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wdc:HardDrive
wdc:Year
xbrli:pure
iso4217:USD
xbrli:shares
xbrli:shares
iso4217:USD
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureAndSignificantAccountingPoliciesTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accounting policies followed by Western Digital Corporation (the “Company”) are set forth
in Part II, Item 8, Note 1 of the Notes to Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended July 1, 2011. In the opinion of management,
all adjustments necessary to fairly state the unaudited condensed consolidated financial statements
have been made. All such adjustments are of a normal, recurring nature. Certain information and
footnote disclosures normally included in the consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have
been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended July 1, 2011. The results of operations for
interim periods are not necessarily indicative of results to be expected for the full year (see
note 12).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Company management has made estimates and assumptions relating to the reporting of certain
assets and liabilities in conformity with U.S. GAAP. These estimates and assumptions have been
applied using methodologies that are consistent throughout the periods presented. However, actual
results could differ materially from these estimates.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:SupplementalBalanceSheetDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Supplemental Financial Statement Data</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Inventories</i>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Jul. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(in millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials and component parts
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>170</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">172</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work-in-process
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>275</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">263</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>200</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total inventories
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>645</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">577</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Warranty</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company records an accrual for estimated warranty costs when revenue is recognized. The
Company generally warrants its products for a period of one to five years. The warranty provision
considers estimated product failure rates and trends, estimated repair or replacement costs and
estimated costs for customer compensatory claims related to product quality issues, if any. A
statistical warranty tracking model is used to help prepare estimates and assists the Company in
exercising judgment in determining the underlying estimates. The statistical tracking model
captures specific detail on hard drive reliability, such as factory test data, historical field
return rates, and costs to repair by product type. Management’s judgment is subject to a greater
degree of subjectivity with respect to newly introduced products because of limited field
experience with those products upon which to base warranty estimates. Management reviews the
warranty accrual quarterly for products shipped in prior periods and which are still under
warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact
current period gross margin and income. Such changes are generally a result of differences between
forecasted and actual return rate experience and costs to repair. If actual product return trends,
costs to repair returned products or costs of customer compensatory claims differ significantly
from estimates, future results of operations could be materially affected. Changes in the warranty
accrual were as follows (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Oct. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty accrual, beginning of period
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>170</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">170</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Charges to operations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Utilization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(42</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(38</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in estimate related to pre-existing warranties
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty accrual, end of period
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>173</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">173</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Accrued warranty also includes amounts classified in other liabilities of $38 million at
September 30, 2011 and July 1, 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Income per Common Share</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company computes basic income per common share using net income and the weighted average
number of common shares outstanding during the period. Diluted income per common share is computed
using net income and the weighted average number of common shares and potentially dilutive common
shares outstanding during the period. Potentially dilutive common shares include certain dilutive
outstanding employee stock options, rights to purchase shares of common stock under the Company’s
Employee Stock Purchase Plan (“ESPP”) and restricted stock unit awards.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table illustrates the computation of basic and diluted income per common share
(in millions, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Oct. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>239</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">197</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>233</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">230</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Employee stock options and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>237</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income per common share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1.03</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.86</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1.01</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.84</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Anti-dilutive potential common shares excluded*
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">For purposes of computing diluted income per common share, certain potentially dilutive
securities have been excluded from the calculation because their effect would have been
anti-dilutive.
</div></td>
</tr>
</table>
</div>
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<!-- Begin Block Tagged Note 4 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Debt</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In February 2008, Western Digital Technologies, Inc. (“WDTI”), a wholly-owned subsidiary of
the Company, entered into a five-year credit agreement that provided for a $500 million term loan
facility. As of September 30, 2011, the term loan facility had a variable interest rate of 1.50%
and a remaining balance of $263 million, which requires principal payments totaling $113 million
through the remainder of fiscal 2012 and $150 million in fiscal 2013. The term loan facility has a
maturity date of February 11, 2013. As of September 30, 2011, WDTI was in compliance with all
covenants.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">See Note 10 for additional disclosures related to the Company’s new credit facility to be
entered into in connection with the closing of the planned acquisition of Viviti Technologies Ltd.,
until recently known as Hitachi Global Storage Technologies Holdings Pte. Ltd (“HGST”).
</div>
</div>
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<!-- Begin Block Tagged Note 5 - us-gaap:LegalMattersAndContingenciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Legal Proceedings</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">When the Company becomes aware of a claim or potential claim, the Company assesses the
likelihood of any loss or exposure. The Company discloses information regarding each material claim
where the likelihood of a loss contingency is probable or reasonably possible. If a loss
contingency is probable and the amount of the loss can be reasonably estimated, the Company records
an accrual for the loss. In such cases, there may be an exposure to potential loss in excess of the
amount accrued. Where a loss is not probable but is reasonably possible or where a loss in excess
of the amount accrued is reasonably possible, the Company discloses an estimate of the amount of
the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the
amount of such reasonably possible losses is not material to the Company’s financial position,
results of operations or cash flows. For each of the matters described below, the Company has
either recorded an accrual for losses that are probable and reasonably estimable or has determined
that, while a loss is reasonably possible (including potential losses in excess of the amounts
accrued by the Company), a reasonable estimate of the amount of loss or range of possible losses
with respect to the claim or in excess of amounts already accrued by the Company cannot be made.
