IDEMA Financial ConferenceDistribution Unwrapped Session

Richard E. RutledgeVice President & General ManagerPC ComponentsMember, IDEMA BOD

November 4, 2004

Distribution Structure

2

WD Confidential

Customers113,000 Worldwide37,000 Americas44,000 EMEA32,000 APAC

Partners77 WW (19 Americas, 35 EMEA, 23 APAC)Coverage Customer BaseCredit Risk Currency RiskConvenience CommunicationCollaboration Cost-of-Sales

SuppliersProducts & ServicesPlace & PeoplePrice & ProgramsPromotion

Distribution Model: Focus On All Layers

PUSHPUSH

PULLPULL

3

WD Confidential

Distribution Partners: Models & Balance

ComponentDistributors

Industrial Distributors

Product Distributors

Component Distributors Product Distributors Industrial Distributors Volume One Stop Shopping Value Added Services PC Component Focused PC Product Focused Non-PC Platform FocusedHighest Turns Higher Turns High TurnsLowest SG&A Lower SG&A Low SG&A Makes Phone Calls Takes Phone Calls Makes Field CallsLimited External Sales Limited External Sales Technical External SalesLarge Customer Base Largest Customer Base Limited Customer Base Limited Product Lines Multiple Product Lines Focused Product Lines Multi-Site Inventory Multi-Site Inventory Multi-Site Inventory Private Firms Public Firms Public Firms

4

WD Confidential

Global Distribution: Know the Customer

Key IndirectSelectWD

Government

Education

SMB

Business

End Users

AuthorizedRetailer

AuthorizedDistributor

PlatinumReseller

PlatinumRetailer

GoldReseller

PlatinumIntegrator

GoldIntegrator

BlueIntegrator

POS

POS

Western Digital

Direct

5

WD Confidential

Global Distribution: Meet the Customer

         

         

         

         

6

WD Confidential

Global Distribution: Service the Customer

Sao Paulo

High Level Recovery Centers Customer Return Centers

Budapest

SeoulBeijing

Shenzhen

Singapore

Dubai

Moscow

Sydney

MumbaiNew DehliBangaloreChennaiKolkata

Suzhou

Amsterdam

Shanghai Los Angeles

Toronto

Call Centers

7

WD Confidential

Global Distribution: Manage the Programs

Distribution programs are not unique to HDDs or PC Components McKinsey conclusion: transactional pricing increases profit

Michael V. Marn, Eric V. Roegner, and Craig C. Zawadahttp://www.mckinseyquarterly.com/article_abstract.aspx?ar=1269&L2=16&L3=19

The McKinsey Quarterly, 2003

A Price Waterfall Example, Light Bulbs

8

WD Confidential

Global Distribution: Understand the Dynamic

Not linear or automatic but NOT random

Weekly Sales Out Trends Within the QuarterDistribution Channel

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 Wk 12 Wk 13

Week Within the Fiscal Quarter

Cum

ulat

ive

Perc

enta

ge o

f Uni

ts S

old

Perfect Linearity

IDEMA Financial ConferenceDistribution Unwrapped Session

Richard E. RutledgeVice President & General ManagerPC ComponentsMember, IDEMA BOD

November 4, 2004

Distribution Structure