Western Digital Corporation: Investment Thesis

May 4th 2012
Technology
Western Digital Corporation

Ticker: WDC
Recommendation: Hold
Current Price: $37.57
Implied Price: $58.74
Investment Thesis
Key Statistics
$22.64 - $44.44
$XX$XX.XX
$41.64
WDCs market share is expected to rise from 30% to 47% after

acquiring Hitachi Global Storage Technology
WDC have already recovered to pre-flood capacity level currently
Estimated Beta
1.39
Dividend Yield
N/A
EBITDA will be steady after acquisition according to my projection,

and strong cash flow from operating will provide sufficient money for
them to do further investing and expansion
Better earning quality compared to their competitors in the industry

using EV/Revenue, EV/Gross Profit, and EV/EBITDA multiples
Although increasing demand trend of total Computer Peripheral

Manufacturing Industry will be offset by the lower price in the later
year, the demand growth from services conducted online and the
increasing in the number of data processing companies will potentially
increase the demand for HDDs more than its falling price
52 Week Price Range

50-Day Moving Average
Market Capitalization
$9325.78 million
3-Year Revenue CAGR
12.23%
Trading Statistics
Diluted Shares Outstanding
Average Volume
269
4,021,674 million
Institutional Ownership
85%
Insider Ownership
1%
Western Digital Price (5- Year)

60,000,000
$50.00
EV/EBITDA
4.66x
$45.00
Margins and Ratios

Gross Margin
26%
$35.00
EBITDA Margin
19%
$30.00
Net Margin
10%
$25.00
22.15%
$20.00
Debt to Enterprise Value

Leverage Ratio
50,000,000
$40.00
1.25x
40,000,000
30,000,000
20,000,000
$15.00
$10.00
10,000,000
$5.00
Covering Analysts: Lei Liu
$0.00
Apr-07
0
Oct-07
Apr-08
Oct-08 Apr-09
Volume
Price
Oct-09 Apr-10
Oct-10 Apr-11
50-Day Avg
Oct-11
200-Day Avg
leil@uoregon.edu
1
University of Oregon Investment Group
May 4th 2012
Business Overview
Western Digital Corporation is a supplier of digital content storage, collection
and protection. WDC was founded in 1970, and their current executive office is
in Irvine, California. WDC operates globally in the United States, Asia, Europe,
Middle East and Africa.
WDCs data storage products have three different categories: the hard disc
drives, the solid stated storage drives, and the home entertainments. However,
their main products are hard disk drives, so they report only on one business
segment, the hard drive business.
Hard disk drives (HDDs) are made of rigid magnetic rotating discs (or platters),
and with magnetic heads to write data on the magnetic surfaces, and also read
data from surfaces when needed later. HDDs have characteristics of non-volatile
memory (contain information even without power), random access (access at
any time without a sequence of action), low cost, small size, and high capacities
and speed. So as a result, HDDs are the most popular and primary data storage
medium so far.
SSDs
HDDs
Spin-up Time
Instantaneous
1-5 seconds
Random Access
0.1 ms
5-10 ms
Data Transfer
100MB/S - 500MB/S Highest 100MB/S
Fragmentation
No
Yes
Noise
Silent
Can be Significant
Environment
Resistant to shock
Weight and Size
Small and light
Solid-state drives (SSDs) are made of integrated circuits as memory to retain

digital contents. The major difference compared to HDDs is that SSDs do not
have moving mechanical components. SSDs have significant advantages over
HDDs, but their major disadvantage is the high production costs. This is the
reason why HDDs dominant the data storage market currently. Here is my
research on how SSDs differ from HDDs.
Storage Capacity Up to 2TB
WDC offers various HDDs and SSDs for different purposes and uses. Generally,
for HDDs, they provide products in size of 3.5 inch, and 2.5 inch form factors.
Capacities are from 80 GB to 3 TB. Rotation speed is up to 10,000 RPM
Susceptible to shock
(revolutions per minute). For SSDs, they produce 2.5 inch compact flash form
Large and heavy
factors mainly range from 1GB to 256 GB. Although they have 2TB for
Up to 4 TB
enterprise uses, it is too expansive, so that it is not a popular product.
Cost per capacity $0.9-2 per GB
$0.05-0.1 per GB
WDCs storage products are classified as three major categories in terms of

using purposes.
Client compute storage products are mainly used in desktops and laptops. WDC
sold 151 million products for the purpose of clients compute storage in 2011,
147 million in 2010, and 109 million in 2009. Their main product series are WD
Caviar (use in desktop, high performance, high capacities, and low cost per
gigabytes), WD Scorpio (mobile PCs, high Performance, high capacities, low
power consumption, low heat, and low noise), WD Silicon Edge (SSDs, read
intensive client, high performance, high price).
(HDD structure)
Client non-compute products are made for various end user devices such as
digital video recorders (DVRs), personal data backup systems, portable external
storage systems and digital media systems. WDC sold 46 million products for
the purpose of client non-compute storage in 2011, 38 million in 2010, and 33
million in 2009. Their main product series are My Book and WD Elements
(external capacity for desktop, simplify storage), My Passport (portable external
device, light), and WD TV, (digital media players)
Enterprise storage products are designed for enterprise servers, mainframes and
workstations. WDC sold 10 million products for the purpose of enterprise
storage in 2011, 9 million in 2010, and 4 million in 2009. WD S25 (enterprise
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server), WD VelociRaptor (High performance enterprise server), WD RE (high

performance enterprise server), WD Silicon Drive (SSDs)
Sales Regions
WDC has sale departments all around the world including some major places in
Americas, Asia Pacific, Europe, and the Middle East. They do most of their
marketing and advertising by themselves, and they closely manage their
customer relationship.
(SSD structure)
Product Distribution
Sell to original equipment manufacturers (OEMs). OEMs typically purchase
directly from WDC, but sometimes they also buy from other distributors. OEMs
always pick two or three other companies for their production inputs. They
always use this strategy to negotiate prices and manage qualities. OEMs
purchasing behaviors normally are waiting until they get orders from their
consumers, they will then placing orders from WDC. So for WDC, inventory
management is crucial as well. WDC usually hold finished goods in their
inventory houses, which are near major OEMs factories to satisfy their just in
time orders.
Sell to distributors. WDC has numerous distributors to sell their products to
some other smaller firms. They usually contract with these distributors, and they
arrange a specific sales territory for them in order to protect sales.
Sell to retailers: WDC also sells directly to some selected big retailers. The
purpose according to managers is that this strategy is the most efficient way to
build their brand awareness among all customers.
In addition, WDC also have own web sales. Everyone can easily purchase their
products online.
Materials and Supplies

The inputs of making hard drives are Magnetic heads, Magnetic media, and
spindle motors, circuit boards, and so on. For the parts of hard drives that have
to be specifically designed, WDC designs and produces in house. They usually
do this for large customers. Otherwise, the rests such as semiconductor media
are purchased from other companies. This strategy allows them to select the
qualities and quantities they want, and reduces their fixed costs.
Vertical Integrate Acquisition Growth Strategies

WDCs main business growth strategy is vertical integrate acquisition. They
constantly acquire companies along their supply chain to achieve reducing
production and supply costs in order to increase margin. They made acquisitions
every year in the past four years.
On March 8, 2012, WDC announced that their acquisition of Hitachi Global
Storage Technologies was completely finished. They paid 3.9 billion dollars in
cash, and issued another 25 million shares to pay for this acquisition. These 25
million shares are estimated to worth 0.9 billion dollars. The 2.3 billion dollars
cash came from 5 years term loan from bank of America, and 500 million
dollars from revolving credit, and the rest from companys cash balance. This
acquisition activity is the biggest in their 42 years history, and because of the
advantages from acquisition, they expected to be the new world leading storage
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May 4th 2012
company. The managers are extremely confident, and they are expecting higher
market shares, revenue, and gross profit than before.
In 2010, WDC paid 253 million dollars to acquire Hoya Magnetics, which is a
Magnetic manufacturing company. Magnetic media is the core inputs for HDDs.
This vertical acquisition along their supply chain allows WDC to reduce the
input costs of core components, and make higher margins.
In 2009, WDC paid 63 million dollars to acquire Silicon System. After realizing
the potential of SSDs, WDC acquired Silicon System, a SSDs manufacturing
company. This acquisition allows them have the technology to enter into SSDs
market. I personally believe this acquisition is a really important strategic long
term plan.
In 2008, WDC paid 927 million dollars to acquire Komag Inc. This is another
vertical integrate acquisition. Komag Inc. is a supplier of magnetic thin-film
disks, which is another crucial component for HDDs. The purpose acquisition is
also to reduce input costs, and achieve higher margin.
Industry Analysis
Computer Peripheral Manufacturing Industry
In computer peripheral manufacturing industry, there are five main products and
services segments. Computer monitors (25%), hard drives (25%), printers,
scanners and supplies (25%), webcams and digital cameras (15%), and mice and
keyboards (10%).
There are several factors determine the demand in this industry. Increasing
digital information and content will affect demand, data storage needs from
people will strongly affect demand, and emerging markets need should be also
considered.
The estimation of average revenue growth from 2012 in this industry will be
steadily around 1.69%. The revenue growth in 2012 and 2013 will
approximately be 6.52% and 5.2%, and then trend down towards average of
1.69%.
The reason for the growth is that this industry has trend of increasing demand
due to the reason I explained before, which is represented by increasing unit
sales. However, the reason it trends down in later years is mainly due to reduce
in costs and selling prices when technology is mature. So as a result, the
decrease in price will offset the increasing in units of sales.
In order to prove the industry growing trends, I did additional research on PC
unit sales, and average industry selling price index. The worldwide PC unit sales
have been growing at an average steady rate about 8.47% over past five years,
which is a huge growth number. At the same time, the price index has been
decrease about 30%, and will continuously decrease to 50% in 2017 compare to
the 2006 base. This forecast matches the industry growing trend, and illustrate
why it trends down in the later years.
So how does it affect WDC? According to my research and WDCs
management guide, for WDC, they have seen the trend of peripheral equipment
outsell the entire PC units almost about 87% more. Managers believe that
outperformance of hard drives sales will continue going on, because of the
increase of personal uses of data storage devices for gaming, the increase
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May 4th 2012
demand of the external storage devices such as portable and easy storage
devices. So to conservatively conclude, WDC still have great potential even
though the entire industry revenue trends down toward 2017. In addition, hard
drive market only represent 25% of the industry.
The barriers to enter this industry are medium high, and this industry is in a
mature stage currently. The main reason is because the technology innovation is
extremely fast, and it requires a lot of capital investments. Most manufactures
use automated assembly processes to reduce their price in order to compete with
others. So as a result, the competition is also high, and tough for new companies
to survive in the long run. Major companies in term of market shares: Western
Digital Corporation (8.2%), Seagate technology (14.1%), Dell Inc (11%), HP
(30.8%), others 35%
Data Processing and Hosting Services Industry

