The following Questions and Answers are related to the company's acquisition of SiliconSystems, Inc., announced
March 30, 2009.
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| 1. | Who are SiliconSystems? |
| | http://www.siliconsystems.com/about/about.aspx |
| 2. | What are SiliconSystems’ products? |
| | http://www.siliconsystems.com/products/products.aspx |
| 3. | What are SiliconSystems’ markets? |
| | http://www.siliconsystems.com/applications/applications.aspx |
| 4. | What are SiliconSystems’ technologies? |
| | http://www.siliconsystems.com/technology/technology.aspx |
| 5. | How big is the solid-state drive market? |
| | a. In 2008 it is estimated at $1.1 billion. |
| | b. The largest sub-segment was embedded systems at $400 million. |
| | i. The majority of SiliconSystems’ current business is in the embedded systems segment. |
| 6. | Who are SiliconSystems’ customers? |
| | a. SiliconSystems serves a broad customer base, including many Fortune 500 companies in the network-communications, industrial equipment, medical, aerospace and military markets. |
| | b. The top-ten customers represent approximately 40% of the business. |
| | c. The majority of these customers are new WD customers. |
| 7. | Who are their competitors and suppliers? |
| | a. Main competitors are STEC, Adtron (Smart Modular), Hagiwara Sys-Com. |
| | b. We do not disclose supplier names; this is company policy. |
| 8. | How will this impact WD’s OPEX? |
| | a. Impact to our operating expense model will be minimal. |
| 9. | What is SiliconSystems’ historical business model? |
| | a. Gross margins are higher than any of WD’s existing businesses. |
| | b. OPEX is higher, due to higher support requirements. |
| 10. | Is SiliconSystems profitable? |
| | a. Yes, founded in 2002, SiliconSystems has been profitable since 2005. |
| 11. | What portions of SiliconSystems is WD acquiring? |
| | a. The entire company. |
| 12. | When does WD expect the acquisition to be accretive? |
| | a. Immediately. |
| 13. | Will SiliconSystems be absorbed into WD or operate separately? |
| | a. SiliconSystems will operate as WD’s Solid-State Storage business unit, similar to our existing business units of Branded Products, Client Storage, Consumer Storage, and Enterprise Storage. |
| 14. | When will WD market an SSD for computing applications? |
| | a. Today’s acquisition strengthens and accelerates our ability to get to market with additional SSD products. We announce new products when they begin shipping. |
| | b. WD implements new products and technologies that are meaningful to customers and at a time when the company can maximize the critical balance of cost, reliability, quality and availability, while meeting our customers’ needs. |
| 15. | Does this acquisition displace WD’s traditional enterprise development? |
| | a. Both magnetic and solid-state technologies are complementary in enterprise applications, especially in emerging tiered-storage architectures. |
| 16. | How many employees does SiliconSystems have? Does WD plan to keep all of them? |
| | a. WD plans to retain substantially all of the approximately 100 employees. |
| 17. | Will the incremental business be cash flow positive immediately? |
| | a. Yes. |
| 18. | What is the extent of the SiliconSystems asset base? |
| | a. Undisclosed. |
| 19. | Will this increase your projected CAPEX for the balance of FY 2009 and onwards into 2010? |
| | a. No, we do not expect a material change in our CAPEX outlook. |
| 20. | Will this have an impact on your tax rate? |
| | a. Impact to our effective tax rate will be minimal. |
| 21. | Will you have accounting entries and charges in the current quarter to reflect the purchase? |
| | a. Our purchase price allocation for accounting purposes is currently in process. We expect that some portion of the purchase price will be allocated to in-process research and development. In accordance with FAS 141, this amount will be recorded as a one-time charge during our fiscal third quarter, which ended on March 27, 2009. |