The ability to
predict the ultimate outcome of such matters involves judgments, estimates and inherent
uncertainties. The actual outcome of such matters could differ materially from management’s
estimates.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Intellectual Property Litigation</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On June 20, 2008, plaintiff Convolve, Inc. (“Convolve”) filed a complaint in the Eastern
District of Texas against the Company and two other companies alleging infringement of U.S. Patent
Nos. 6,314,473 and 4,916,635. The complaint sought unspecified monetary damages and injunctive
relief. On October 10, 2008, Convolve amended its complaint to allege infringement of only the ‘473
patent. The ‘473 patent allegedly relates to interface technology to select between certain modes
of a disk drive’s operations relating to speed and noise. A trial in the matter began on July 18,
2011 and concluded on July 26, 2011 with a verdict against the Company in an amount that is not
material to the Company’s financial position, results of operations or cash flows. The Company has
filed post-trial motions challenging the verdict and will evaluate its options for appeal after the
court rules on the post-trial motions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On July 15, 2009, plaintiffs Carl B. Collins and Farzin Davanloo filed a complaint in the
Eastern District of Texas against the Company and ten other companies alleging infringement of U.S.
Patent Nos. 5,411,797 and 5,478,650. Plaintiffs are seeking injunctive relief and unspecified
monetary damages, fees and costs. The asserted patents allegedly relate to nanophase diamond films.
On October 11, 2011, plaintiffs and the Company filed a joint motion to stay all deadlines
applicable to claims involving the Company, indicating that the parties have reached an agreement
in principle that would resolve the case for an immaterial amount that was accrued by the Company
in the first quarter of fiscal 2012. The Court approved the motion on October 13, 2011. The parties
are in the process of finalizing a formal written settlement agreement.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On December 7, 2009, plaintiff Nazomi Communications filed a complaint in the Eastern District
of Texas against the Company and seven other companies alleging infringement of U.S. Patent Nos.
7,080,362 and 7,225,436. Plaintiffs dismissed the Eastern District of Texas suit after filing a
similar complaint in the Central District of California on February 8, 2010. The case was
subsequently transferred to the Northern District of California on October 14, 2010. Plaintiffs are
seeking injunctive relief and unspecified monetary damages, fees and costs. The asserted patents
allegedly relate to processor cores capable of Java hardware acceleration. The Company intends to
defend itself vigorously in this matter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On January 5, 2010, plaintiff Enova Technology Corporation filed a complaint in the District
of Delaware against the Company and Initio Corporation alleging infringement of U.S. Patent Nos.
7,136,995 and 7,386,734. Plaintiff is seeking injunctive relief and unspecified monetary damages,
fees and costs. The asserted patents allegedly relate to real time full disk encryption application
specific integrated circuits, or ASICs. The Company intends to defend itself vigorously in this
matter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On November 10, 2010, plaintiff Rembrandt Data Storage filed a complaint in the Western
District of Wisconsin against the Company alleging infringement of U.S. Patent Nos. 5,995,342 and
6,195,232. Plaintiff is seeking injunctive relief and unspecified monetary damages, fees and costs.
The asserted patents allegedly relate to specific thin film heads having solenoid coils. The
Company intends to defend itself vigorously in this matter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On August 1, 2011, plaintiff Guzik Technical Enterprises filed a complaint in the Northern
District of California against the Company and various of its subsidiaries alleging infringement of
U.S. Patent Nos. 6,023,145 and 6,785,085, breach of contract and misappropriation of trade secrets.
Plaintiff is seeking injunctive relief and unspecified monetary damages, fees and costs. The
asserted patents allegedly relate to devices used to test hard disk drive heads and media. The
Company intends to defend itself vigorously in this matter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On September 6, 2011, plaintiff Powerline Innovations filed a complaint in the Eastern
District of Texas against the Company alleging infringement of U.S. Patent No. 5,471,190. Plaintiff
is seeking unspecified monetary damages, fees and costs. The asserted patent allegedly relates to
power line Ethernet communications. The Company intends to defend itself vigorously in this
matter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On October 4, 2006, plaintiff Seagate Technology LLC (“Seagate”) filed a complaint against the
Company and one of its employees formerly employed by Seagate in the Minnesota Fourth Judicial
District Court. The complaint
alleges claims based on supposed misappropriation of trade secrets and seeks injunctive relief
and unspecified monetary damages, fees and costs. On June 19, 2007, the Company’s employee filed a
demand for arbitration with the American Arbitration Association. A motion to stay the litigation
as against all defendants and to compel arbitration of all Seagate’s claims was granted on
September 19, 2007. On September 23, 2010, Seagate filed a motion to amend its claims and add
allegations based on the supposed misappropriation of additional confidential information, and the
arbitrator granted Seagate’s motion. The arbitration hearing commenced on May 23, 2011 and
concluded on July 11, 2011. The parties filed post-arbitration briefs in August 2011. The
arbitrator is expected to render a decision by November 30, 2011. The Company continues to defend
itself vigorously in this matter.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Employment Litigation</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On March 20, 2009, plaintiff Ghazala H. Durrani, a former employee of the Company, filed a
putative class action complaint in the Alameda County (California) Superior Court. The complaint
alleged that certain of the Company’s engineers had been misclassified as exempt employees under
California state law and were, therefore, due unspecified amounts for unpaid hourly overtime wages
and other amounts, as well as penalties for allegedly missed meal and rest periods. By court order
dated April 24, 2009, the case was transferred to the Orange County (California) Superior Court. On
or about June 16, 2009, the Company was dismissed from the case without prejudice by stipulation,
leaving WDTI as the sole remaining defendant. On or about June 4, 2009, WDTI filed its answer to
the complaint, denying the substantive allegations thereof and raising several affirmative
defenses. The parties participated in a mediation of the case on June 3, 2010, which led to a
proposed settlement of the case. The proposed settlement, which was ultimately approved by the
court, resolved the case on a class-wide basis for an immaterial amount that was accrued by the
Company in the fourth quarter of fiscal 2010. The court granted final approval of the settlement
and entered judgment on February 7, 2011. A final accounting hearing took place on July 11, 2011,
at which the court confirmed that the settlement amount was fully paid in accordance with the
settlement agreement.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On February 26, 2010, and as thereafter amended on August 23, 2010 and December 22, 2010,
plaintiff Tariq Sadaat, a former employee of the Company, filed a putative class action complaint
in the Orange County (California) Superior Court against the Company, WDTI, Kelly Services, Inc., a
Delaware corporation (“Kelly Services”), and certain other unnamed individuals. Plaintiff sought to
represent certain hourly employees who were assigned to work at certain of the Company’s facilities
by Kelly Services, a temporary staffing agency. In this regard, the complaint alleged that the
hourly employees were due unspecified sums for unpaid overtime wages and other amounts, as well as
penalties for allegedly missed meal and rest periods. The complaint sought unspecified damages
including lost wages, penalties under the California Labor Code and other statutes, compensatory
and punitive damages, declaratory relief, injunctive relief, interest, attorneys’ fees and costs.