The second industry that I looked into is Data Processing and Hosting Services
Industry. These data processing and hosting firms generally need equipment
such as hard drives. They will affect the demand for peripheral manufacturing
industry.
In Data Processing and Hosting Services Industry, there are seven main
segments. Business process management and data processing (23.8%),
application service provisioning (18.3%), data storage and management services
(12.4%), IT technical support services (7.6%), IT computer network and
network management services (7.4%), website hosting services (5.2%), and
others (25.3%). WDCs products go into all these segments.
The barriers to enter this industry are medium, which means not too hard to
enter this industry. The cost of starting a new operation company in this industry
is estimated to be 500,000 dollars, which is not too expensive either. The low
initial costs to enter this industry is a good sign for WDC, because any firm can
easily get into this industry, and as a result, it will potentially increase the
demand for HDDs from WDC.
Services Conducted Online

Besides all that, I looked into percentage of services conducted online as well,
which might also affect the demands for data storage companies.
The percentage of services conducted online has been growing extremely fast
over last 10 years. It starts off at 2002 with only 3.3% yearly growth to 2012 of
9.4% of yearly growth. It is estimated to be over 10% yearly growth in the next
few years. Since every data processing service will need HDDs, it will drag up
the demand for WDC potentially.
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May 4th 2012
Managements
John F. Coyne
President and Chief Executive Officer
John Coyne is the CEO of WDC, and is one of board of directors. He served a
long time for WDC since 1983, and he has been in many different executive
positions. He became president in 2006, and became CEO since 2007. In
addition, he is in a position of director of Jacobs Engineering Group Inc. as well.
Timothy M. Leyden
Chief Operating Officer
Tim Leyden became vice president of finance in 2007 first, and then became
chief financial officer. He worked for WDC from 1983 to 2000, and then he
joined Sage Software Inc. as a senior vice president. Prior to the COO, he has
been in many different positions in WDC such as finance, manufacturing, and
information technology and so on. He has ACMA certification, and he has a
master degree from University of California, Irvine.
Wolfgang U. Nickl
Senior Vice President and Chief Financial Officer
Wolfgang Nickl joined the WDC since 1995, and is the current CFO at WDC.
He is in charge of financial planning, accounting, credit, tax, and any other thing
related to finance. Before that he was also in various position related in finance,
such as supply chain management and IT positions. He has a masters degree
from the University of Southern California.
Recent News
WD Gives Mac Users the First 2 TB Portable Hard Drives for All
Their Digital Content
April 3rd, 2012
WDC introduced new My Passport for Mac users. It is easy and quick for Mac
users to automatically back up their data. It has metal surface, and both design
and color match the Mac Pro and Air. My Passport Studio 2TBs price is $299.
Western Digital Corp: HGST Ships the World's First 4TB Enterprise
Hard Drive
April 3rd, 2012
HGST introduced the new worlds first 4TB enterprise hard drive family. The
Ultrastar 7K4000 family provides space-efficient, high-performance, low-power
storage for traditional enterprises as well as for the explosive big data and
cloud/Internet markets where storage density, watt-per-gigabyte and cost-perGB are critical parameters.
WD Completes Acquisition of Hitachi Global Storage Technologies
March 8th, 2012
WDC announced that their acquisition of Hitachi Global Storage Technologies
was completely finished on March 8, 2012. They paid 3.9 billion dollars in cash,
and issued another 25 million shares to pay for this acquisition. These 25 million
shares are estimated to worth 0.9 billion dollars. The 2.3 billion dollars cash
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May 4th 2012
came from 5 years term loan from bank of America, and 500 million dollars
from revolving credit, and the rest from companys cash balance. This
acquisition activity is the biggest in their 42 years history, and because of the
advantages from acquisition, they expected to be the new world leading storage
company. The managers are extremely confident, and they are expecting higher
market shares, revenue, and gross profit than before.
Thailand flood
Oct 2011
There was a huge flood in Thailand in October, 2011, which destroyed WDCs
magnetic head slider fabrication facilities, hard drives, and other manufacturing
facilities. Due to this flood, WDC shut down their manufacturing facilities, and
they record 199 million dollars loss in their income statement. The 109 million
dollars from asset impairments, 39 million from recovery charges, and 28
million from write down in inventory, and other expenses. Their managements
are working on increasing their capacities to the pre flood level, and they
estimated that until September 2012, they will have as much as capacities
before.
Catalysts
Upside
Successfully acquired HGST through one year pending

Increasing market share through consolidation
Recovering from Thailand flood
Downside
Threats from SSDs competitors

Lower pricing pressure
Risk Analysis
Volatile demand: the uncertainty of demand will result many risks, which will
significantly affect their financial statements. If demand of hard drives
fluctuates, and not predictable, WDC will have to incur restructuring cost due to
the fluctuation, which is not favorable. In addition, this industry is highly
competitive, so if the demand is decreasing, this will result more severe price
competition, which will result in low margin, and less market shares for WDC.
Beta Sensitivity Analysis
Adjusted Beta
Terminal Growth Rate

60
2.0%
2.5%
3.0%
3.5%
4.0%
1.19
61.61
64.22
67.19
70.60
74.58
1.29
58.53
60.78
63.31
66.20
69.53
1.39
55.83
57.78
59.96
62.43
65.24
1.49
53.44
55.14
57.04
59.17
61.57
1.59
51.32
52.81
54.47
56.32
58.39
Customer risks: In 2011, 49% of WDCs revenues come from ten large
Terminalhave
Growth not
Rate only one supplier. So if they
customer orders. All of these customers
lose some of their orders due to any reasons, WDCs revenues will decline
sharply. Moreover, even if these customers still keep their orders, and at the
same time, their business is suffering as well. As a result, so they will probably
put price pressure on WDC, and transfer risks to WDC. So WDC has the
possibility of suffering from customer risks.
Research and development risk: WDC spent a lot of money in research and
development, and they are trying to be new technology leader. So WDC is
exposed to the risk of investment failure. If they are not able to innovate
successfully, and if they cannot turn new technologies into profits, their
investment will be wasted.
Competitor risk: Some of WDCs competitors not only operate in hard drive
business, but also in other businesses. These competitors not only replying on
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May 4th 2012
the revenues from this business, so they may sell hard drive products at low
prices, and push them out of businesses slowly.
Industry risk: this industry has consolidation trend over last several years. This
trend may result in potential risks for WDC. Such as their competitors may
potentially growth stronger, and have more capacities than WDC.
Comparable Analysis (35%)

Four comparables that I am using to value WDC is based on their product
market shares and threats in the future.
First, I find the comparables overall market shares in HDDs market. Then I
allocate the weighting according to their market shares. So the market shares
graph listed on the left is pre acquisition market share, and Samsung is acquired
by Seagate at the end of last year.
Seagate Technology PLC
Seagate Technology Public Limited Company is the world largest hard disk
drive (HDD) manufacturing company in terms of total revenues. They were
founded in 1979 in Dublin, Ireland, and its operational headquarters are in Scotts
Valley, CA. Their products are mainly used to provide solutions for enterprise
applications, client compute applications and client non-compute applications.
On December 11, 2011, they acquired Samsung Electronics Co., Ltds
(Samsung) hard disk drive (HDD) business, so they this this acquisition will
help them improve on 2.5 inch products. They paid total 1.1 billion dollars for
this transaction with consists of 571 million of cash and additional 45.2 million
shares of common stocks.
STX is the biggest competitor to WDC, and they are very similar grow strategy.
Their products are sold to OEMs, distributions, and retailers. Most of STXs
sales go to OEMs as well, and they are trying to sign long term contracts with
their customers. STXs managements view WDC as primary competitor as well,
because they share similar risks in HDDs industry in terms of supply and
demand. In regarding to Thai flood in 2011, because STXs operations widely
spread around the world, their Thailand facilities did not affect too much by
flood, but the impacts of flood on their supply chains are similar to WDC. So
thats why their multiples and stock performance looks better than WDC.
SanDisk Corporation
SanDisk Corporation is a global flash memory storage solution provider. Their
mission is to provide various devices with simple, reliable, and affordable
products. Their product categories are removable cards, embedded products,
USB, drives, digital media players, and so on. They have a main supplier,
Toshiba Corporation, which they also have venture relationship with. They
purchase most of their NAND flash memory from Toshiba. They usually design
their products in house, and outsourcing their manufacturing to third parties.
Their products mainly go into smartphones, tablets, ultra books, eReaders,
cameras, camcorders, media players, USB drives and computing devices.
I pick SanDisk as a comparable mainly because they a threat to WDC. Although
their distribution channel are similar, which is OEMs and retailer, their product
mix are totally different, As I talked before, SSD (flash memory based storage)
have major advantages over HDDs. Valuing WDC based on compare how
SNDK is growing and operating is very important. In addition, WDC has
already realized that SDD is definitely future product for data storage, they also
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May 4th 2012
manufacture SSDs, but they are not their main focus right now. I think SanDisk
will be a main competitor for WDC not right now, but maybe 4 or 5 years later.
So I believe SanDisk is a valuable comparable.
Micron Technology Inc.
Micron Technology is a manufacture of memory technologies. They mainly
provide solutions of DRAM, NAND Flash, NOR Flash memory, and packaging
for electronic devices, industrial products, and networks. They sell their
products to OEMs, and retailers all around world. Micron Technology has three
ways to manufacture their products: from their own facilities, from joint venture
factories, and from third parties.
Micron is similar to SanDisk in terms of product mix, and they are also similar
to WDC in terms of business strategies. They are constantly increasing and
expanding their production capacities. They used strategic acquisition and joint
venture to reduce cost and increase efficiency, and they also invest money in
R&D. The rest of the reason I pick Micron as comparable are similar to
SanDisk.
Toshiba Corporation
Toshiba is traded on Tokyo exchange, and it is not a U.S public traded company.
Toshibas segments including Digital Products, Electronic Devices, Social
Infrastructure, Home Appliances, and Others. They make advanced electronic
and electrical products, spanning information and communications equipment
and systems, internet-based solutions and services, electronic components and
materials, power systems, industrial and social infrastructure systems, and
household appliances.
Since Toshiba plays an extremely important role in HDDs market, and they are a
direct competitor to WDC, so choose it as a comparable to value WDC is
essential. So I convert all the Japanese currency Yen to U.S dollar at 1U.S dollar
to 80.8 Yen in order to compare it with my other comparable.
Discounted Cash Flow Analysis (40%)

