Edgar Filing: WESTERN DIGITAL CORP

Western Digital Corporation

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO.___)

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WESTERN DIGITAL CORPORATION

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(WESTERN DIGITAL LOGO)

Dear Shareholder:

You are cordially invited to attend our Annual Meeting of Shareholders to be held at the Sutton Place Hotel located at 4500 MacArthur Boulevard, Newport Beach, California 92660 on Thursday, November 20, 2003, at 10:00 a.m., local time. Your Board of Directors and management look forward to welcoming you.

The Annual Meeting of Shareholders is being held for the following purposes:


	•	To elect the nine directors named in the Proxy Statement to serve until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified;

	•	To approve an amendment to the Company’s 1993 Employee Stock Purchase Plan to increase by 3,000,000 the number of shares of common stock available for issuance under the plan; and

	•	To ratify the selection of KPMG LLP as independent accountants for the Company for the fiscal year ending July 2, 2004.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE PROPOSALS.

Whether or not you are able to attend the meeting, it is important that your shares be represented, no matter how many shares you own. You may vote over the Internet, by telephone or by mailing a proxy card. We urge you to promptly mark, sign, date and mail your proxy card in the return envelope provided, or provide voting instructions electronically via the Internet or by telephone.

On behalf of the Board of Directors, thank you for your continued support.


	/s/ Matthew E. Massengill
	MATTHEW E. MASSENGILL
	Chairman and Chief Executive Officer

October 7, 2003

20511 Lake Forest Drive

Lake Forest, California 92630-7741

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held on November 20, 2003

To the Shareholders of

WESTERN DIGITAL CORPORATION:

The Annual Meeting of Shareholders of Western Digital Corporation, a Delaware corporation, will be held at the Sutton Place Hotel located at 4500 MacArthur Boulevard, Newport Beach, California 92660, on Thursday, November 20, 2003, at 10:00 a.m., local time, for the following purposes:


	1. To elect nine directors to serve until the next Annual Meeting of Shareholders of the Company and until their successors are duly elected and qualified;

	2. To approve an amendment to the Company’s 1993 Employee Stock Purchase Plan to increase by 3,000,000 the number of shares of common stock available for issuance to employees of the Company under the plan;

	3. To ratify the selection of KPMG LLP as independent accountants for the Company for the fiscal year ending July 2, 2004; and

	4. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only shareholders of record at the close of business on October 2, 2003, are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.

ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO VOTE YOUR SHARES BY COMPLETING AND RETURNING THE ACCOMPANYING PROXY CARD OR BY TRANSMITTING YOUR VOTING INSTRUCTIONS ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE. PLEASE SEE THE ACCOMPANYING INSTRUCTIONS FOR MORE DETAILS ON VOTING. RETURNING YOUR PROXY PROMPTLY WILL ASSIST THE COMPANY IN REDUCING THE EXPENSES OF ADDITIONAL PROXY SOLICITATION. SUBMITTING YOUR PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.


	By Order of the Board of Directors


	RAYMOND M. BUKATY
	Vice President, General Counsel and Secretary

Lake Forest, California

October 7, 2003

TABLE OF CONTENTS


TABLE OF CONTENTS
VOTING
SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
PROPOSAL 1
ELECTION OF DIRECTORS
	Nominees for Election
	Committees and Meetings
	Director Compensation
EXECUTIVE COMPENSATION
	Report of the Compensation Committee
	Executive Compensation Components
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
STOCK PERFORMANCE GRAPH
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
PROPOSAL 2 APPROVAL OF THE AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE PLAN
EQUITY COMPENSATION PLAN INFORMATION
AUDIT COMMITTEE
	Report of the Audit Committee
PROPOSAL 3 RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
SHAREHOLDER PROPOSALS FOR 2004
ANNUAL REPORT
OTHER MATTERS
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
VOTING VIA THE INTERNET OR BY TELEPHONE
EXPENSES OF SOLICITATION