The Company’s response to the complaint was filed and served in January 2011. The parties
participated in a mediation of the case, which led to a proposed settlement of Sadaat’s individual
claims for an immaterial amount. The Court approved the proposed settlement on July 26, 2011, and
dismissed the complaint in its entirety, with prejudice as to Sadaat’s individual claims and
without prejudice as to the alleged class claims.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Other Matters</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the normal course of business, the Company is subject to other legal proceedings, lawsuits
and other claims. Although the ultimate aggregate amount of probable monetary liability or
financial impact with respect to these other matters is subject to many uncertainties and is
therefore not predictable with assurance, management believes that any monetary liability or
financial impact to the Company from these other matters, individually and in the aggregate, would
not be material to the Company’s financial condition, results of operations or cash flows. However,
there can be no assurance with respect to such result, and monetary liability or financial impact
to the Company from these other matters could differ materially from those projected.
</div>
</div>
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<!-- Begin Block Tagged Note 6 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s income tax provision for the three months ended September 30, 2011 was $19
million as compared to $14 million in the prior-year period. The differences between the effective
tax rate and the U.S. Federal statutory rate are primarily due to tax holidays in Malaysia,
Singapore and Thailand that expire at various dates through 2023 and the current year generation of
income tax credits.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the three months ended September 30, 2011, the Company recorded a net decrease of $14
million in its liability for unrecognized tax benefits. The decrease is due primarily to the
resolution of the United States Internal Revenue Service (“IRS”) audit of Komag, Incorporated
(“Komag”), which was acquired by the Company on September 5, 2007. As of September 30, 2011, the
Company had a recorded liability for unrecognized tax benefits of approximately $231 million.
Interest and penalties recognized on such amounts were not material.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The IRS has completed its field examination of the federal income tax returns for fiscal years
2006 and 2007 for the Company and calendar years 2005 and 2006 for Komag. In September 2011, the
Company received a final Revenue Agent Report (“RAR”) and Closing Agreement with respect to the
years under examination for Komag. This agreement resulted in an immaterial benefit to the
Company’s income tax provision. The Company has also received RARs from the IRS that seek
adjustments to income before income taxes of approximately $970 million in connection with
unresolved issues related primarily to transfer pricing and certain other intercompany
transactions. The Company disagrees with the proposed adjustments. In May 2011, the Company filed a
protest with the IRS Appeals Office regarding the proposed adjustments.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company believes that adequate provision has been made for any adjustments that may
result from tax examinations. However, the outcome of tax audits cannot be predicted with
certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not
consistent with management’s expectations, the Company could be required to adjust its provision
for income taxes in the period such resolution occurs. As of September 30, 2011, it is not possible
to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably
possible within the next twelve months. Any significant change in the amount of the Company’s
unrecognized tax benefits would most likely result from additional information or settlements
relating to the examination of the Company’s uncertain tax positions.
</div>
</div>
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<!-- Begin Block Tagged Note 7 - us-gaap:FairValueDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Fair Value Measurements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial assets and liabilities that are remeasured and reported at fair value at each
reporting period are classified and disclosed in one of the following three levels:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 1. </i>Quoted prices in active markets for identical assets or liabilities.
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Level 2. </i>Inputs other than Level 1 that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify"><i>Level 3. </i>Inputs that are unobservable for the asset or liability and that are significant to the
fair value of the assets or liabilities.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents information about the Company’s financial assets that are
measured at fair value on a recurring basis as of September 30, 2011, and indicates the fair value
hierarchy of the valuation techniques utilized to determine such value (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>Fair Value Measurements at</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Reporting Date Using</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in Active</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Markets for</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Identical</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Observable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Assets</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasury securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Government agency securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">913</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Auction-rate securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets at fair value
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">106</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">928</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities at fair value
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Money Market Funds. </i>The Company’s money market funds are funds that invest in U.S. Treasury
securities and are recorded within cash and cash equivalents in the condensed consolidated balance
sheets. Money market funds are valued based on quoted market prices.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>U.S. Treasury Securities. </i>The Company’s U.S. Treasury securities are investments in Treasury
bills with original maturities of three months or less, are held in custody by a third party and
are recorded within cash and cash equivalents in the condensed consolidated balance sheets. U.S.