Beta
SD
Weighting
5 Year Monthly
1.35
0.27
0.00%
5 Year Weekly
1.34
0.10
25.00%
3 Year Monthly
1.38
0.32
0.00%
3 Year Weekly
1.36
0.14
25.00%
1 Year Weekly
1.54
0.22
0.00%
5 Year Weekly Vesicek
1.44
0.12
25.00%
3 Year Weekly Vesicek
1.41
0.16
25.00%
5 Year Weekly Hamada
1.12
0.00%
3 Year Weekly Hamada
1.14
0.00%
Western Digital Corporation Beta1.39
Beta: I ran various betas to see what the real systematic risk is for WDC. I first
ran 5 and 3 year monthly and weekly, and 1 year weekly. Then I picked the one
with the lowest standard deviation for both 3 and 5 year, and then run Vesicek
beta for 3 and 5 year monthly. In addition, I also ran 3 and 5 year Hamada Beta.
After all that I decided not to use Hamada beta, because the tax rate and the debt
for these companies various too much, which means when I leverage my
unlevered beta back to leveraged beta, the industry percentage that I used is not
accurate. As a result, I get beta of 1.39 for WDC.
Revenue: WDC only has one operating segment, so I project revenue only
based on their HDD segment. I use quantities time price method to figure out
how much revenue they will make in the future. I also follow management
guidance closely plus my estimation about industry average selling price.
First part is WDCs revenue. So after Thailand flood, their capacity was 10-20%
down from pre flood level. So managers are expecting their capacity to go back
up to pre flood level at the end of the fourth quarter. In third quarter, they will
reach 80% of pre flood capacity, and in fourth quarter, they go will back to
100% of pre flood capacity. In addition, the management predicts that the
demand will be stronger in the next half of 2012, because of holiday season.
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May 4th 2012
The unit sales this quarter is 44.2 million. Overall, I project 36.5 million in next
quarter, and 169 million for the year 2012.
ASP is high due to flood this quarter. ASP is $68/units in 3rd quarter. It will start
dropping for next 2 quarters. In addition, for the future ASP, I use both the
management forecasts plus other analysts estimation to project my future ASP.
Second part is Hitachis revenue projection. Since Hitachi Global Storage
Technology is privately held companies, their information is hard to find.
However, since WDC acquired them, they provided last two years data and
some estimation. Besides that they report them together.
So, all together, I think the revenue for WDC after acquisition in 2012 will be
11,713 million dollars, and 18,733.6 for 2013.
R&D: One of WDCs business strategies is to lead HDD industry through faster
innovation and provide better technology. So, they will further spend money on
their R&D to innovate faster. The R&D cost for third quarter is 265 million.
Since they will keep spending more money in R&D, I project 8.5% of revenues
over years.
EBITDA
$5,000
25.0%
21.58% 21.20%
20.66%
$4,500
20.18% 20.99% 20.52%
20.08%
18.18%
$4,000
20.0%
$3,500
14.84%
14.52%
$3,000
15.0%
$2,500
$2,000
10.0%
$1,500
$1,000
5.0%
$500
$0
0.0%
2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E
EBITDA
Capital Expenditure: WDC has to recover from the flood, so the capital
expenditure for the third quarter is 139 million dollars. They also estimated that
capital expenditure will still be high until the end of the fourth quarter. In
addition, the total capital spending will be around 750-800 million for fiscal year
2012 according to management.
Acquisition: Since this industry has vertical consolidation trend, so I project
they will spend about 3% of their total revenue to acquire other companies along
their supply chain to further lower their production costs.
Inventory: Inventory level will be steady and constantly up because of the
recovery of capacity. For the fourth quarter, I project 460 million dollar
inventory, and I project the inventory to be 6.5% of revenue over years.
EBITDA Margin
Flood Expense: the management estimated that the charge for flood is 50
million more due to flood in the third quarter, and offset 21 million by insurance
company.
WACC Sensitivity Analysis
WACC
Discount Rate
60
2.0%
2.5%
3.0%
3.5%
4.0%
9.14%
68.6
72.1
76.2
81.0
86.8
10.14%
61.4
64.0
67.0
70.3
74.3
11.14%
55.9
57.9
60.1
62.6
65.4
12.14%
51.6
53.1
54.8
56.7
58.8
13.14%
48.1
49.3
50.6
52.1
53.7
Tax rate: I project tax rate will be 8% over year. The reason why tax rate is so
low is that they have foreign tax holidays
and
Discount
Rateincentives. The low tax rate will
be expired after 2023. So the average tax rate should be around 8%.
WACC: As I mentioned above, WDC borrowed almost 2.5 billion debts to
acquire HGST, and they will pay it back in 5 years. So the year over year capital
structure will change significantly when they pay off debt each year. So when
they have significant amount of debt this period, the WACC of current period
should be lower. And then when they pay off current large portion of debt next
year, the WACC will increase. So I choose to compute WACC for each different
period, and use these to discount my future free cash flow. The graph is my
WACC table, and WACC sensitivity analysis.
WACC Over Periods
2012E
2013E
2014E
2015E
2016E
2017E
Equity %
59.67%
61.94%
66.41%
68.48%
71.93%
74.95%
Debt %
40.33%
38.06%
33.59%
31.52%
28.07%
25.05%
CAPM
12.82%
12.82%
12.82%
12.82%
12.82%
12.82%
WACC
10.11%
10.26%
10.56%
10.70%
10.93%
11.14%
Weighted Average WACC

Cost of Debt
6.63%
Tax Rate
8%
10.62%
UOIG 10
May 4th 2012
Exit Multiple Approach of DFC Analysis (25%)

Exit Multiple
Years
EV/EBITDA Weighting
2013E
2.4x
20%
2012E
3.9x
20%
LTM Average
4.6x
20%
2 Year Industry Average
4.2x
20%
5.1x
20%
6.1x
0%
Exit Multiple
4.0x
In order to get exit multiple, I first get EV/EBITDA of 2 year average, 3 year
average, and 4 year average of every my comparable companies.
Then I take the total weighted average of these comparables EV/EBITDA for
each 2, 3, 4 years, and then weight them again with LTM, 2012E, and 2013E. I
believe the more data I used; the more accurate my terminal value will be, when
I multiplied them back to my terminal EBITDA. The graph is listed on the left.
Leveraged Buyout Analysis (0%)
LBO Transaction
52 - Week High
$44.44
52 - Week Low
$22.64
Current Price
$37.57
Premium
I did LBO Analysis to see how much premium other company is willing to pay
when they leverage to acquire WDC, and then retire all their debt and common
stock to keep it private. In order to get 20% IRR, the purchase premium should
be 52% more than its current price.
52%
Purchase Price Premium
$57.11
Shares Outstanding
269.0
$15,361.62
Transaction Date
Although as I said before, this industry is experience huge consolidation, it is

still not realistic in reality that WDC will be acquired by other company. So I
did not put any weighting on LBO analysis.
6/30/2012
Portfolio History
DADCO
Tall Firs
Svigals
Date
10/24/2010 10/19/2010 10/8/2010
Price
29.08
29.57
28.91
Shares
100
575
73
Current Price
37.57
37.57
37.57
Holding Return
29.20%
27.05%
29.96%
DADCO portfolio purchased 100 shares at 29.08 per share on 10/14/2010.

Holding return is 29.2%.
Tall Firs portfolio purchased 575 shares at 29.57 per share on 10/19/2010.
Holding return is 427.05%.
Svigals portfolio purchased 73 shares at 28.91 per share on 10/8/2010. Holding
return is 29.96%.
Recommendation
Recommendation
Comparabal Analysis
35.00%
57.22
DCF Analysis
40.00%
59.34
Exit Muliple
25.00%
59.92
LBO Analysis
Current Price
Implied Price
Undervalued
0.00%
57.11
37.57
58.74
56.35%
Overall, I think the acquisition will help WDC increase their market share
significantly up to around 47%. As a result, the cash flow from operation is
expected to be high in the future, and will generate sufficient cash for WDCs
future expansion.
Comparing to their competitors, WDCs earning is steadier, and have better
earning quality than other companies in the industry. EV/EBITDA is a good
indicator for the earning quality.
More importantly, the demand in this industry will still keep rising because of
the increasing trend in number of data service companies over years. After they
recover from Thailand flood, they will have enough capacities to satisfy every
order they received.
According to all my projection and analysis, WDC is still undervalued, and I
recommend a hold for all the portfolios.
UOIG 11
May 4th 2012
Appendix 1 Comparables Analysis

Comparables Analysis
($ in millions)
Stock Characteristics
Current Price
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Non-Controlling Interest
Preferred Stock
Diluted Basic Shares
Enterprise Value
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
Gross Profit
EBIT
EBITDA
Net Income
Valuation
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/Net Income
Max
$37.57
Min
Weight Avg.
$6.55
$22.06
WDC
STX
Western Digital
Seagate
Corporation
Technology PLC
Median
60.00%
$29.42
$37.57
$29.42
(In U.S Dollar)