TABLE OF CONTENTS


		Page

Proxy Statement			1
Voting			1
Security Ownership by Principal Shareholders and Management			2
Proposal 1: Election of Directors			4
	Nominees for Election		4
	Committees and Meetings		5
	Director Compensation		6
Executive Compensation			10
	Report of the Compensation Committee		10
	Summary Compensation Table		14
	Option/SAR Grants in Last Fiscal Year		15
	Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values		16
Compensation Committee Interlocks and Insider Participation			16
Stock Performance Graph			17
Section 16(a) Beneficial Ownership Reporting Compliance			17
Employment Agreements, Termination of Employment and Change of Control Arrangements			18
Proposal 2: Approval of the Amendment to the 1993 Employee Stock Purchase Plan			20
Equity Compensation Plan Information			23
Audit Committee			26
	Report of the Audit Committee		26
Proposal 3: Ratification of Selection of Independent Public Accountants			27
Shareholder Proposals for 2004			27
Annual Report			27
Other Matters			28
Delivery of Documents to Shareholders Sharing an Address			28
Voting Via the Internet or by Telephone			28
Expenses of Solicitation			28

20511 Lake Forest Drive

Lake Forest, California 92630-7741

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

November 20, 2003

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Western Digital Corporation, a Delaware corporation, for use at the Company’s 2003 Annual Meeting of Shareholders to be held on November 20, 2003, at 10:00 a.m., local time, and at any and all adjournments and postponements of the Meeting. The Meeting will be held at the Sutton Place Hotel located at 4500 MacArthur Boulevard, Newport Beach, California 92660. This Proxy Statement and the accompanying form of proxy/ voting instruction card is first being mailed to shareholders on or about October 10, 2003.

VOTING

October 2, 2003 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting. On the record date, 206,277,749 shares of the Company’s common stock were outstanding. Each share is entitled to one vote on any matter that may be presented for consideration and action by the shareholders at the Meeting. The holders of a majority of the shares of common stock outstanding on the record date and entitled to be voted at the Meeting, present in person or by proxy, will constitute a quorum for the transaction of business at the Meeting and any adjournments and postponements thereof. Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum.

Each proxy will be voted FOR the following three proposals: (1) election of the nine director nominees named herein, (2) approval of the amendment to the Company’s 1993 Employee Stock Purchase Plan to increase by 3,000,000 the number of shares of common stock available for issuance to employees of the Company under the Plan, and (3) ratification of the selection of KPMG LLP as the Company’s independent accountants for the fiscal year ending July 2, 2004, except that if a shareholder has submitted a proxy with different voting instructions, the shares will be voted according to the shareholder’s direction. Any shareholder has the power to revoke his or her proxy at any time before it is voted at the Meeting by submitting a written notice of revocation to the Secretary of the Company, by submitting a duly executed written proxy bearing a later date or by providing new voting instructions electronically via the Internet or by telephone. A proxy will not be voted if the shareholder who executed it is present at the Meeting and elects to vote the shares represented by the proxy in person.

For the purposes of Proposal 1, the nominees receiving the greatest number of votes at the Meeting will be elected. Because directors are elected by plurality, abstentions and broker non-votes will be entirely excluded from the vote and will have no effect on the election of directors. For the purposes of Proposals 2 and 3, approval requires the affirmative approval of a majority of the shares represented and voting at the Meeting. As a result, abstentions will have the same effect as a negative vote, whereas broker non-votes will have no effect on the outcome of the vote.

SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the Company’s common stock as of October 2, 2003, by (1) each person known by the Company to own beneficially more than 5% of the outstanding shares of the Company’s common stock, (2) each director of the Company, (3) each of the executive officers named in the Summary Compensation Table (the “Named Executive Officers”), and (4) all current directors and executive officers as a group. This table is based on information supplied to the Company by the executive officers, directors and principal shareholders or on a Schedule 13G filed with the Securities and Exchange Commission.



	Western Digital

	Amount and
	Nature of		Percent
	Beneficial		of
Beneficial Owner	Ownership(1)		Class(2)

Greater than 5% Stockholders:
FMR Corp.
82 Devonshire Street, Boston, MA 02109(3)		23,914,539		11.59	%

Directors:
Peter D. Behrendt(4)(5)		92,469		*
I. M. Booth(4)(6)		151,461		*
Kathleen A. Cote(4)		59,063		*
Henry T. DeNero(4)		80,625		*
William L. Kimsey(4)		0		*
Michael D. Lambert(4)		30,742
Roger H. Moore(4)		80,625		*
Thomas E. Pardun(4)		223,750		*

Executive Officers:
Matthew E. Massengill(7)(8)		1,968,432		*
Arif Shakeel(8)		937,249		*
D. Scott Mercer(8)		374,724		*
Raymond M. Bukaty(8)		241,305		*
David C. Fetah(8)		309,245		*
All Directors and Executive Officers as a group (13 persons)(4)(5)(6)(8)(9)		4,549,690		2.17	%


	*	Represents less than 1% of the outstanding stock of the Company.