Treasury securities are valued using a market approach that is based on observable inputs,
including market interest rates, from multiple pricing sources.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>U.S. Government Agency Securities. </i>The Company’s U.S. Government agency securities are
investments in fixed income securities sponsored by the U.S. Government with original maturities of
three months or less, are held in custody by a third party and are recorded within cash and cash
equivalents in the condensed consolidated balance sheets. U.S. Government agency securities are
valued using a market approach that is based on observable inputs, including market interest rates,
from multiple pricing sources.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Auction-Rate Securities. </i>The Company’s auction-rate securities have maturity dates through
2050, are primarily backed by insurance products and are accounted for as available-for-sale
securities. These investments are classified as long-term investments and recorded within other
non-current assets in the condensed consolidated balance sheets. Auction-rate securities are valued
using an income approach that is based on a discounted cash flow model or a credit default model.
The inputs to the discounted cash flow model include market interest rates and a discount factor to
reflect the illiquidity of the investments. The inputs to the credit default model include market
interest rates, yields of similar securities, and probability-weighted assumptions related to the
creditworthiness of the underlying assets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Foreign Exchange Contracts. </i>The Company’s foreign exchange contracts are short-term contracts
to hedge the Company’s foreign currency risk related to the Thai Baht, Malaysian Ringgit, Euro and
British Pound Sterling. Foreign exchange contracts are classified within other current assets in
the condensed consolidated balance sheets. Foreign exchange contracts are valued using an income
approach that is based on a present value of future cash flows model. The market-based observable
inputs for the model include forward rates and credit default swap rates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the three months ended September 30, 2011, there were no changes in Level 3 financial
assets measured on a recurring basis.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses
approximate fair value for all periods presented because of the short-term maturity of these assets
and liabilities. The carrying amount of debt approximates fair value because of its variable
interest rate.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Foreign Exchange Contracts</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Although the majority of the Company’s transactions are in U.S. dollars, some transactions are
based in various foreign currencies. The Company purchases short-term, foreign exchange contracts
to hedge the impact of foreign currency exchange fluctuations on certain underlying assets,
revenue, liabilities and commitments for operating expenses and product costs denominated in
foreign currencies. The purpose of entering into these hedging transactions is to minimize the
impact of foreign currency fluctuations on the Company’s results of operations. These contract
maturity dates do not exceed 12 months. All foreign exchange contracts are for risk management
purposes only. The Company does not purchase foreign exchange contracts for trading or speculative
purposes. As of September 30, 2011, the Company had outstanding foreign exchange contracts with
commercial banks for Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling. Thai Baht
contracts are designated as either cash flow or fair value hedges. Malaysian Ringgit contracts are
designated as cash flow hedges. Euro and British Pound Sterling contracts are designated as fair
value hedges.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If the derivative is designated as a cash flow hedge, the effective portion of the change in
fair value of the derivative is initially deferred in other comprehensive income (loss), net of
tax. These amounts are subsequently recognized into earnings when the underlying cash flow being
hedged is recognized into earnings. Recognized gains and losses on foreign exchange contracts
entered into for manufacturing-related activities are reported in cost of revenue. Hedge
effectiveness is measured by comparing the hedging instrument’s cumulative change in fair value
from inception to maturity to the underlying exposure’s terminal value. As of September 30, 2011,
the net amount of existing gains expected to be reclassified into earnings within the next 12
months was $24 million. The Company determined the ineffectiveness associated with its cash flow
hedges to be immaterial.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A change in the fair value of fair value hedges is recognized in earnings in the period
incurred and is reported as a component of operating expenses. All fair value hedges were
determined to be effective. The fair value and the changes in fair value on these contracts were
not material to the condensed consolidated financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, the Company did not have any foreign exchange contracts with
credit-risk-related contingent features. The Company opened $902 million and $907 million, and
closed $836 million and $727 million, in foreign exchange contracts in the three months ended
September 30, 2011 and October 1, 2010, respectively. The fair value and balance sheet location of
such contracts were as follows (in millions):
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Asset Derivatives</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Liability Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Jul. 1, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Jul. 1, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Derivatives Designated as</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Hedging Instruments</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange
contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="2" align="center" nowrap="nowrap">Accrued Expenses</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">33</td>
<td> </td>
<td> </td>
<td colspan="2" align="center" nowrap="nowrap">Accrued Expenses</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The impact on the condensed consolidated financial statements was as follows (in
millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of Gain (Loss)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of Gain (Loss)</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Recognized in</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of Gain</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Reclassified from</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>(Loss) Reclassified</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI into</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Derivatives in Cash</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>on Derivatives</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>from Accumulated</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Income</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Flow Hedging Relationships</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Oct. 1, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>OCI into Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Oct. 1, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Cost of revenue</td>
<td> </td>
<td align="left" valign="top">$</td>
<td align="right" valign="top">11</td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">$</td>
<td align="right" valign="top">27</td>
<td valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The total net realized transaction and foreign exchange contract currency gains and
losses were not material to the condensed consolidated financial statements during the three months
ended September 30, 2011 and October 1, 2010.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Stock-Based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2011, the Company recognized in expense $9 million
for stock-based compensation related to the vesting of options issued under stock option plans and
the ESPP, compared to $11 million in the comparative prior-year period. As of September 30, 2011,
total compensation cost related to unvested stock options and ESPP rights issued to employees but
not yet recognized was $80 million and will be amortized on a straight-line basis over a weighted
average service period of approximately 2.5 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2011 and the comparative prior-year period, the
Company recognized in expense $8 million related to the vesting of awards of restricted stock and
restricted stock units (“RSUs”). As of September 30, 2011, the aggregate unamortized fair value of
all unvested RSUs was $60 million, which will be recognized on a straight-line basis over a
weighted average vesting period of approximately 1.8 years.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Stock Option Activity</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes activity under the Company’s stock option plans (in millions,
except per share amounts and remaining contractual lives):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual Life</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>of Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Per Share</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(in years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Options outstanding at July 1, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">10.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22.49</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">2.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29.64</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7.99</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Canceled or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Options outstanding at September
30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">12.5</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24.20</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Exercisable at September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">6.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20.75</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Vested and expected to vest after
September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">12.3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24.13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If an option has an exercise price that is less than the quoted price of the Company’s common
stock at the particular time, the aggregate intrinsic value of that option at that time is
calculated based on the difference between the exercise price of the underlying options and the
quoted price of the Company’s common stock at that time. As of September 30, 2011, the Company had
options outstanding to purchase an aggregate of 5.8 million shares with an exercise price below the
quoted price of the Company’s stock on that date resulting in an aggregate intrinsic value of $46
million at that date. During the three months ended September 30, 2011, the aggregate intrinsic
value of options exercised under the Company’s stock option plans was $5 million, determined as of
the date of exercise, compared to $2 million in the comparative prior-year period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Fair Value Disclosure </i>— <i>Binomial Model</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of stock options granted is estimated using a binomial option-pricing model.
