based on the excess of the carrying values over the estimated fair values of the assets. The fair values of the land, buildings, and equipment were estimated using the market approach. The intangible asset was valued using the income approach.

During the fourth quarter of 2009, the Company sold its substrate manufacturing facility, and related assets, in Sarawak, Malaysia for net proceeds of approximately $29 million, resulting in a gain of $18 million. The closure and disposal of the Company’s manufacturing facilities was to realign its manufacturing capacity with the Company’s expectations regarding demand at that time. Total restructuring charges of $112 million, partially offset by the $18 million gain on sale of assets, is included in restructuring and other, net within operating expenses in the accompanying consolidated statements of income.

Acquisitions

12 Months Ended

Jul. 02, 2010

Acquisitions [Abstract]

Acquisitions


Note 14.	Acquisitions

Magnetic Media Operations

On June 30, 2010, the Company acquired the facilities, equipment, intellectual property and working capital of the magnetic media sputtering operations of Hoya. The acquisition is intended to augment the Company’s existing magnetic media operations, strengthening its ability to meet anticipated growth in demand for hard drives. The cost of the acquisition was approximately $233 million and was funded with available cash. The Company has identified and recorded the assets, including specifically identifiable intangible assets, and liabilities assumed from Hoya at their estimated fair values as of the date of acquisition, and has allocated the remaining value to goodwill. The values assigned to certain acquired assets and liabilities are preliminary, are based on information available as of July 2, 2010, and may be adjusted as further information becomes available during the allocation period of up to 12 months from the date of the acquisition. The purchase price was based on preliminary estimates of the working capital assets acquired and liabilities assumed and therefore, may be adjusted when finalized. The preliminary allocation is as follows (in millions):


	June 30,
	2010

Tangible assets acquired and liabilities assumed:
Inventories	$	36
Property and equipment		189
Accounts payables and other liabilities		(10	)
Intangible assets		11
Goodwill		7

Total	$	233

Intangible assets of $11 million primarily relate to a glass substrate supply agreement and existing technology. These intangibles will be amortized to cost of revenue over the weighted average useful life of 3 years. Pro forma financial information has not been presented as the acquisition did not have a material impact on the Company’s consolidated financial statements for the fiscal year ended July 2, 2010.

Semiconductor Wafer Fabrication Facility

On May 25, 2010, the Company agreed to purchase a semiconductor wafer fabrication facility consisting of land, a building, equipment and certain intangible assets for a total acquisition cost of approximately $35 million. The land and building were acquired for $20 million during the fourth fiscal quarter of 2010. The Company is expecting to acquire the equipment and certain intangible assets for approximately $15 million and convert the facility from a semiconductor fabrication facility to a head wafer fabrication facility in late fiscal 2011.

SiliconSystems

On March 27, 2009, the Company acquired SiliconSystems, a supplier of solid-state drives for the embedded systems market. The total acquisition cost of SiliconSystems was $66 million, consisting of $65 million in cash paid to SiliconSystems shareholders and $1 million of other direct acquisition costs. The Company identified and recorded the assets, including specifically identifiable intangible assets, and liabilities assumed from SiliconSystems at their estimated fair values as of the acquisition date, and allocated the remaining value to goodwill. The allocation was as follows (in millions):


	March 27,
	2009

Tangible assets acquired and liabilities assumed, net	$	5
Intangible assets		24
In-process research and development		14
Goodwill		23

Total	$	66

Intangible assets of $24 million primarily relates to existing technology that is amortized to cost of revenue over the weighted average useful life of 6 years. In-process research and development of $14 million relates to projects that had not reached technological feasibility and had no alternative future use, and therefore, did not qualify for capitalization and was recorded as an operating expense during 2009 in the accompanying consolidated statements of income.

Komag

On September 5, 2007, the Company acquired Komag, a media manufacturer, which was followed by a merger of State M, the Company’s indirect wholly-owned subsidiary, and Komag whereby Komag became an indirect wholly-owned subsidiary of the Company and changed its name to WD Media. The aggregate purchase price for Komag was $1.0 billion, consisting of cash paid for outstanding shares, transaction fees, severance and other employee-related equity payments.