(1)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Unless otherwise noted, and subject to applicable community property laws, each individual has sole voting and investment power with respect to the shares indicated. Shares subject to options currently exercisable or exercisable within 60 days after October 2, 2003, are deemed outstanding for computing the share amount and the percentage ownership of the person holding such stock options, but are not deemed outstanding for computing the percentage of any other person.

(2)	Applicable percentage of ownership is based on 206,277,749 shares of the Company’s common stock outstanding as of October 2, 2003.

(3)	According to a Schedule 13G filed jointly by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson with the Securities and Exchange Commission on June 10, 2003, the parties reported the beneficial ownership of 23,914,539 shares of the Company’s common stock and further reported that (i) Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR Corp., was the beneficial owner of 16,636,439 shares of the Company’s common stock in its capacity as investment advisor to various registered investment companies (the “Fidelity Funds”) (the power to vote such shares resides solely with the boards of trustees of the Fidelity Funds, while the power to dispose of such shares


	resides with Mr. Johnson, FMR Corp., and the Fidelity Funds); (ii) Fidelity Management Trust Company (“Fidelity Management”), a bank that is wholly-owned by FMR Corp., was the beneficial owner of 2,295,900 shares of the Company’s common stock in its capacity as investment manager of institutional accounts (and each of Mr. Johnson and FMR Corp., through its control of Fidelity Management, has the sole dispositive power with respect to 2,295,900 of such shares and the sole voting power with respect to 2,217,900 of such shares); and (iii) Fidelity International Limited (“FIL”), a provider of investment advisory and management services, of which Mr. Johnson is chairman but which is a separate corporate entity from FMR Corp., was the beneficial owner of 4,982,200 shares of the Company’s common stock (the power to vote and the power to dispose of such shares resides solely with FIL). The Schedule 13G indicates that Mr. Johnson is chairman and Ms. Johnson is a director of FMR Corp. and may be deemed to be members of a controlling group with respect to FMR Corp. The Schedule 13G indicates that FMR Corp. and FIL are of the view that they are not acting as a group and that they are not otherwise required to attribute beneficial ownership of the Company’s common stock to one another.

(4)	Includes shares of common stock of the Company which may be acquired within 60 days after October 2, 2003, through the exercise of stock options as follows: Mr. Behrendt (74,687), Mr. Booth (131,250), Ms. Cote (59,063), Mr. DeNero (80,625), Mr. Lambert (25,938), Mr. Moore (80,625), and Mr. Pardun (218,750). Does not include shares representing deferred stock units credited to accounts in the Company’s Deferred Compensation Plan as of October 2, 2003, as to which participants currently have no voting or investment power, as follows: Mr. Behrendt (7,738), Mr. Booth (7,235), Ms. Cote (28,615), Mr. DeNero (45,487), Mr. Kimsey (2,708), Mr. Moore (49,430), and Mr. Pardun (15,425).

(5)	Includes 750 shares of common stock of the Company held by Mr. Behrendt’s sons.

(6)	Does not include 24,108 shares of common stock of the Company held by a trust established for the benefit of Mr. Booth’s grandchildren, as to which Mr. Booth disclaims beneficial ownership.

(7)	Mr. Massengill is also a director of the Company.

(8)	Includes shares of common stock of the Company which may be acquired within 60 days after October 2, 2003, through the exercise of stock options as follows: Mr. Massengill (1,465,846), Mr. Shakeel (679,051), Mr. Mercer (231,250), Mr. Bukaty (153,718) and Mr. Fetah (225,120).

(9)	Includes 3,425,923 shares of common stock of the Company which may be acquired within 60 days after October 2, 2003, through the exercise of stock options. Does not include 156,638 shares of common stock of the Company representing deferred stock units credited to accounts in the Company’s Deferred Compensation Plan as of October 2, 2003, as to which the holders of such accounts currently have no voting or investment power.