The binomial model requires the input of highly subjective assumptions including the expected stock
price volatility, the expected price multiple at which employees are likely to exercise stock
options and the expected employee termination rate. The Company uses historical data to estimate
option exercise, employee termination, and expected stock price volatility within the binomial
model. The risk-free rate for periods within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant. The fair value of stock options granted
was estimated using the following weighted average assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months Ended</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Sept. 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Oct. 1,</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Suboptimal exercise factor
</div></td>
<td> </td>
<td align="center" valign="top"><b>1.81</b></td>
<td> </td>
<td align="center" valign="top">1.81</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Range of risk-free interest rates
</div></td>
<td> </td>
<td align="center" valign="top" nowrap="nowrap"><b>0.13% to 1.43%</b></td>
<td> </td>
<td align="center" valign="top" nowrap="nowrap">0.26% to 1.90%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Range of expected stock price volatility
</div></td>
<td> </td>
<td align="center" valign="top"><b>0.41 to 0.54</b></td>
<td> </td>
<td align="center" valign="top">0.42 to 0.59</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average expected volatility
</div></td>
<td> </td>
<td align="center" valign="top"><b>0.48</b></td>
<td> </td>
<td align="center" valign="top">0.52</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Post-vesting termination rate
</div></td>
<td> </td>
<td align="center" valign="top"><b>2.63%</b></td>
<td> </td>
<td align="center" valign="top">2.42%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dividend yield
</div></td>
<td> </td>
<td align="center" valign="top"><b>—</b></td>
<td> </td>
<td align="center" valign="top">—</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value
</div></td>
<td> </td>
<td align="center" valign="top"><b>$11.97</b></td>
<td> </td>
<td align="center" valign="top">$11.26</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The weighted average expected term of the Company’s stock options granted during the three
months ended September 30, 2011 was 4.9 years, compared to 4.7 years in the comparative prior-year
period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Fair Value Disclosure </i>— <i>Black-Scholes-Merton Model</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of ESPP purchase rights issued is estimated at the date of grant of the
purchase rights using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton
option-pricing model was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. The Black-Scholes-Merton option-pricing model
requires the input of highly subjective assumptions such as the expected stock price volatility and
the expected period until options are exercised. Purchase rights under the current
ESPP provisions are granted on either June 1 or December 1. ESPP activity was immaterial to
the condensed consolidated financial statements for the three months ended September 30, 2011 and
October 1, 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>RSU Activity</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes RSU activity (in millions, except weighted average grant date
fair value):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Grant Date</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>of Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>RSUs outstanding at July 1, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28.85</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">0.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29.64</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.6</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">23.94</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Canceled or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>RSUs outstanding at September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.4</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29.83</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Expected to vest after September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29.90</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of each RSU is the market price of our stock at the date of grant. RSUs are
generally payable in an equal number of shares of the Company’s common stock at the time of vesting
of the units. The grant-date fair value of the shares underlying the restricted stock awards at the
date of grant was $28 million for the three months ended September 30, 2011. These amounts are
being recognized to expense over the corresponding vesting periods. For purposes of valuing these
awards, the Company has assumed a forfeiture rate of 2.3%, based on a historical analysis
indicating forfeitures for these types of awards.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Planned Acquisition</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On March 7, 2011, the Company entered into a stock purchase agreement (the “Purchase
Agreement”) with Hitachi, Ltd. (“Hitachi”), Viviti Technologies Ltd., until recently known as
Hitachi Global Storage Technologies Holdings Pte. Ltd., a wholly owned subsidiary of Hitachi
(“HGST”), and Western Digital Ireland, Ltd., an indirect wholly owned subsidiary of the Company
(“WDI”). Pursuant to the Purchase Agreement, WDI agreed to acquire all of the issued and
outstanding paid-up share capital of HGST from Hitachi. The planned acquisition is intended to
result in a more efficient and innovative customer-focused storage company, with significant
operating scale, strong global talent and the industry’s broadest product lineup backed by a rich
technology portfolio. The aggregate purchase price of the planned acquisition is estimated to be
approximately $4.2 billion, due at closing, and is expected to be funded with existing cash, new
debt, and 25 million newly issued shares of the Company’s common stock. The Purchase Agreement
contains certain termination rights for both the Company and Hitachi, including the right to
terminate the Purchase Agreement if the planned acquisition has not closed by March 7, 2012. The
Purchase Agreement does not contain a termination right for the benefit of the Company in the event
it cannot obtain financing for the transaction. If the planned
acquisition has not closed by March 7, 2012 due to the failure to receive any required antitrust or competition authority’s consent,
approval or clearance or any action by certain governmental entities to prevent the planned
acquisition for antitrust or competition reasons, the Company will, concurrently with such
termination, be required to pay Hitachi a fee of $250 million in cash. During the three months