TOKYO 6502-JP
SNDK
MU
SanDisk
Micron
Corporation
Technology Inc.
Toshiba Corp
10.00%
10.00%
20.00%
$37.49
$6.55
$4.08
In Yen
Toshiba Corp
330.00
$928.00
2,925.00
3,377.00
3.00
0.00
990.00
13,209.58
13,902.58
$0.00
1,000.00
2,094.00
0.00
0.00
242.00
6,484.50
6,705.50
$107.80
2,071.50
1,833.40
0.30
0.00
392.60
9,481.46
9,827.66
$150.00
2,165.00
2,232.00
0.00
0.00
449.00
9,072.58
8,155.58
$500.00
2,013.00
3,377.00
0.00
0.00
269.00
10,106.33
9,242.33
$0.00
2,925.00
2,232.00
0.00
0.00
449.00
13,209.58
13,902.58
$928.00
1,000.00
2,848.00
3.00
0.00
242.00
9,072.58
8,155.58
$150.00
2,165.00
2,094.00
0.00
0.00
990.00
6,484.50
6,705.50
$8,831.21
10,375.59
2,888.63
0.00
0.00
1,333.00
5,444.18
21,762.36
713,562.00
838,348.00
233,401.00
0.00
0.00
1,333.00
439,890.00
1,758,399.00
41.50%
24.90%
30.14%
15.73%
15.68%
(2.26%)
17.63%
(6.55%)
22.62%
12.49%
18.53%
9.79%
28.17%
17.04%
22.93%
14.78%
26.02%
13.32%
19.60%
10.12%
28.17%
17.04%
22.93%
14.78%
41.50%
24.90%
30.14%
15.73%
15.68%
-2.26%
17.63%
-6.55%
22.10%
0.73%
5.08%
-0.71%
22.10%
0.73%
5.08%
-0.71%
$249.00
34.52%
1.57
110.28
$18.00
21.04%
0.96
10.40
$177.10
18.44%
0.85
9.64
$142.00
23.64%
1.15
12.26
$18.00
27.19%
1.27
110.28
$249.00
21.04%
0.96
12.26
$135.00
23.64%
1.15
12.44
$142.00
34.52%
1.57
10.40
$375.10
88.26%
21.21
2.41
$30,308.00
88.26%
21.21
2.41
$13,316.00
3,751.00
2,269.00
3,053.00
1,968.00
$5,574.00
1,314.00
(189.00)
1,477.00
(549.00)
$9,384.80
2,613.30
1,481.30
2,147.50
1,213.60
$8,378.00
2,313.00
1,388.00
1,680.00
877.00
$10,127.00
2,635.00
1,349.00
1,985.00
1,025.00
$13,316.00
3,751.00
2,269.00
3,053.00
1,968.00
$5,574.00
2,313.00
1,388.00
1,680.00
877.00
$8,378.00
1,314.00
(189.00)
1,477.00
(549.00)
$17,838.94
3,942.65
130.33
905.62
(127.39)
$1,441,386.00
318,566.00
10,531.00
73,174.00
(10,293.00)
1.46x
5.52x
166.97x
24.03x
9.30x
0.80x
3.51x
(35.48x)
4.54x
(170.83x)
1.10x
4.19x
34.11x
8.48x
(30.22x)
1.13x
4.40x
6.00x
4.70x
(2.57x)
0.91x
3.51x
6.85x
4.66x
9.02x
1.04x
3.71x
6.13x
4.55x
7.06x
1.46x
3.53x
5.88x
4.85x
9.30x
0.80x
5.10x
(35.48x)
4.54x
(12.21x)
1.22x
5.52x
166.97x
24.03x
(170.83x)
Multiple
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/Net Income
Price Target
Current Price
Undervalued
Implied Price
Weight
$44.50
20.00%
$44.26
20.00%
$174.27
0.00%
$65.77
60.00%
$0.00
0.00%
$57.22
37.57
52.29%
UOIG 12
May 4th 2012
Appendix 2 Discounted Cash Flows Analysis

Discounted Cash Flow Analysis
($ in millions)
2008A
2009A
2010A
2011A
Total Revenue
8,074.00
7,453.00
9,850.00
9,526.00
% YoY Growth
N/A
-7.69%
32.16%
-3.29%
6,335.00
6,116.00
7,449.00
7,735.00
Cost of Goods Sold
Q1
Q2
Q3
Q4
09/30/2011A
12/31/2011A
03/31/2012A
06/30/2012E
2,694.00
2,153.00
1,995.00
1,347.00
3,035.00
2,058.00
3,989.00
3,031.64
2012E
2013E
2014E
2015E
2016E
2017E
11,713.00
18,733.00
19,690.50
20,452.05
21,277.15
22.96%
59.93%
5.11%
3.87%
4.03%
21,889.50
2.88%
8,589.64
14,237.08
14,767.88
15,134.51
15,532.32
15,979.33
% Revenue
78.46%
82.06%
75.62%
81.20%
79.92%
67.52%
67.81%
76.00%
N/A
76.00%
75.00%
74.00%
73.00%
73.00%
Gross Profit
$1,739.00
$1,337.00
$2,401.00
$1,791.00
$541.00
$648.00
$977.00
$957.36
$3,123.36
$4,495.92
$4,922.63
$5,317.53
$5,744.83
$5,910.16
21.54%
17.94%
24.38%
18.80%
20.08%
32.48%
32.19%
24.00%
26.67%
24.00%
25.00%
26.00%
27.00%
27.00%
464.00
509.00
611.00
703.00
193.00
191.00
265.00
355.00
1,004.00
1,420.00
1,532.00
1,636.16
1,808.56
1,970.05
Gross Margin
Research and Development
% Revenue
5.75%
6.83%
6.20%
7.38%
7.16%
9.57%
8.73%
8.90%
8.57%
7.58%
7.78%
8.00%
8.50%
9.00%
Selling General and Administrative Expense
220.00
201.00
265.00
307.00
89.00
96.00
155.00
198.00
538.00
612.00
632.00
613.56
851.09
1,094.47
% Revenue
2.72%
2.70%
2.69%
3.22%
3.30%
4.81%
5.11%
4.96%
4.59%
3.27%
3.21%
3.00%
4.00%
5.00%
Depreciation and Amortization
413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
% Revenue
5.12%
6.43%
5.18%
6.32%
5.86%
7.02%
6.19%
7.43%
6.68%
7.83%
6.51%
6.58%
6.70%
7.08%
49.00
108.00
0.00
0.00
0.00
199.00
15.00
27.92
241.92
281.00
295.36
306.78
425.54
514.40
Other expense
% Revenue
0.61%
1.45%
0.00%
0.00%
0.00%
9.97%
0.49%
0.70%
2.07%
1.50%
1.50%
1.50%
2.00%
2.35%
$1,006.00
$519.00
$1,525.00
$781.00
$259.00
$162.00
$542.00
$376.44
$1,339.44
$2,182.93
$2,463.27
$2,761.03
$2,659.64
$2,331.23
12.46%
6.96%
15.48%
8.20%
9.61%
8.12%
17.86%
9.44%
11.44%
11.65%
12.51%
13.50%
12.50%
10.65%
52.00
27.00
9.00
10.00
4.00
5.00
4.00
15.00
28.00
121.75
97.75
73.75
49.75
25.75
% Revenue
0.64%
0.36%
0.09%
0.10%
0.15%
0.25%
0.13%
0.38%
0.24%
0.65%
0.50%
0.36%
0.23%
0.12%
Net Interest (Income)
(27.00)
(9.00)
(4.00)
(9.00)
(3.00)
(3.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Earnings Before Interest & Taxes

% Revenue
Interest Expense
% Revenue
Earnings Before Taxes
981.00
501.00
1,520.00
780.00
258.00
160.00
538.00
361.44
1,311.44
2,061.18
2,365.52
2,687.28
2,609.89
2,305.48
12.15%
6.72%
15.43%
8.19%
9.58%
8.02%
17.73%
9.06%
11.20%
11.00%
12.01%
13.14%
12.27%
10.53%
114.00
31.00
138.00
54.00
19.00
15.00
55.00
32.53
104.91
164.89
189.24
214.98
208.79
184.44
Tax Rate
11.62%
6.19%
9.08%
6.92%
7.36%
9.38%
10.22%
9.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
Net Income
$867.00
$470.00
$1,382.00
$726.00
$239.00
$145.00
$483.00
$328.91
$1,206.52
$1,896.28
$2,176.28
$2,472.29
$2,401.10
$2,121.04
Net Margin
10.74%
6.31%
14.03%
7.62%
8.87%
7.27%
15.91%
8.25%
10.30%
10.12%
11.05%
12.09%
11.28%
9.69%
413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
% Revenue
Less Taxes (Benefits)
Add Back: Depreciation and Amortization

Add Back: Interest Expense*(1-Tax Rate)
Operating Cash Flow
% Revenue
Current Assets
% Revenue
Current Liabilities
% Revenue
Net Working Capital
% Revenue
45.96
25.33
8.18
9.31
3.71
4.53
3.59
13.65
25.76
112.01
89.93
67.85
45.77
23.69
$1,325.96
$974.33
$1,900.18
$1,337.31
$400.71
$289.53
$674.59
$639.09
$2,014.81
$3,475.67
$3,547.92
$3,885.43
$3,872.20
$3,695.39
16.42%
13.07%
19.29%
14.04%
14.87%
14.51%
22.23%
16.02%
17.20%
18.55%
18.02%
19.00%
18.20%
16.88%
2,692.00
1,436.00
1,986.00
1,997.00
2,251.00
1,474.00
4,068.00
2,310.00
2,310.00
2,887.00
3,315.88
3,668.90
4,361.82
4,815.69
19.72%
15.41%
16.84%
17.94%
20.50%
22.00%
2,354.00
1,552.00
4,035.00
3,340.34
3,340.34
4,309.05
4,751.89
5,513.01
5,485.24
5,500.25
28.52%
23.00%
24.13%
26.96%
25.78%
25.13%
($103.00)
($78.00)
$33.00
($1,030.34)
($1,030.34)
($1,422.05)
($1,436.01)
($1,844.11)
($1,123.42)
($684.56)
-3.13%
33.34%
19.27%
20.16%
20.96%
1,564.00
1,525.00
2,023.00
2,170.00
19.37%
20.46%
20.54%
22.78%
$1,128.00
($89.00)
($37.00)
($173.00)
13.97%
-1.19%
-0.38%
-1.82%
-8.80%
-7.59%
-7.29%
-9.02%
-5.28%
(1,217.00)
52.00
(136.00)
70.00
25.00
111.00
(1,063.34)
(857.34)
(391.71)
(13.96)
(408.10)
720.68
438.86
615.00
519.00
737.00
778.00
134.00
119.00
139.00
358.00
750.00
1,125.00
1,186.00
1,215.00
1,254.00
1,298.00
% Revenue
7.62%
6.96%
7.48%
8.17%
4.97%
5.96%
4.58%
8.97%
6.40%
6.01%
6.02%
5.94%
5.89%
5.93%
Acquisitions
927.00
63.00
253.00
15.00
0.00
0.00
3,541.00
0.00
3,541.00
0.00
590.72
613.56
638.31
656.68
Change in Working Capital

Capital Expenditures
% Revenue
Unlevered Free Cash Flow
Discounted Free Cash Flow
11.48%
0.85%
2.57%
0.16%
0.00%
0.00%
116.67%
0.00%
30.23%
0.00%
3.00%
3.00%
3.00%
3.00%
($216.04)
$1,609.33
$858.18
$680.31
$196.71
$145.53
($3,116.41)
$1,344.43
($1,418.85)
$2,742.38
$1,785.16
$2,464.96
$1,259.20
$1,301.85
$2,427.14
$1,424.19
$1,771.42
$810.21
$747.89
$1,312.45
UOIG 13
May 4th 2012
Appendix 3 Discounted Cash Flows Analysis Assumptions

