When it comes to data storage, Western Digital has drive and more than a splash of flash. The company is one of the largest independent makers of hard-disk drives (HDDs), which record, store, and recall volumes of data. It is also active in the fast-growing area of solid-state drives (SSDs), which are faster and lighter than HDDs. Drives for PCs account for most of Western Digital's sales, although the company also makes devices used in servers, cloud computing data centers, and home entertainment products such as set-top boxes and video game consoles. The company sells to manufacturers and through retailers and distributors and generates more than half its sales from the Asia/Pacific region.
Western Digital is structured around two subsidiaries: WD Technologies and Hitachi Global Storage Technologies (HGST). Each subsidiary maintains its own brand and product lines, with separate sales, marketing, operations, and product development teams. The company is looking to offer improved customer experiences for competing and complementary brands, while finding efficiencies in shared services.
The company's largest market is Asia (which represents about 50% of sales, including China's 19%). The US and the EMEA region each contribute about 20%.
Western Digital has manufacturing facilities in the US, as well as in China, Japan, Malaysia, the Philippines, Singapore, and Thailand; it has sales offices worldwide.
Sales and Marketing
Western Digital offers its products to OEMs, as well as through distributors and retailers. The OEM customer segment is its largest (almost two-thirds of revenue), with Hewlett-Packard accounting for slightly more than 10% of total revenue. Distributors and retailers account for about 23% and 13% of sales, respectively.
Western Digital's sales slowed 4% in 2015 to $14.57 billion from $15.13 billion in 2014. Shipments of hard disks slipped 8% for 2015 because of the sluggish demand around the world for personal computers. An increase in average selling prices rose to $60 in 2015 from $58 in 2014.
The revenue drop translated to a 9% fall in profit. The company posted $1.47 billion in profit in 2015, down from $1.6 billion in 2014.
Cash flow from operations came in at $2.2 billion in 2015, from $2.8 billion in 2014.
Western Digital is one of a handful of manufacturers that dominate the hard-disk drive market -- a sector characterized by harsh competition, short product life cycles, and aggressive price cuts. In order to reduce its dependence on drives for PCs, the company has branched into branded consumer media devices, including DVR expanders, portable media drives, and media players that let users play data from external drives on TV. Its WD TV Live Plus media player streams movies (including those offered by Netflix) and Internet video to a digital TV. It is also investing in products for the mobile computing and cloud computing markets. Products of these types accounted for 53% of revenue in 2014, up from 50% the prior year and just 36% in 2012.
Western Digital is moving aggressively into flash storage for data centers and other environments were quick access to data is important. Recent acquisitions have bolstered the company's HGST unit, expanding it's capabilities to meet large scale demands.
In 2015, Western Digital sold a 15% stake to Unisplendour, a unit of Tsinghua Holding of China, for $3.7 billion. The deal infuses a good amount of money into Western Digital, which is could use to further build its flash storage business. It also provides a channel for boosting sales in China, where Western Digital's sales plunged 22% in 2015 from 2014. The deal might face regulatory scrutiny since Tsinghua is controlled by the Chinese government.
Mergers & Acquisitions
Western Digital has long used acquisitions to add new product lines and extend its geographic reach.
In 2015, the company agreed to buy SanDisk for $19 billion in cash and stock. SanDisk, which has $6.6 billion in annual revenues, is a leader in non-volatile memory, and would enable Western Digital to offer a more comprehensive product line. Western Digital also gains a long-term source of NAND products and technology. NAND is a type of flash memory that is used for high-capacity data storage, a market growing with the rise of cloud computing, big data, and analytics.
In another 2015 deal, Western Digital acquired Amplidata, a developer of object storage software for public and private cloud data centers, for about $267 million The acquisition is expected to help the HGST subsidiary to expand into higher value data storage platforms and systems in cloud data centers.
In 2013 it acquired Virident, a provider of sever-side flash storage products. The purchase followed the company's acquisition of STEC (for about $340 million), a maker of enterprise solid-state drives (SSDs), and VeloBit, an advanced SSD caching software company. Collectively these purchases expand HGST's presence in the fast-growing enterprise SSD market.
In 2012 Western Digital bought Hitachi's disk drive business, HGST, for around $4.3 billion in cash and stock. The deal boosted Western Digital's share of the global market to nearly 50%, ahead of rival Seagate Technology which accounted for around 30% of global shipments. Strategically, the deal added disk drives used with servers -- a large part of both Hitachi and Seagate's businesses -- and gave Western Digital a better foothold in solid-state drives used in tablets and other portable devices.