PROPOSAL 1

ELECTION OF DIRECTORS

The Company’s directors are elected at each Annual Meeting of Shareholders. Currently, the authorized number of directors of the Company is nine. At the Meeting, nine directors will be elected to serve until the next Annual Meeting of Shareholders and until their successors are elected and qualified. The nominees receiving the greatest number of votes at the Meeting up to the number of authorized directors will be elected.

Nominees for Election

The nominees for election as directors set forth below are all incumbent directors. Each of the nominees has consented to serve as a director if elected. Unless authority to vote for any director is withheld in a proxy, it is intended that each proxy will be voted FOR such nominees. In the event that, before the Meeting, any of the nominees for director should become unable to serve if elected, shares represented by proxies will be voted for such substitute nominees as may be recommended by the Company’s existing Board of Directors, unless other directions are given in the proxies. To the Company’s knowledge, all the nominees will be available to serve. The Board of Directors recommends that shareholders vote FOR the election of each of the nominees listed below.

The following biographical information furnished with respect to each of the nine nominees has been furnished by the nominee:

Matthew E. Massengill, 42, has been a director of the Company since January 2000 and assumed the position of Chairman of the Board of Directors in November 2001. Mr. Massengill has also served as Chief Executive Officer since January 2000. From October 1999 until that time he was Chief Operating Officer, and from August 1999 to October 1999, he was Co-Chief Operating Officer. Prior to that time he served for more than five years in various executive capacities within the Company.

I. M. Booth, 71, has been a director of the Company since 1985. Mr. Booth retired in 1996 after having served as Chairman, President and Chief Executive Officer of Polaroid Corporation, a manufacturer of photographic equipment, from June 1991 to March 1996.

Peter D. Behrendt, 64, has been a director of the Company since 1994. He was Chairman of Exabyte Corporation, a manufacturer of computer tape storage products, from January 1992 until he retired in January 1998 and was President and Chief Executive Officer of Exabyte Corporation from July 1990 to January 1997. He is also a director of Infocus Corporation.

Kathleen A. Cote, 54, has been a director of the Company since January 2001. Ms. Cote was the Chief Executive Officer of Worldport Communications, Inc., a European provider of Internet managed services from May 2001 to June 2003. From September 1998 until May 2001, she served as President of Seagrass Partners, a provider of expertise in business planning and strategic development for early stage companies. From November 1996 until September 1998, she served as President and Chief Executive Officer of Computervision Corporation, an international supplier of product development and data management software.

Henry T. DeNero, 57, has been a director of the Company since June 2000. He was Chairman and Chief Executive Officer of HomeSpace, Inc., a provider of Internet real estate and home services from January 1999 until it was acquired by LendingTree, Inc. in August 2000. From July 1995 to January 1999, he was Executive Vice President and Group Executive, Commercial Payments for First Data Corporation, a provider of information and transaction processing services. Prior to 1995, he was Vice Chairman and Chief Financial Officer of Dayton Hudson Corporation, a general merchandise retailer, and was previously a Director of McKinsey & Company, a management-consulting firm. He is also a director of THQ, Inc., Banta Corporation and Digital Insight Corporation.

William L. Kimsey, 61, has been a director of the Company since March 2003. He is a veteran of 32 years’ service with Ernst & Young, a global independent auditing firm, and became that firm’s global chief executive officer. Mr. Kimsey served at Ernst & Young as director of management consulting in St. Louis,

office managing partner in Kansas City, vice chairman and Southwest Region managing partner in Dallas, vice chairman and West Region managing partner in Los Angeles, deputy chairman and chief operating officer and, from 1998 to 2002, chief executive officer and a global executive board member. He is also a director of Royal Caribbean Cruises Ltd.

Michael D. Lambert, 56, has been a director of the Company since August 2002. From 1996 until he retired in May 2002, Mr. Lambert served as Senior Vice President for Dell Computer Corporation’s Enterprise Systems Group. During such period he also participated as member of a six-man operating committee at Dell, which reported to the Office of the Chairman. Mr. Lambert served as vice president, sales and marketing for Compaq Computer Corporation from 1993 to 1996. Prior to that, for four years, he ran the Large Computer Products division at NCR/ AT&T Corporation as vice president and general manager. Mr. Lambert began his career with NCR Corporation, where he served for 16 years in product management, sales and software engineering capacities. He is chairman of the board of Vignette Corp.