The Company identified and recorded the assets, including specifically identifiable intangible assets, and liabilities assumed from Komag at their estimated fair values as of the acquisition date, and allocated the residual value to goodwill. The allocation was as follows (in millions):


	Sept. 5,
	2007

Tangible assets acquired and liabilities assumed:
Cash	$	72
Short-term investments		58
Accounts receivable		114
Inventories		204
Other current assets		6
Property and equipment		657
Deferred taxes and other non-current assets		118
Accounts payable		(130	)
Accrued expenses		(81	)
Debt assumed		(248	)
Other liabilities		(15	)
Intangible assets		89
In-process research and development		49
Goodwill		109

Total	$	1,002

The recorded values and estimated useful lives of the intangibles acquired from Komag were:


			Estimated
	Estimated Fair		Weighted-Average
	Value		Useful Life
	(in millions)		(in years)

Existing technology	$	79		10
Customer substrate relationships		10		3

Total acquired identifiable intangible assets	$	89		9

The customer substrate relationships intangible asset was subsequently impaired in 2009 as a result of the Company’s restructuring plan. See Note 13.

Komag had an in-process research and development project associated with technology for higher recording densities on advanced perpendicular recording media. As these advanced products were not ready for commercial production and had no alternative future use, the development effort did not qualify for capitalization. Accordingly, the Company recorded $49 million as a charge to operating expenses at the time of the acquisition.

In connection with the acquisition, the Company assumed $250 million face value of additional debt in the form of Convertible Subordinated Notes (the “Notes”) issued by Komag on March 28, 2007. The holders of the Notes tendered their Notes to the Company and on December 5, 2007, the Company paid $250 million plus accrued and unpaid interest to purchase the Notes.

Quarterly Results of Operations (unaudited)

12 Months Ended

Jul. 02, 2010

Quarterly Results of Operations (unaudited) [Abstract]

Quarterly Results of Operations (unaudited)


Note 15.	Quarterly Results of Operations (unaudited)


	First		Second		Third		Fourth

2010(1)
Revenue, net	$	2,208	$	2,619	$	2,641	$	2,382
Gross margin		514		687		665		535
Operating income		319		473		441		293
Net income		288		429		400		265
Basic income per common share	$	1.28	$	1.89	$	1.75	$	1.15

Diluted income per common share	$	1.25	$	1.85	$	1.71	$	1.13

2009(2)
Revenue, net	$	2,109	$	1,823	$	1,592	$	1,928
Gross margin		424		290		253		370
Operating income		234		16		61		209
Net income		211		14		50		196
Basic income per common share	$	0.95	$	0.06	$	0.22	$	0.88

Diluted income per common share	$	0.93	$	0.06	$	0.22	$	0.86


(1)		The fourth quarter of 2010 included $27 million in expense related to litigation settlements.

(2)		The second quarter of 2009 included $113 million of restructuring charges associated with the restructuring plan announced December 17, 2008 and $4 million of related tax benefits. The third quarter of 2009 included a $14 million in-process research and development charge related to the acquisition of SiliconSystems and $4 million of restructuring charges. The fourth quarter of 2009 included an $18 million gain on the sale of assets from the Company’s substrate manufacturing facility in Sarawak, Malaysia and a $5 million reduction of operating expenses due to favorable settlements of restructuring accruals.

- Definition

This element can be used to disclose the entire quarterly financial data disclosure in the annual financial statements as a single block of text. The disclosure includes a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income (loss) before extraordinary items and cumulative effect of a change in accounting principle and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished. Alternatively, the details of this disclosure can be reported using the elements in this group, or by using other taxonomy elements and applying the appropriate quarterly date and period contexts when creating an instance document. For example, the element for "Interest and Dividend Income, Operating" may be used by financial institutions from the Statement of Income, applying the appropriate quarterly date and period context when creating an instance document.

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