Discounted Free Cash Flow Assumptions
Tax Rate
8.00% Terminal Growth Rate
3.00%
Risk Free Rate
3.12% Terminal Value
16,482
Beta
1.39 PV of Terminal Value
Market Risk Premium
7.00% Sum of PV Free Cash Flows
9,469
8,493
% Equity
51.11% Firm Value
17,962
% Debt
48.89% Total Debt
2,000
Cost of Debt
6.63% Cash & Cash Equivalents
CAPM
12.82% Market Capitalization
Terminal WACC
11.14% Fully Diluted Shares
3,377
15,962
269
Implied Price
59.34
Current Price
37.57
Undervalued
57.94%
Appendix 4 Discounted Cash Flows Exit Multiple Analysis

DCF Exit Multiple Valuation
Exit Multiple
Years
EV/EBITDA Weighting
Terminal Year EBITDA
2013E
2.4x
20%
Exit Multiple
2012E
3.9x
20%
Terminal Value
LTM Average
4.6x
20%
Discount Period
4.2x
20%
Discount Factor (@ WACC of 11.1%)
5.1x
20%
Discounted Terminal Value
6.1x
0%
Exit Multiple
4.0x
$4,396.3
4.0x
$17,645.3
5.3
57.4%
PV of FCF
$8,493.3
Enterprise Value
18,630.2
Less: Debt
Equity Value
Diluted Shares Outstanding
(2,513.0)
$16,117.2
269.0
$10,136.9
Implied Share Price
$59.92
Current Share Price
$37.57
Undervalued
59.48%
UOIG 14
May 4th 2012
Appendix 5 Leveraged Buyout Analysis
52 - Week High
$44.44
52 - Week Low
$22.64
Current Price
$37.57
Premium
52%
Purchase Price Premium
$57.11
Shares Outstanding
269.0
$15,361.62
Transaction Date
Exit Analysis
New Debt Assumption
LBO Transaction
6/30/2012
New $2 B Revolver
Total Available
$1,500.0
Maturity
12/31/2017
Interest Rate
L + 3.00%
Commitment Fee
0.35%
New $3 B U.S. Term Loan
Exit Date: 12/31/2017

EBITDA at Exit Date
$4,396
Illustrative Exit Multiple
4.0x
Illustrative Exit Proceeds
$17,645.30
$3,000.0
Maturity
12/31/2017
Interest Rate
L + 4.50%
Amortization Rate
Less: Exit Date Net Debt (Net Cash)
-3652.262359
Proceeds Available for Equity
$21,298
1.50%
New $1M 8.5% High Yield Notes
Exit Analysis
$1,000.0
Maturity Date
2012
12/31/2017
Interest Rate
8.50%
Fees
Initial Investment
2013
2014
2015
$0.0
$0.0
$0.0
Exit Proceeds
Advisory Fees
1.25%
Financing Fees
2.50%
$21,297.6
Total
($10,434.7)
20%
MOIC
2.0x
Uses
Sources
$3,003.00
Cash to Balance Sheet
$500.00
Acquisition Revolver
$1,500.00
Total Debt Obligations
$2,500.00
Acquisition Term Loans
$3,000.00
Common Shareholders Consideration
Acquisition High Yiled Notes
$1,000.00
Advisory Fees
$10,434.68
Financing Fees
$18,937.68
Total Uses
Total Sources
2012 EBITDA
$15,361.62
$192.02
$384.04
$18,937.68
2,363.9
12/31/2011
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
LIBOR Curve
1.50%
2.40%
3.15%
4.02%
4.45%
4.45%
4.45%
LIBOR Floor
1.50%
Current Debt Summary

$500 Million Revolver Credit Facility
$ 2000 Million 5 Year Term Loan
Stated Rate
L + 4.50%
LIBOR Rate
Interest Rate
1.50%
7.50%
6.00%
6.50%
LBO Debt Summary

Acquisition Revolver
L + 3.00%
1.50%
4.500%
Acqusition Term Loans
L + 4.50%
1.50%
6.00%
Acquisition High Yield Notes
8.50%
UOIG 15
$21,297.6
IRR
Cash from Balance Sheet 12/31/2011
Sponsorship Equity
2016
($10,434.7)
8.50%
May 4th 2012
Appendix 6 Revenue Model

Revenue Model
($ in millions)
Western Digital Corporation
Units of Sale
% Growth
ASPs
% Growth
Total Revenue
Hitachi Global Storage Technology
Units of Sale
% Growth
ASPs
% Growth
Total Revenue
% Growth
Total Revenue after Acquisition
% Growth
2008A
136.85
2009A
2010A
Q1
Q2
Q3
Q4
09/30/2011A 12/31/2011A 03/31/2012A 06/30/2012E
2011A
146.14
6.79%
$51.00
197.00
34.80%
$50.00
211.69
7.46%
$45.00
$8,074.00
$7,453.00
-7.69%
$9,850.00
32.16%
0.00
0
$0.00
0
$0.00
91.11
N/A
$53.00
$59.00
$8,074.00
58.57
28.91
44.20
36.50
$46.00
$69.00
$68.00
$64.00
$9,526.00
-3.29%
$2,694.00
$1,995.00
$3,005.60
112.96
23.98%
$53.00
104.96
-7.08%
$55.00
30.00
35.00
$53.00
$4,829.00
$5,987.00
23.98%
$5,773.00
-3.57%
$7,453.00
-7.69%
$9,850.00
32.16%
$9,526.00
-3.29%
$1,590.00
$2,694.00
2012E
2013E
2014E
2015E
2016E
2017E
168.18
-20.55%
$59.86
221.00
31.41%
$53.00
245.31
11.00%
$50.00
269.84
10.00%
$47.00
294.13
9.00%
$45.00
317.66
8.00%
$43.00
$2,336.00
$10,066.73
5.68%
$11,713.00
16.35%
$12,265.50
4.72%
$12,682.53
3.40%
$13,235.70
4.36%
$13,659.24
3.20%
31.00
29.00
$58.00
$60.00
$57.00
125.00
19.09%
$57.00
135.00
12.00%
$52.00
148.50
10.00%
$50.00
161.87
9.00%
$48.00
174.81
8.00%
$46.00
187.05
7.00%
$44.00
$2,030.00
$1,860.00
$1,653.00
$7,125.00
23.42%
$7,020.00
-1.47%
$7,425.00
5.77%
$7,769.52
4.64%
$8,041.45
3.50%
$8,230.25
2.35%
$1,995.00
$3,035.00
$3,989.00
$11,713.00
22.96%
$18,733.00
59.93%
$19,690.50
5.11%
$20,452.05
3.87%
$21,277.15
4.03%
$21,889.50
2.88%
Appendix 7 Consolidated Statements of Income

Consolidated Statements of Income
($ in millions)
Revenue
COGS
Q1
Q2
Q3
Q4
2008A
2009A
2010A
2011A
09/30/2011A
12/31/2011A
03/31/2012A
06/30/2012E
2012E
2013E
2014E
2015E
2016E
2017E
8,074.00
7,453.00
9,850.00
9,526.00
2,694.00
1,995.00
3,035.00
3,989.00
11,713.00
18,733.00
19,690.50
20,452.05
21,277.15
21,889.50
6,335.00
6,116.00
7,449.00
7,735.00
2,153.00
1,347.00
2,058.00
3,031.64
8,589.64
14,237.08
14,767.88
15,134.51
15,532.32
15,979.33
$1,739.00
$1,337.00
$2,401.00
$1,791.00
$541.00
$648.00
$977.00
$957.36
$3,123.36
$4,495.92
$4,922.63
$5,317.53
$5,744.83
$5,910.16
21.54%
17.94%
24.38%
18.80%
20.08%
32.48%
32.19%
24.00%
26.67%
24.00%
25.00%
26.00%
27.00%
27.00%
R&D
464.00
509.00
611.00
703.00
193.00
191.00
265.00
355.00
1,004.00
1,420.00
1,532.00
1,636.16
1,808.56
1,970.05
413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
SG&A
220.00
201.00
265.00
307.00
89.00
96.00
155.00
198.00
538.00
612.00
632.00
613.56
851.09
1,094.47
49.00
108.00
0.00
0.00
0.00
199.00
15.00
27.92
241.92
281.00
295.36
306.78
425.54
514.40
$1,006.00
$519.00
$1,525.00
$781.00
$259.00
$162.00
$542.00
$376.44
$1,339.44
$2,182.93
$2,463.27
$2,761.03
$2,659.64
$2,331.23
(27.00)
(9.00)
(4.00)
(9.00)
(3.00)
(3.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
52.00
27.00
9.00
10.00
4.00
5.00
4.00
15.00
28.00
121.75
97.75
73.75
49.75
25.75
Income before Income Taxes
981.00
501.00
1,520.00
780.00
258.00
160.00
538.00
361.44
1,311.44
2,061.18
2,365.52
2,687.28
2,609.89
2,305.48
Income Tax Provision
114.00
31.00
138.00
54.00
19.00
15.00
55.00
32.53
104.91
164.89
189.24
214.98
208.79
184.44
Net income
$867.00
$470.00
$1,382.00
$726.00
$239.00
$145.00
$483.00
$328.91
$1,206.52
$1,896.28
$2,176.28
$2,472.29
$2,401.10
$2,121.04
Net Margin
10.74%
6.31%
14.03%
7.62%
8.87%
7.27%
15.91%
8.25%
10.30%
10.12%
11.05%
12.09%
11.28%
9.69%
Gross Profit
Gross Margin
Restructuring and Other

Operating income
Interest Income
Interest and other Expense
UOIG 16
May 4th 2012
Appendix 8 Consolidated Statements of Cash Flow

Consolidated Statements of Cash Flows
($ in millions)
Net income
Q1
Q2
Q3
Q4
2008
2009
2010
2011
09/30/2011A
12/31/2011A
03/31/2012A
06/30/2012E
2012
2013
2014
2015
2016
2017
867.00
470.00
1,382.00
726.00
239.00
145.00
483.00
328.91
1,206.52
1,896.28
2,176.28
2,472.29
2,401.10
2,121.04
Adjustments to Net Cash Provided by Operations:

413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
Stock-Based Compensation
37.00
47.00
60.00
69.00
17.00
24.00
20.00
0.00
61.00
0.00
0.00
0.00
0.00
0.00
Deferred Income Taxes
(2.00)
24.00
27.00
20.00
9.00
9.00
24.00
0.00
42.00
0.00
0.00
0.00
0.00
0.00
Loss on Investments
13.00
10.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Acquired in-process Research and Development
49.00
14.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Non-Cash Portion of Restructuring and Other, net
0.00
63.00
0.00
0.00
0.00
109.00
10.00
0.00
119.00
0.00
0.00
0.00
0.00
0.00
(194.00)
92.00
(330.00)
50.00
(150.00)
609.00
(1,630.00)
847.00
(324.00)
(456.00)
(50.00)
(99.00)
(418.26)
(182.93)
8.00
88.00
(148.00)
(17.00)
(68.00)
179.00
(816.00)
822.00
117.00
(160.00)
(364.53)
(140.34)
(151.77)
(146.19)
Accounts Payable
114.00
(33.00)
270.00
178.00
157.00
(832.00)
1,891.00
(574.00)
655.00
660.00
340.00
685.89
(56.00)
0.77
Accrued Expenses
38.00
23.00
67.00
71.00
(17.00)
15.00
473.00
(336.00)
152.00
173.39
34.47
6.96
7.60
(1.07)
Changes in:
Accounts Receivable, net
Inventories
Other Assets and Liabilities

Net Cash Provided by Operating Activities
56.00
28.00
104.00
(44.00)
7.00
(20.00)
565.00
(129.66)
(44.66)
231.78
65.69
(37.07)
(92.46)
(202.97)
$1,399.00
$1,305.00
$1,942.00
$1,655.00
$352.00
$378.00
$1,208.00
$1,254.78
$2,766.39
$3,812.82
$3,483.63
$4,234.02
$3,115.54
$3,139.32
(615.00)
(519.00)
(737.00)
(778.00)
(134.00)
(119.00)
(139.00)
(358.00)
(750.00)
(1,125.00)
(1,186.00)
(1,215.00)
(1,254.00)
(1,298.00)
0.00
29.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(927.00)
(63.00)
(253.00)
(15.00)
0.00
0.00
(3,541.00)
0.00
(3,541.00)
0.00
(590.72)
(613.56)
(638.31)
(656.68)
0.00
Cash Flows from Investing Activities

Purchases of Property, Plant and Equipment
Proceeds from the sale of PP&E
Acquisitions, Net of Cash Acquired
Sales and Maturities of Investments
Purchase of Investment
Net Cash used in Investing Activities
326.00
2.00
4.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(105.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
($1,321.00)
($551.00)
($986.00)
($793.00)
($134.00)
($119.00)
($3,680.00)
($358.00)
($4,291.00)
($1,125.00)
($1,776.72)
($1,828.56)
($1,892.31)
($1,954.68)
Cash Flows from Financing Activities

Issuance of Stock under Employee Stock Plans
65.00
28.00
79.00
58.00
2.00
21.00
29.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Taxes Paid on Vested Stock Awards under Employee Stock Plans
(5.00)
(5.00)
(17.00)
(8.00)
(5.00)
0.00
0.00
0.00
(5.00)
0.00
0.00
0.00
0.00
0.00
Increase (decrease) in excess Tax Benefits from Employee Stock Plans
89.00
(24.00)
4.00
0.00
1.00
1.00
0.00
0.00
2.00
0.00
0.00
0.00
0.00
0.00
(60.00)
(36.00)
0.00
(50.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(500.00)
(1,000.00)
(1,000.00)
(475.00)
Repurchases of Common Stock/Dividend

Repayment of Debt
(1,023.00)
(27.00)
(82.00)
(106.00)
(31.00)
(32.00)
(879.00)
(730.00)
(1,672.00)
(413.00)
(475.00)
(475.00)
(475.00)
Repayment of Acquired Convertible Debentures
(250.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Proceeds from Debt
1,510.00
0.00
0.00
0.00
0.00
0.00
2,775.00
0.00
2,775.00
75.00
75.00
75.00
75.00
75.00
Net Cash used in Financing Activities
$326.00
($64.00)
($16.00)
($106.00)
($33.00)
($10.00)
$1,925.00
($730.00)
$1,100.00
($338.00)
($400.00)
($900.00)
($1,400.00)
($1,400.00)
Net Increase in Cash and Cash Equivalents
$404.00
$690.00
$940.00
$756.00
$185.00
$249.00
($547.00)
$166.78
($424.61)
$2,349.82
$1,306.91
$1,505.46
($176.78)
($215.37)
UOIG 17
May 4th 2012
Appendix 9 Consolidated Statements of Balance Sheet

Consolidated Balance Sheets
($ in millions)
Q1
Q2
Q3
Q4
2008
2009
2010
2011
09/30/2011A
12/31/2011A
03/31/2012A
06/30/2012E
2012
2013
2014
2015
2016
2017
1,104.00
1,794.00
2,734.00
3,490.00
3,675.00
3,924.00
3,377.00
3,543.78
3,543.78
5,893.60
7,200.51
8,705.97
8,529.20
8,313.83
ASSETS
Current Assets:
Cash and Cash Equivalents
Short Term Investment
Advances to Suppliers
3.00
0.00
36.00
0.00
1,010.00
926.00
1,256.00
1,206.00
1,356.00
747.00
2,377.00
1,530.00
1,530.00
1,986.00
2,036.00
2,135.00
2,553.26
2,736.19
Inventories
456.00
376.00
560.00
577.00
645.00
466.00
1,282.00
460.00
460.00
620.00
984.53
1,124.86
1,276.63
1,422.82
Other Current Assets
122.00
134.00
170.00
214.00
250.00
261.00
409.00
320.00
320.00
281.00
295.36
409.04
531.93
656.68
Total Current Assets
$2,731.00
$3,230.00
$4,720.00
$5,487.00
$5,926.00
$5,398.00
$7,445.00
$5,853.78
$5,853.78
$8,780.59
$10,516.39
$12,374.88
$12,891.01
$13,129.52
1,668.00
1,584.00
2,159.00
2,224.00
2,209.00
2,091.00
4,171.00
4,232.47
4,232.47
3,890.09
4,385.09
4,868.37
5,335.36
5,739.39
116.00
139.00
146.00
151.00
151.00
151.00
1,851.00
1,851.00
1,851.00
1,851.00
1,851.00
1,851.00
1,851.00
1,851.00
81.00
89.00
88.00
71.00
67.00
63.00
840.00
840.00
840.00
840.00
840.00
840.00
840.00
840.00
279.00
249.00
215.00
185.00
114.00
104.00
203.00
203.00
203.00
203.00
203.00
203.00
203.00
203.00
$4,875.00
$5,291.00
$7,328.00
$8,118.00
$8,467.00
$7,807.00
$14,510.00
$12,980.25
$12,980.25
$15,564.69
$17,795.49
$20,137.25
$21,120.38
$21,762.91
Accounts Payable
1,181.00
1,101.00
1,507.00
1,545.00
1,708.00
883.00
2,774.00
2,200.00
2,200.00
2,860.00
3,200.00
3,885.89
3,829.89
3,830.66
Accrued Expenses
266.00
247.00
281.00
349.00
348.00
364.00
837.00
501.00
501.00
674.39
708.86
715.82
723.42
722.35
Accrued Warranty
90.00
95.00
129.00
132.00
135.00
124.00
194.00
239.34
239.34
374.66
443.04
511.30
531.93
547.24
Current Portion of Long-term Debt
27.00
82.00
106.00
144.00
163.00
181.00
730.00
400.00
400.00
475.00
475.00
475.00
475.00
75.00
$1,564.00
$1,525.00
$2,023.00
$2,170.00
$2,354.00
$1,552.00
$4,535.00
$3,340.34
$3,340.34
$4,384.05
$4,826.89
$5,588.01
$5,560.24
$5,175.25
Long-Term Debt
482.00
400.00
294.00
150.00
100.00
50.00
2,013.00
1,613.00
1,613.00
1,200.00
800.00
400.00
0.00
0.00
Other Liabilities
133.00
174.00
302.00
310.00
290.00
282.00
546.00
282.00
282.00
339.45
351.13
359.48
369.27
275.75
Total Liabilities
$2,179.00
$2,099.00
$2,619.00
$2,630.00
$2,744.00
$1,884.00
$7,094.00
$5,235.34
$5,235.34
$5,923.50
$5,978.02
$6,347.49
$5,929.51
$5,451.00
Property, Plant and Equipment, net

Goodwill
Other Intangible Assets, net
Other Non-Current Assets
Total Assets
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Total Current Liabilities
Shareholders Equity:
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (loss)
Retained Earnings
Treasure Stock
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
906.00
896.00
1,022.00
1,091.00
1,106.00
1,151.00
2,161.00
2,161.00
2,161.00
2,161.00
2,161.00
2,161.00
2,161.00
2,161.00
(12.00)
2.00
11.00
(5.00)
(24.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
1,822.00
2,292.00
3,674.00
4,400.00
4,639.00
4,784.00
5,267.00
5,595.91
5,595.91
7,492.19
9,668.46
11,640.76
13,041.86
14,162.90
-22
Total Shareholders Equity
$2,696.00
$3,192.00
$4,709.00
$5,488.00
$5,723.00
$5,923.00
$7,416.00
$7,744.91
$7,744.91
$9,641.19
$11,817.46
$13,789.76
$15,190.86
$16,311.90
Total Liabilities and Shareholders Equity
$4,875.00
$5,291.00
$7,328.00
$8,118.00
$8,467.00
$7,807.00
$14,510.00
$12,980.25
$12,980.25
$15,564.69
$17,795.49
$20,137.25
$21,120.38
$21,762.91
UOIG 18
May 4th 2012
Appendix 10 Working Capital Model