ended September 30, 2011, the Company incurred $11 million of expenses related to the planned
acquisition of HGST, which are included within selling, general and administrative expense in the
condensed consolidated statement of income.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On March 7, 2011, in connection with the planned acquisition of HGST, the Company, WDTI and
WDI entered into a commitment letter with Bank of America, N.A. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated regarding a new credit facility for an amount of $2.5 billion, consisting of a
$500 million revolving credit facility and $2.0 billion in term loans, to be entered into in
connection with the closing of the planned acquisition (the “Senior Facility”). Since entering into
the commitment letter, Bank of America N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
led the effort to syndicate the Senior Facility for an amount of up to $3.0 billion, consisting of
a $500 million revolving credit facility and up to $2.5 billion in term loans. As a result of such
effort, the Company, WDTI and WDI have fully negotiated definitive loan documents for the Senior
Facility with the syndicate members. The Company, WDTI and WDI expect all of these syndicate
members to be part of the final lender group, subject to customary closing conditions, including
completion of the acquisition in accordance with its terms, the
receipt of antitrust approvals or the expiration
of applicable waiting periods without any action being taken by an authority that would impose
any material adverse condition on the Company, HGST or their respective subsidiaries taken as a whole, and there not having occurred for HGST,
the Company or WDI a material adverse effect on their
respective business, financial condition or operations. We are required to pay a commitment
fee at the rate of 0.35%, per annum, of the aggregate unfunded amount committed to be borrowed
under the Senior Facility.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The planned acquisition of HGST is subject to several closing conditions, including the
receipt of antitrust approvals or the expiration of applicable waiting periods in the United
States, the European Union, the People’s Republic of China, Japan, Korea and Mexico. In certain
jurisdictions, the Company has received requests for additional information and is engaged in more
in-depth reviews of the pending acquisition. The Company has proposed a remedy to the European
Commission intended to address the preliminary assessment of competitive effects of the transaction
set out by the European Commission. This proposal remains under consideration by the European
Union and there is no assurance that the proposal will be accepted or, if accepted, can be
successfully implemented. The Company is cooperating fully with each of the regulatory authorities
reviewing the proposed transaction. Subject to obtaining the required regulatory approvals or
expiration of applicable waiting periods, the Company is targeting the transaction to close in its
second quarter of fiscal 2012.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>11. Recent Accounting Pronouncements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the FASB issued ASU 2011-05 “Presentation of Comprehensive Income” (“ASU
2011-05”). ASU 2011-05 requires that all non-owner changes in shareholders’ equity be presented
either in a single continuous statement of comprehensive income or in two separate but continuous
statements. If presented in two separate statements, the first statement should present total net
income and its components followed immediately by a second statement of total other comprehensive
income, its components and the total comprehensive income. ASU 2011-05 is effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2011, which for
the Company is the first quarter of fiscal 2013. The Company is currently evaluating how it will
report comprehensive income, but either method permitted will constitute a change in the Company’s
financial statement presentation.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>12. Subsequent Event</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company suspended production in all of its Thailand manufacturing facilities during the
week of October 10, 2011 due to severe flooding in Thailand, and the flood waters have since
inundated these facilities and submerged equipment located there. The flooded facilities in
Thailand include the Company’s magnetic head slider fabrication
facilities, which supply a
substantial majority of the Company’s magnetic head requirements. The flooded facilities in
Thailand also include the Company’s hard drive, head gimbal assembly (“HGA”) and head stack
assembly (“HSA”) facilities. Approximately 60% of the hard drives produced by the Company in the
quarter ended September 30, 2011 came from its Thailand facilities. In addition to the suspension
of the Company’s Thailand hard drive assembly operations and the internal slider shortages, the
Company is also experiencing other shortages of component parts from vendors located in several
Thailand industrial parks that have been flooded or have been affected by protective plant
shutdowns.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company is evaluating the Thailand situation on an ongoing basis and does not know, at
this time, when it will recommence operations in Thailand, including the operation of its Thailand
slider fabrication facility that also supports operations outside of Thailand. The Company is also
uncertain about the timeline for recovery and recommencement of production by suppliers in
Thailand. The Company is pursuing its options so that it can safely begin working to accelerate
the water removal and either extract and transfer equipment to clean rooms in another location or
prepare the equipment for operation on-site. The Company expects the suspension of its operations in Thailand
and that of some of its suppliers will continue into the March quarter and possibly beyond. During
this time, the Company’s operations outside Thailand will be impacted by a shortage of sliders that
would otherwise be produced by the Company in Thailand and other shortages of components produced
by some of its suppliers impacted by the floods. The Company is working with its suppliers to
better understand the effect of the flooding on the supply chain and to locate alternative sources
of supply, and is also pursuing all options to maximize existing capacity in other locations,
including its Malaysian hard drive assembly facility and a third-party slider fabrication facility
in the Philippines.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The flooding of the Company’s Thailand facilities, combined with the flood damage to the
supply chain in Thailand, will have a significant impact on the Company’s overall operations and
its ability to meet customer demand for its products in the December quarter and possibly beyond.
