Western Digital : Growth and Transformation LCDG Capital Meixi Chen Ada Del Rosso Amir Ganaba Richard Graham Alyson

1. Western Digital: Growth and Transformation LCDG Capital Meixi Chen Ada Del Rosso Amir Ganaba Richard Graham Alyson Laux

2. Highlights • Successful Transformation of Business Model • High Value Products dominate the Product Mix • Cost Structure as a Sustainable Competitive Advantage • Promising Growth in Emerging Markets • Position in the 2-yr cycle $24 $47 $60 Analyst Estimate Range Source: Yahoo Finance

3. A Deeper Look at WDC… • Company History • History of adapting to new markets • Strategic use acquisitions and divestitures • Competitive Landscape • New Technology increases product differentiation • Exports to emerging market promise revenue growth • Entering the Maturity Stage of the Life Cycle • Key Success Factors • Production Inputs make up majority of budget • Positioning • Back to Basics Strategy • 30% Market Share • Vertical Integration • Key Financials • 52 Week Trading Range: $23.06 - $45.09 P/E Ratio: 8.24 • Shares Outstanding: 231.67M EPS: 4.63 • Market Cap: $8.85B Debt/Equity: 6.78

4. New Products Increasing Demand in Storage Enterprise Consumer Electronics Increase in WDC Products Branded Source: Company Data and Revenue Projections

5. New Markets Geographic Mix Asia Growth Rates Source: Company Data and Revenue Projections • Capturing a Growing Market • PC shipments up 8.8% in 2010 • Economy improvements • Growth of Wealth in Emerging Nations Source: Company Data and Revenue Projections

6. Cost Structure Market Leader with Experience • Economies of Scale • HDD component vertical integration • Responsive and Flexible Production Process • Hitachi acquisition proves thesis Source: Company Data and Revenue Projections

7. Potential Risks Competitive Environment • Intensifying Competition in the industry • Average Selling Price uniformly decreasing • Varied competitors – Pureplay & Conglomerates Market Cannibalization • Flash based Solid State Drives (SSDs) • Tablets • Cloud Computing Technologies

8. Competitive Environment Western Digital Operates in a Highly Competitive Market Pure play Conglomerates SSD = Medium Threat = Low Threat = High Threat

9. Competitive Environment Western Digital Operates in a Highly Competitive Market Pure play Conglomerates • Western Digital’s Advantage • Hard Drive Products are substitutable • Lower Average Selling Price • High Quality Reputation • Stable ROE over past years Conclusion Western Digital is Superior to Seagate and will be able to Capture Seagate’s Established Market Share in Traditional Segment SSD = Medium Threat = Low Threat = High Threat

10. Competitive Environment Western Digital Operates in a Highly Competitive Market Pure play Conglomerates WDC VS. Seagate SSD = Medium Threat = Low Threat = High Threat

11. Conglomerates Western Digital Operates in a Highly Competitive Market Pure play Conglomerates SSD = Medium Threat = Low Threat = High Threat

12. Conglomerates Western Digital Operates in a Highly Competitive Market Pure play • Western Digital’s Advantage • Focus on the Storage Device Market • Low Average Selling Price • Higher Quality • Technological Innovation Ability • Conclusion • Western Digital provides higher quality products & faster technology update • WD will expand through winning their market shares Conglomerates SSD = Medium Threat = Low Threat = High Threat

13. Market Cannibalization – SSDs High Cost High performance Low Power Consumption Small Physical Size SSD is a high growth market with great potential; but it will not replace HDD in the next Decade

14. Market Cannibalization – SSDs Take Away Western Digital has already started manufacturing SSD lines 10 Years transition period will allow WD to leverage its brand strength and R&D to capture market share High Cost High performance Low Power Consumption Small Physical Size SSD is a high growth market with great potential; but it will not replace HDD in the next Decade

15. Tablet & Cloud Computing Tablet – Competition with HDD However… Virtualized Storage Service May Erode the HDD Market However… HDD will still be used – demand from cloud service provider iPAD – Content Consumption Device Therefore, HDD is still required to store information & data Opens up opportunities for WD’s RAID Edition WD’s NAS – provide personal cloud opportunity

16. Valuation Summary Valuation balances depressed industry valuation with future growth potential • Comparables more accurately captures current market valuation • DCF more accurately captures potential growth • Gordon growth given limited weighting • Precedent transactions analysis not included due to lack of takeover potential

17. Comparable Companies $38.45 $51.14

19. Key Ratios Project stable margins over 5 year period We project the firm will remain solvent Project declining ROA and ROE as industry enters mature stage Liquidity ratios suggest the firm is highly liquid

20. Western Digital: Growth and Transformation LDGC Capital Meixi Chen Ada Del Rosso Amir Ganaba Richard Graham Alyson Laux

21. Appendix Main Presentation Appendix Key Highlights Company Overview Conclusion Financials Sensitivity Analysis WACC PV Interest Earned on Cash Tax Treatment EPS and PE Analysis Capex Key Ratios Wall Street Consensus Future Outlook Risks New Products New Markets Cost Structure Overview Competitor Analysis Advantage over Seagate ROE Comparison Conglomerates Advantage over Conglomerates SSDs SSD Takeaway Tablet and Cloud Computing Financial Summary Strategic Insights WDC History of Innovation Seagate Technology Potential Acquisition Effects Hitachi Valuation Summary Comparable Companies Discounted Cash Flow

22. Sensitivity Analysis Sensitivity analysis shows roughly an average $25 price range for each DCF valuation methodology

23. WACC

24. PV Interest Earned on Cash Effect of interest earned on cash balance small

25. Tax Treatment Tax holiday until 2020 in Malaysia substantially improves WDC’s EPS

26. CAPEX Forecast Projected 2011 CAPEX consistent with management forecast Projected 2012-2015 CAPEX based on historical CAPEX as % of sales

27. EPS and P/E Analysis Average P/E: 8.9x

28. WDC has a History of Innovation 1: WDC Emerges from Bankruptcy 2: Begins Constructing own HDDS 3: Begins Multiple HDD models 4: Increases Product Variety 5: Enters Enterprise Market

29. Wall Street Consensus Standard and Poor’s

30. Seagate Technology Strength Weakness Business Overview: Seagate Technology (NASDAQ: STX) designs, manufactures, markets and sells hard disk drives. Its products are used in enterprise applications, client computer applications and consumer electronics. Seagate sells its products to OEMs, retailers and distributors. The company is direct competitor with WD in all areas. Industry leader Replaceable products Domination in the Enterprise Market Higher ASP High reputation Unstable ROE 1 Year Stock Performance

31. Potential Acquisition Effects Characteristics of Potential Acquisition Market Cap of $1-3B Core Competencies: Semiconductors Electronic Components Software Development UI Dilution Effects Cash on hand more than adequate to finance future potential acquisitions motivated by vertical integration Acquisition Currency Cash on Hand: $3.1B

32. Total Market Size

33. Recent HitachiAcquisition $4.3 Billion=$3.5 Billion Cash + $750 Million Equity