Working Capital Model
($ in millions)
Total Revenue
Current Assets
Accounts Receivable
% of Revenue
Inventory
% of Revenue
% of Revenue
% of Revenue
Long Term Assets
Net PP&E Beginning
Capital Expenditures
Acquisition
Goodwill of Acquisition
Net PP&E Ending
Total Current Assets & Net PP&E
% of Revenue
Current Liabilities
Accounts Payable
% of Revenue
Accrued Expense
% of Revenue
Accrued Warranty
% of Revenue
Current Portion of Long Term Debt
% of Revenue
% of Revenue
2008A
2009A
2010A
2011A
Q1
Q2
Q3
Q4
09/30/2011A
12/31/2011A
03/31/2012A
06/30/2012E
2012E
2013E
2014E
2015E
2016E
2017E
$8,074.00
$7,453.00
$9,850.00
$9,526.00
$2,694.00
$1,995.00
$3,035.00
$3,989.00
$11,713.00
$18,733.00
$19,690.50
$20,452.05
$21,277.15
$21,889.50
1,010.00
12.51%
456.00
5.65%
122.00
1.51%
$2,692.00
33.34%
926.00
12.42%
376.00
5.04%
134.00
1.80%
$1,436.00
19.27%
1,256.00
12.75%
560.00
5.69%
170.00
1.73%
$1,986.00
20.16%
1,206.00
12.66%
577.00
6.06%
214.00
2.25%
$1,997.00
20.96%
1,356.00
747.00
2,377.00
1,530.00
645.00
466.00
1,282.00
460.00
250.00
261.00
409.00
320.00
$2,251.00
83.56%
$1,474.00
73.88%
$4,068.00
134.04%
$2,310.00
57.91%
1,530.00
13.06%
460.00
3.93%
320.00
2.73%
$2,310.00
19.72%
1,986.00
10.60%
620.00
3.31%
281.00
1.50%
$2,887.00
15.41%
2,036.00
10.34%
984.53
5.00%
295.36
1.50%
$3,315.88
16.84%
2,135.00
10.44%
1,124.86
5.50%
409.04
2.00%
$3,668.90
17.94%
2,553.26
12.00%
1,276.63
6.00%
531.93
2.50%
$4,361.82
20.50%
2,736.19
12.50%
1,422.82
6.50%
656.68
3.00%
$4,815.69
22.00%
741.00
615.00
927.00
1,668.00
519.00
63.00
1,584.00
737.00
253.00
2,159.00
778.00
15.00
2,224.00
134.00
0.00
2,209.00
119.00
0.00
4,171.00
358.00
0.00
4,232.47
0.00
0.00
4,232.47
1,125.00
0.00
3,890.09
1,186.00
590.72
4,385.09
1,215.00
613.56
4,868.37
1,254.00
638.31
5,335.36
1,298.00
656.68
413.00
1,668.00
$4,360.00
54.00%
479.00
1,584.00
$3,020.00
40.52%
510.00
2,159.00
$4,145.00
42.08%
602.00
2,224.00
$4,221.00
44.31%
158.00
2,209.00
$4,460.00
165.55%
140.00
2,091.00
$3,565.00
178.70%
2,091.00
139.00
3,541.00
1,412.00
188.00
4,171.00
$8,239.00
271.47%
296.53
4,232.47
$6,542.47
164.01%
0.00
4,232.47
$6,542.47
55.86%
1,467.38
3,890.09
$6,777.09
36.18%
1,281.71
4,385.09
$7,700.98
39.11%
1,345.28
4,868.37
$8,537.27
41.74%
1,425.32
5,335.36
$9,697.18
45.58%
1,550.66
5,739.39
$10,555.08
48.22%
1,181.00
14.63%
266.00
3.29%
90.00
1.11%
27.00
0.33%
$1,564.00
19.37%
1,101.00
14.77%
247.00
3.31%
95.00
1.27%
82.00
1.10%
$1,525.00
20.46%
1,507.00
15.30%
281.00
2.85%
129.00
1.31%
106.00
1.08%
$2,023.00
20.54%
1,545.00
16.22%
349.00
3.66%
132.00
1.39%
144.00
1.51%
$2,170.00
22.78%
1,708.00
63.40%
348.00
12.92%
135.00
5.01%
163.00
6.05%
$2,354.00
87.38%
883.00
44.26%
364.00
18.25%
124.00
6.22%
181.00
9.07%
$1,552.00
77.79%
2,774.00
91.40%
837.00
27.58%
194.00
6.39%
230.00
7.58%
$4,035.00
132.95%
2,200.00
55.15%
501.00
12.56%
239.34
6.00%
400.00
10.03%
$3,340.34
83.74%
2,200.00
18.78%
501.00
4.28%
239.34
2.04%
400.00
3.42%
$3,340.34
28.52%
2,860.00
15.27%
674.39
3.60%
374.66
2.00%
400.00
2.14%
$4,309.05
23.00%
3,200.00
16.25%
708.86
3.60%
443.04
2.25%
400.00
2.03%
$4,751.89
24.13%
3,885.89
19.00%
715.82
3.50%
511.30
2.50%
400.00
1.96%
$5,513.01
26.96%
3,829.89
18.00%
723.42
3.40%
531.93
2.50%
400.00
1.88%
$5,485.24
25.78%
3,830.66
17.50%
722.35
3.30%
547.24
2.50%
400.00
1.83%
$5,500.25
25.13%
UOIG 19
May 4th 2012
Appendix 11 LBO Debt Schedule

LBO Debt Schedule
Acquisition Revolver (7 Years)
Interest Expense
Current Portion
Principle
Amorzation
Acquisition Term Loan (5 Years)
Interest Expense
Current Portion
Principle
Amorzation
Acquistion High Yield Notes (4 Years)
Interest Expense
Current Portion
Principle
Amorzation
Outstanding Amount
Interest Rate
$1,000.00
4.50%
Out Standing Amount

Interest Rate
$3,000.00
6.00%
Out Standing Amount

Interest Rate
$1,000.00
8.50%
2012
2013
2014
2015
2016
2017
2018
$22.50
$71.43
$928.57
-$71.43
2012
$41.79
$142.86
$785.71
-$214.29
2013
$35.36
$142.86
$642.86
-$357.14
2014
$28.93
$142.86
$500.00
-$500.00
2015
$22.50
$142.86
$357.14
-$642.86
2016
$16.07
$142.86
$214.29
-$785.71
2017
$9.64
$142.86
$71.43
-$928.57
2018
$162.00
$126.00
$90.00
$54.00
$18.00
$600.00
$600.00
$600.00
$600.00
$400.00
$2,100.00 $1,500.00
$900.00
$300.00
$0.00
-$900.00 -$1,500.00 -$2,100.00 -$2,700.00 -$3,000.00
2013
2014
2015
2016
2017
$0.00
$0.00
$0.00
$0.00
2018
$90.00
$300.00
$2,700.00
-$300.00
2012
$42.50
$125.00
$875.00
-$125.00
$74.38
$250.00
$625.00
-$375.00
$53.13
$250.00
$375.00
-$625.00
$31.88
$10.63
$250.00
$125.00
$125.00
$0.00
-$875.00 -$1,000.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Appendix 12 LBO Consolidated Statements of Income

Consolidated Statements of Income
($ in millions)
Revenue
COGS
Q1
Q2
Q3
Q4
2008A
2009A
2010A
2011A
09/30/2011A
12/31/2011A
03/31/2012E
06/30/2012E
2012E
2013E
2014E
2015E
2016E
2017E
8,074.00
7,453.00
9,850.00
9,526.00
2,694.00
1,995.00
3,035.00
3,989.00
11,713.00
18,733.00
19,690.50
20,452.05
21,277.15
21,889.50
6,335.00
6,116.00
7,449.00
7,735.00
2,153.00
1,347.00
2,058.00
3,031.64
8,589.64
14,237.08
14,767.88
15,134.51
15,532.32
15,979.33
$1,739.00
$1,337.00
$2,401.00
$1,791.00
$541.00
$648.00
$977.00
$957.36
$3,123.36
$4,495.92
$4,922.63
$5,317.53
$5,744.83
$5,910.16
21.54%
17.94%
24.38%
18.80%
20.08%
32.48%
32.19%
24.00%
26.67%
24.00%
25.00%
26.00%
27.00%
27.00%
R&D
464.00
509.00
611.00
703.00
193.00
191.00
265.00
355.00
1,004.00
1,420.00
1,532.00
1,636.16
1,808.56
1,970.05
413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
SG&A
220.00
201.00
265.00
307.00
89.00
96.00
155.00
198.00
538.00
612.00
632.00
613.56
851.09
1,094.47
49.00
108.00
0.00
0.00
0.00
199.00
15.00
27.92
241.92
281.00
295.36
306.78
425.54
514.40
$1,006.00
$519.00
$1,525.00
$781.00
$259.00
$162.00
$542.00
$376.44
$1,339.44
$2,182.93
$2,463.27
$2,761.03
$2,659.64
$2,331.23
(27.00)
(9.00)
(4.00)
(9.00)
(3.00)
(3.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
52.00
27.00
9.00
10.00
4.00
5.00
4.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
155.00
155.00
278.16
214.48
150.80
87.13
34.07
2,297.16
Gross Profit
Gross Margin
Restructuring and Other

Operating income
Interest Income
Interest and other Expense
LBO Acquisition Interest Payment
Income before Income Taxes
981.00
501.00
1,520.00
780.00
258.00
160.00
538.00
221.44
1,184.44
1,904.76
2,248.79
2,610.22
2,572.52
Income Tax Provision
114.00
31.00
138.00
54.00
19.00
15.00
55.00
32.53
104.91
164.89
189.24
214.98
208.79
184.44
Net income
$867.00
$470.00
$1,382.00
$726.00
$239.00
$145.00
$483.00
$188.91
$1,079.52
$1,739.87
$2,059.54
$2,395.24
$2,363.73
$2,112.72
Net Margin
10.74%
6.31%
14.03%
7.62%
8.87%
7.27%
15.91%
4.74%
9.22%
9.29%
10.46%
11.71%
11.11%
9.65%
UOIG 20
May 4th 2012
Appendix 12 LBO Consolidated Statements of Cash Flow

Consolidated Statements of Cash Flows
($ in millions)
Net income
Q1
Q2
Q3
Q4
2008
2009
2010
2011
09/30/2011A
12/31/2011A
03/31/2012E
06/30/2012E
2012
2013
2014
2015
2016
2017
867.00
470.00
1,382.00
726.00
239.00
145.00
483.00
188.91
1,079.52
1,739.87
2,059.54
2,395.24
2,363.73
2,112.72
Adjustments to Net Cash Provided by Operations:

413.00
479.00
510.00
602.00
158.00
140.00
188.00
296.53
782.53
1,467.38
1,281.71
1,345.28
1,425.32
1,550.66
Stock-Based Compensation
37.00
47.00
60.00
69.00
17.00
24.00
0.00
0.00
41.00
0.00
0.00
0.00
0.00
0.00
Deferred Income Taxes
(2.00)
24.00
27.00
20.00
9.00
9.00
0.00
0.00
18.00
0.00
0.00
0.00
0.00
0.00
Loss on Investments
13.00
10.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Acquired in-process Research and Development
49.00
14.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Non-Cash Portion of Restructuring and Other, net
0.00
63.00
0.00
0.00
0.00
109.00
0.00
0.00
109.00
0.00
0.00
0.00
0.00
0.00
(194.00)
92.00
(330.00)
50.00
(150.00)
609.00
(405.00)
(378.00)
(324.00)
(290.00)
(72.00)
(243.00)
(454.00)
(185.29)
8.00
88.00
(148.00)
(17.00)
(68.00)
179.00
263.00
(257.00)
117.00
(160.00)
(364.53)
(140.34)
(151.77)
(146.19)
Accounts Payable
114.00
(33.00)
270.00
178.00
157.00
(832.00)
388.00
929.00
655.00
660.00
340.00
685.89
(56.00)
0.77
Accrued Expenses
38.00
23.00
67.00
71.00
(17.00)
15.00
16.00
121.00
152.00
173.39
34.47
6.96
7.60
(1.07)
Changes in:
Inventories
Other Assets and Liabilities

Net Cash Provided by Operating Activities
56.00
28.00
104.00
(44.00)
7.00
(20.00)
7.00
(96.66)
(91.66)
142.33
7.14
(95.07)
(321.46)
(406.97)
$1,399.00
$1,305.00
$1,942.00
$1,655.00
$352.00
$378.00
$940.00
$803.78
$2,538.39
$3,732.96
$3,286.35
$3,954.97
$2,813.42
$2,924.63
(615.00)
(519.00)
(737.00)
(778.00)
(134.00)
(119.00)
(139.00)
(358.00)
(750.00)
(1,125.00)
(1,186.00)
(1,215.00)
(1,254.00)
(1,298.00)
0.00
29.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(927.00)
(63.00)
(253.00)
(15.00)
0.00
0.00
(3,541.00)
0.00
(3,541.00)
0.00
(590.72)
(613.56)
(638.31)
(656.68)
0.00
Cash Flows from Investing Activities

Purchases of Property, Plant and Equipment
Proceeds from the sale of PP&E
Acquisitions, Net of Cash Acquired
Sales and Maturities of Investments
Purchase of Investment
Net Cash used in Investing Activities
326.00
2.00
4.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(105.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
($1,321.00)
($551.00)
($986.00)
($793.00)
($134.00)
($119.00)
($3,680.00)
($358.00)
($4,291.00)
($1,125.00)
($1,776.72)
($1,828.56)
($1,892.31)
($1,954.68)
Cash Flows from Financing Activities

Issuance of Stock under Employee Stock Plans
65.00
28.00
79.00
58.00
2.00
21.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Taxes Paid on Vested Stock Awards under Employee Stock Plans
(5.00)
(5.00)
(17.00)
(8.00)
(5.00)
0.00
0.00
0.00
(5.00)
0.00
0.00
0.00
0.00
0.00
Increase (decrease) in excess Tax Benefits from Employee Stock Plans
89.00
(24.00)
4.00
0.00
1.00
1.00
0.00
0.00
2.00
0.00
0.00
0.00
0.00
0.00
(60.00)
(36.00)
0.00
(50.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(1,023.00)
(27.00)
(82.00)
(106.00)
(31.00)
(32.00)
(181.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(2,000.00)
(2,000.00)
0.00
0.00
0.00
0.00
0.00
(496.43)
(496.43)
(992.86)
(992.86)
(992.86)
(867.86)
(542.86)
Repurchases of Common Stock

Repayment of Debt
LBO Retire of Debt
LBO Acuiqistion Debt Payment
Repayment of Acquired Convertible Debentures
(250.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Proceeds from Debt
1,510.00
0.00
0.00
0.00
0.00
0.00
2,000.00
5,000.00
7,000.00
0.00
0.00
0.00
0.00
0.00
(576.06)
(576.06)
0.00
0.00
0.00
0.00
0.00
10,434.68
10,434.68
0.00
0.00
0.00
0.00
0.00
(15,361.62)
(15,361.62)
0.00
0.00
0.00
0.00
0.00
Related Fees
From Sponsership Equity
Payment to Retire Common Stock
Net Cash used in Financing Activities
$326.00
($64.00)
($16.00)
($106.00)
($33.00)
($10.00)
$1,819.00
($2,999.43)
($1,002.43)
($992.86)
($992.86)
($992.86)
($867.86)
($542.86)
Net Increase in Cash and Cash Equivalents
$404.00
$690.00
$940.00
$756.00
$185.00
$249.00
($921.00)
($2,553.65)
($2,755.04)
$1,615.10
$516.77
$1,133.55
$53.25
$427.09
UOIG 21
May 4th 2012
Appendix 12 LBO Consolidated Statements of Balance Sheet

Consolidated Balance Sheets
($ in millions)
Q1
Q2
Q3
Q4
2008
2009
2010
2011
09/30/2011A
12/31/2011A
03/31/2012E
06/30/2012E
2012
2013
2014
2015
2016
2017
1,104.00
1,794.00
2,734.00
3,490.00
3,675.00
3,924.00
3,003.00
449.35
449.35
2,064.45
2,581.22
3,714.78
3,768.03
4,195.12
ASSETS
Current Assets:
Cash and Cash Equivalents
Short Term Investment
Advances to Suppliers
3.00
0.00
36.00
0.00
1,010.00
926.00
1,256.00
1,206.00
1,356.00
747.00
1,152.00
1,530.00
1,530.00
1,820.00
1,892.00
2,135.00
2,589.00
2,774.29
Inventories
456.00
376.00
560.00
577.00
645.00
466.00
203.00
460.00
460.00
620.00
984.53
1,124.86
1,276.63
1,422.82
122.00
134.00
170.00
214.00
250.00
261.00
266.00
320.00
320.00
281.00
295.36
409.04
531.93
656.68
$2,731.00
$3,230.00
$4,720.00
$5,487.00
$5,926.00
$5,398.00
$4,624.00
$2,759.35
$2,759.35
$4,785.45
$5,753.11
$7,383.68
$8,165.59
$9,048.91
1,668.00
1,584.00
2,159.00
2,224.00
2,209.00
2,091.00
5,583.00
5,644.47
5,644.47
5,302.09
5,797.09
6,280.37
6,747.36
7,151.39
116.00
139.00
146.00
151.00
151.00
151.00
151.00
151.00
151.00
535.11
535.11
535.11
410.11
185.11
81.00
89.00
88.00
71.00
67.00
63.00
63.00
63.00
63.00
63.00
63.00
63.00
63.00
63.00
279.00
249.00
215.00
185.00
114.00
104.00
200.00
250.00
250.00
339.45
398.00
456.00
685.00
889.00
$4,875.00
$5,291.00
$7,328.00
$8,118.00
$8,467.00
$7,807.00
$10,621.00
$8,867.82
$8,867.82
$11,025.10
$12,546.31
$14,718.16
$16,071.06
$17,337.41
Accounts Payable
1,181.00
1,101.00
1,507.00
1,545.00
1,708.00
883.00
1,271.00
2,200.00
2,200.00
2,860.00
3,200.00
3,885.89
3,829.89
3,830.66
Accrued Expenses
266.00
247.00
281.00
349.00
348.00
364.00
380.00
501.00
501.00
674.39
708.86
715.82
723.42
722.35
Accrued Warranty
90.00
95.00
129.00
132.00
135.00
124.00
130.00
239.34
239.34
374.66
443.04
511.30
531.93
547.24
Current Portion of Long-term Debt
27.00
82.00
106.00
144.00
163.00
181.00
50.00
496.43
496.43
992.86
992.86
992.86
867.86
542.86
$1,564.00
$1,525.00
$2,023.00
$2,170.00
$2,354.00
$1,552.00
$1,831.00
$3,436.77
$3,436.77
$4,901.91
$5,344.75
$6,105.87
$5,953.10
$5,643.11
482.00
400.00
294.00
150.00
100.00
50.00
2,000.00
Property, Plant and Equipment, net

Goodwill
Other Intangible Assets, net
Other Non-Current Assets
Total Assets
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:

Long-Term Debt
LBO Acquisition Long Term Debt
0.00
0.00
0.00
0.00
0.00
0.00
0.00
4,503.57
4,503.57
3,510.71
2,517.86
1,525.00
657.14
214.29
Other Liabilities
133.00
174.00
302.00
310.00
290.00
282.00
384.00
282.00
282.00
339.45
351.13
359.48
369.27
275.75
Total Liabilities
$2,179.00
$2,099.00
$2,619.00
$2,630.00
$2,744.00
$1,884.00
$4,215.00
$8,222.34
$8,222.34
$8,752.07
$8,213.74
$7,990.35
$6,979.51
$6,133.14
(4,926.94)
Shareholders Equity:
Common Stock
2.00
2.00
2.00
2.00
2.00
2.00
2.00
(4,926.94)
(4,926.94)
(4,926.94)
(4,926.94)
(4,926.94)
(4,926.94)
Additional Paid-in Capital
906.00
896.00
1,022.00
1,091.00
1,106.00
1,151.00
1,151.00
112.32
112.32
0.00
0.00
0.00
0.00
0.00
Accumulated Other Comprehensive Income (loss)
(12.00)
2.00
11.00
(5.00)
(24.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
(14.00)
Retained Earnings
1,822.00
2,292.00
3,674.00
4,400.00
4,639.00
4,784.00
5,267.00
5,455.91
5,455.91
7,195.78
9,255.32
11,650.56
14,014.29
16,127.01
Total Shareholders Equity
$2,696.00
$3,192.00
$4,709.00
$5,488.00
$5,723.00
$5,923.00
$6,406.00
$627.29
$627.29
$2,254.84
$4,314.38
$6,709.62
$9,073.35
$11,186.07
Total Liabilities and Shareholders Equity
$4,875.00
$5,291.00
$7,328.00
$8,118.00
$8,467.00
$7,807.00
$10,621.00
$8,849.63
$8,849.63
$11,006.91
$12,528.12
$14,699.97
$16,052.87
$17,319.22
UOIG 22
May 4th 2012
Appendix 13 Sources
Western Digital Corporation 10-K 10-Q
Factset
Seeking Alpha
Yahoo! Finance
Google Finance
IBIS World
Seagate Technology PLC 10-K 10-Q
SanDisk Corporation 10-K 10-Q
Micron Technology Inc. 10-K 10-Q
Taylor Gentry
UOIG 23

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May 4th 2012