While the Company expects industry unit
demand in the December quarter will be flat to slightly down from the September quarter, it
expects that its hard drive shipments during the December quarter will be between 22 million and 26
million units in contrast to the 58 million units shipped in the September quarter and that the
overall hard drive industry unit shipments in the December quarter will also be supply constrained
due to the flooding. In addition, while the Company’s operations in Thailand remain suspended
completely or in part, its costs will be impacted negatively by significant under-absorption of its
assets and infrastructure, costs it will incur in restoring supply and increased costs of use of
air freight and other charges to expedite the immediate availability of the Company’s production
for its customers. The Company also expects to incur significant unusual charges and expenses
related to the flooding of its operations, including such items as fixed asset impairments,
inventory write-downs, purchase order cancellations for excess materials that cannot be used near
term, service charges for reclaim and recovery work and foreign exchange losses to settle a portion
of its forward exchange contracts that exceed its current requirements. The Company is unable to
estimate the amount of these charges and expenses at this time.
</div>
<p align="center" style="font-size: 10pt; text-indent: 4%"> 
<!-- Folio -->
<!-- /Folio -->
</p>
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Given the lower expected product shipments, the Company anticipates its net revenue in the
December quarter will be substantially lower than the quarter ended September 30, 2011. In
addition, while the Company believes that supply constraint, relative
to demand, will result in a higher
average selling price (“ASP”) for the December quarter, the Company expects that the higher costs
referenced above will result in negative gross margins and that it will incur a significant loss
for the quarter before taking into account unusual charges and expenses the Company expects to
incur related to the flooding. The Company’s revenues, gross margins and operating results will
continue to be negatively impacted in subsequent quarters until the Company and its supply sources
affected by the Thailand flooding are able to substantially restore operations, the supply chain
infrastructure is re-established and the Company is able to regain any lost market share.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company maintains insurance coverage that provides for reimbursement from losses resulting
from flood damage. The Company anticipates the amount of flood damage incurred will exceed the
policy’s limit but cannot estimate by how much at this time. The Company also maintains insurance
for business interruption losses, and is currently working with its
insurance carrier to determine the amounts which may be recoverable under this policy.
</div>
</div>
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<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accounting policies followed by Western Digital Corporation (the “Company”) are set forth
in Part II, Item 8, Note 1 of the Notes to Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended July 1, 2011. In the opinion of management,
all adjustments necessary to fairly state the unaudited condensed consolidated financial statements
have been made. All such adjustments are of a normal, recurring nature. Certain information and
footnote disclosures normally included in the consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have
been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended July 1, 2011. The results of operations for
interim periods are not necessarily indicative of results to be expected for the full year (see
note 12).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Company management has made estimates and assumptions relating to the reporting of certain
assets and liabilities in conformity with U.S. GAAP. These estimates and assumptions have been
applied using methodologies that are consistent throughout the periods presented. However, actual
results could differ materially from these estimates.
</div>
</div>
</div>
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<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Jul. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(in millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials and component parts
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>170</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">172</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work-in-process
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>275</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">263</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>200</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total inventories
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>645</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">577</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
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<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Oct. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty accrual, beginning of period
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>170</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">170</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Charges to operations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Utilization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(42</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(38</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in estimate related to pre-existing warranties
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty accrual, end of period
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>173</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">173</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Accrued warranty also includes amounts classified in other liabilities of $38 million at
September 30, 2011 and July 1, 2011.
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note3_table1 - us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table illustrates the computation of basic and diluted income per common share
(in millions, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Sept. 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Oct. 1,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>239</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">197</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>233</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">230</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Employee stock options and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>237</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income per common share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1.03</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.86</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1.01</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.84</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Anti-dilutive potential common shares excluded*
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">For purposes of computing diluted income per common share, certain potentially dilutive
securities have been excluded from the calculation because their effect would have been
anti-dilutive.
</div></td>
</tr>
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note7_table1 - us-gaap:ScheduleOfFairValueAssetsAndLiabilitiesMeasuredOnRecurringBasisTableTextBlock-->
<div align="left" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents information about the Company’s financial assets that are
measured at fair value on a recurring basis as of September 30, 2011, and indicates the fair value
hierarchy of the valuation techniques utilized to determine such value (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>Fair Value Measurements at</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Reporting Date Using</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in Active</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Markets for</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Identical</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Observable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Assets</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasury securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Government agency securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">913</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Auction-rate securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets at fair value
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">807</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">106</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">928</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities at fair value
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note8_table1 - us-gaap:ScheduleOfDerivativeInstrumentsInStatementOfFinancialPositionFairValueTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Asset Derivatives</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Liability Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Jul. 1, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Jul. 1, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Derivatives Designated as</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance Sheet</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Hedging Instruments</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange
contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="2" align="center" nowrap="nowrap">Accrued Expenses</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">33</td>
<td> </td>
<td> </td>
<td colspan="2" align="center" nowrap="nowrap">Accrued Expenses</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note8_table2 - us-gaap:ScheduleOfDerivativeInstrumentsGainLossInStatementOfFinancialPerformanceTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of Gain (Loss)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Amount of Gain (Loss)</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Recognized in</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Location of Gain</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Reclassified from</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>(Loss) Reclassified</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Accumulated OCI into</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Derivatives in Cash</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>on Derivatives</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>from Accumulated</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Income</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Flow Hedging Relationships</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Oct. 1, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>OCI into Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Sept. 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Oct. 1, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Cost of revenue</td>
<td> </td>
<td align="left" valign="top">$</td>
<td align="right" valign="top">11</td>
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top">$</td>
<td align="right" valign="top">27</td>
<td valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note9_table1 - us-gaap:ScheduleOfShareBasedCompensationStockOptionsActivityTableTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes activity under the Company’s stock option plans (in millions,
except per share amounts and remaining contractual lives):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual Life</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>of Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Per Share</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(in years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Options outstanding at July 1, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">10.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22.49</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">2.5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29.64</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7.99</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Canceled or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Options outstanding at September
30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">12.5</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24.20</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Exercisable at September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">6.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20.75</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Vested and expected to vest after
September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">12.3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24.13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note9_table2 - wdc:GrantedStockOptionsFairValueAssumptionsTableTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months Ended</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Sept. 30,</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Oct. 1,</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Suboptimal exercise factor
</div></td>
<td> </td>
<td align="center" valign="top"><b>1.81</b></td>
<td> </td>
<td align="center" valign="top">1.81</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Range of risk-free interest rates
</div></td>
<td> </td>
<td align="center" valign="top" nowrap="nowrap"><b>0.13% to 1.43%</b></td>
<td> </td>
<td align="center" valign="top" nowrap="nowrap">0.26% to 1.90%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Range of expected stock price volatility
</div></td>
<td> </td>
<td align="center" valign="top"><b>0.41 to 0.54</b></td>
<td> </td>
<td align="center" valign="top">0.42 to 0.59</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average expected volatility
</div></td>
<td> </td>
<td align="center" valign="top"><b>0.48</b></td>
<td> </td>
<td align="center" valign="top">0.52</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Post-vesting termination rate
</div></td>
<td> </td>
<td align="center" valign="top"><b>2.63%</b></td>
<td> </td>
<td align="center" valign="top">2.42%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dividend yield
</div></td>
<td> </td>
<td align="center" valign="top"><b>—</b></td>
<td> </td>
<td align="center" valign="top">—</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value
</div></td>
<td> </td>
<td align="center" valign="top"><b>$11.97</b></td>
<td> </td>
<td align="center" valign="top">$11.26</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The weighted average expected term of the Company’s stock options granted during the three
months ended September 30, 2011 was 4.9 years, compared to 4.7 years in the comparative prior-year
period.
</div>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note Table: WDC-20110930_note9_table3 - us-gaap:ScheduleOfSharebasedCompensationRestrictedStockAndRestrictedStockUnitsActivityTableTextBlock-->
<div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif">
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes RSU activity (in millions, except weighted average grant date
fair value):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Grant Date</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>of Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>RSUs outstanding at July 1, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28.85</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">0.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29.64</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.6</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">23.94</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Canceled or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>RSUs outstanding at September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.4</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29.83</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Expected to vest after September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3.3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29.90</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</div>
false
--06-29
Q1
2012
2011-09-30
10-Q
0000106040
233790441
Yes
Large Accelerated Filer
7900000000
WESTERN DIGITAL CORP
No
Yes
1545000000
1708000000
1206000000
1356000000
349000000
348000000
-5000000
-24000000
1091000000
1106000000
4000000
4000000
8118000000
8467000000
5487000000
5926000000
928000000
807000000
106000000
15000000
4200000000
11000000
2734000000
2858000000
3490000000
3675000000
913000000
807000000
106000000
0
807000000
53000000
53000000
807000000
0
0
0
53000000
53000000
0
0
0
124000000
185000000
0.01
0.01
450000000
450000000
233000000
234000000
233000000
234000000
1959000000
2153000000
500000000
0.0150
2013-02-11
3000000
9000000
150000000
158000000
0
0
5000000
33000000
27000000
11000000
55000000
-8000000
-33000000
0
-33000000
0
0.86
1.03
0.84
1.01
60000000
1.8
11000000
1000000
71000000
67000000
24000000
151000000
151000000
437000000
541000000
211000000
258000000
2000000
2000000
14000000
19000000
Through 2023
162000000
157000000
68000000
150000000
-52000000
-17000000
1000000
68000000
17000000
-7000000
1000000
1000000
142000000
200000000
577000000
645000000
172000000
170000000
263000000
275000000
2000000
3000000
15000000
0
0
15000000
2630000000
2744000000
8118000000
8467000000
2170000000
2354000000
-33000000
0
-33000000
0
263000000
144000000
163000000
113000000
150000000
150000000
100000000
Less than 12 months
-66000000
-33000000
-200000000
-134000000
390000000
352000000
197000000
239000000
-1000000
226000000
282000000
211000000
259000000
214000000
250000000
185000000
114000000
310000000
290000000
50000000
200000000
134000000
0.01
0.01
5000000
5000000
2000000
2000000
2224000000
2209000000
25000000
31000000
167000000
193000000
8000000
8000000
4400000000
4639000000
2396000000
2694000000
59000000
89000000
19000000
17000000
900000
29.64
3100000
3400000
28.85
29.83
-600000
23.94
0.00
0.00
4.7
4.9
0.59
0.54
0.42
0.41
0.0190
0.0143
0.0026
0.0013
0.52
0.48
6200000
20.75
2000000
5000000
0
0.00
2500000
11.26
11.97
46000000
10200000
12500000
22.49
24.20
46000000
12300000
24.13
170000000
173000000
170000000
173000000
38000000
38000000
38000000
42000000
-3000000
44000000
45000000
5488000000
5723000000
200000
231000000
14000000
4000000
4000000
234000000
237000000
230000000
233000000
132000000
135000000
2500000000
500000000
2000000000
2000000
2000000
3000000000
0.0035
970000000
250000000
727000000
836000000
907000000
902000000
0.023
28000000
2000000
4000000
Dates Through 2050
26000000
22000000
58000000
25000000
5800000
46000000
0.60
P5Y
P5Y
P1Y
500000000
3300000
29.90
4.9
0.0242
0.0263
1.81
1.81
38000000
3.9
7.99
29.64
4.9
11000000
9000000
4000000
5000000
2500000000
80000000
2.5