1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): February 2, 2001 WESTERN DIGITAL CORPORATION (Exact Name of Registrant as Specified in Charter) Delaware 001-08703 95-264-7125 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 20511 Lake Forest Drive Lake Forest, California 92630 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (949) 672-7000 Not Applicable (Former Name or Former Address, if Changed Since Last Report)
2 INFORMATION TO BE INCLUDED IN THE REPORT ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. Exhibit Description - -------- --------------- 99.1 Investor Presentation dated January 31, 2001 - February 2, 2001 ITEM 9. REGULATION FD DISCLOSURE. Attached hereto as Exhibit 99.1 is a copy of an Investor Presentation of Western Digital Corporation dated January 31, 2001 - February 2, 2001, revised as of February 5, 2001. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: February 5, 2001 WESTERN DIGITAL CORPORATION By: /s/ Michael A. Cornelius ----------------------------------- Michael A. Cornelius Vice President Law and Administration and Secretary
1 EXHIBIT 99.1 WESTERN DIGITAL INVESTOR PRESENTATION JANUARY 31, 2001 - FEBRUARY 2, 2001 Matt Massengill President & CEO Terry Hopp Senior Vice President & CFO
2 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]
3 AGENDA - - THE NEW WD - - STRATEGY - - PC & HDD MARKET OUTLOOK, INDUSTRY STRUCTURE - - WD HDS PERFORMANCE - - Q2 HIGHLIGHTS & FINANCIALS [WESTERN DIGITAL LOGO]
4 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]
5 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]
6 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]
7 THE NEW WD: BACKBONE OF THE DIGITAL UNIVERSE [FLOWCHART] HELPING PEOPLE COLLECT, BUILD AND MANAGE THEIR DIGITAL UNIVERSE. [WESTERN DIGITAL LOGO]
8 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]
9 NEW VENTURE FOCUS Personal Web & SAN Storage Networked Management [IMAGE] Storage [IMAGE] [IMAGE] Supply Chain Home Intelligence Entertainment [IMAGE] [IMAGE] [Western Digital Logo]
10 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]
11 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]
12 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]
13 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]
14 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]
15 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]
16 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]
17 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]
18 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
19 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
20 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
21 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.
22 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
23 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
24 Western Digital Financial Performance January 2001
25 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
26 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
27 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
28 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
29 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
30 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
31 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
32 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
33 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
34 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