Roger H. Moore, 61, has been a director of the Company since June 2000. Mr. Moore served as President and Chief Executive Officer of Illuminet Holdings, Inc., a provider of network, database and billing services to the communications industry, from January 1996 until it was acquired by Verisign, Inc. in December 2001 and he retired at that time. He was a member of Illuminet’s Board of Directors from July 1998 until December 2001. From September 1998 to October 1998, he served as President, Chief Executive Officer and a member of the Board of Directors of VINA Technologies, Inc., a telecommunications equipment company. From November 1994 to December 1995, he served as Vice President of major accounts of Northern Telecom. He is also a director of Tut Systems, Inc. and Verisign, Inc.

Thomas E. Pardun, 59, has been a director of the Company since 1993. Mr. Pardun served as Chairman of the Board of Western Digital Corporation from January 2000 until November 2001, and Chairman of the Board and Chief Executive Officer of Edge2net, Inc., a provider of voice, data and video services, from November 2000 until September 2001. Mr. Pardun was President of MediaOne International Asia Pacific (previously U.S. West International, Asia-Pacific, a subsidiary of U.S. West, Inc.), an owner/operator of international properties in cable television, telephone services, and wireless communications companies, from May 1996 until his retirement in July 2000. Before joining U.S. West, Mr. Pardun was President of the Central Group for Sprint, as well as President of Sprint’s West Division and Senior Vice President of Business Development for United Telecom, a predecessor company to Sprint. Mr. Pardun also held a variety of management positions during a 19-year tenure with IBM, concluding as Director of product-line evaluation. Mr. Pardun is also a director of Exabyte Corporation and MegaPath Networks.

Committees and Meetings

The Board of Directors has standing Executive, Audit, Compensation, and Governance Committees. The membership of these committees is usually determined at the organizational meeting of the Board held immediately after the annual meeting of shareholders. The current membership of each committee is as follows, with the chairman of the committee listed first:


Executive	Audit	Compensation	Governance
Committee	Committee	Committee	Committee

Matthew E. Massengill	Henry T. DeNero	Peter D. Behrendt	Thomas E. Pardun
Henry T. DeNero	Kathleen A. Cote	I. M. Booth	Peter D. Behrendt
Thomas E. Pardun	William L. Kimsey	Michael D. Lambert	I. M. Booth
	Thomas E. Pardun	Roger H. Moore

Executive Committee. Between meetings of the Board, the Executive Committee may exercise all of the powers of the Board (except those powers expressly reserved by applicable law to the Board or to another committee) in the management and direction of the business and conduct of the affairs of the Company, subject to any specific directions given by the Board.

Audit Committee. The Audit Committee represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries, and has general

responsibility for oversight and review of the accounting and financial reporting practices, internal controls and accounting and audit activities of the Company and its subsidiaries. Specifically, the Audit Committee (1) reviews prior to publication the Company’s annual financial statements with management and the Company’s independent accountants; (2) reviews with the Company’s independent accountants the scope, procedures and timing of the annual audits; (3) reviews the adequacy and effectiveness of the Company’s internal accounting controls; (4) reviews the scope of other auditing services to be performed by the Company’s independent accountants; (5) reviews the independence and effectiveness of the Company’s independent accountants, and their significant relationships with the Company; (6) recommends the retention or appointment of the independent auditor of the Company, which is ultimately accountable to the Board through the Audit Committee; (7) reviews the adequacy of the Company’s accounting and financial personnel resources; (8) reviews the Audit Committee Charter on an annual basis; (9) reviews or designates the Chairman of the Committee to review with management and the Company’s independent accountants the results of any significant matters identified as a result of the accountants’ review procedures prior to filing any Form 10-Q or as soon thereafter as possible; (10) reviews material pending legal proceedings involving the Company and other material contingent liabilities; and (11) reviews any other matters relative to the audit of the Company’s accounts and the preparation of its financial statements that the Committee deems appropriate.

Compensation Committee. The Compensation Committee is responsible for recommending to the Board all elements of compensation for executive officers and approving the compensation for the Chief Executive Officer. The Compensation Committee also reviews and approves various other Company policies and compensation matters, reviews and makes recommendations to the Board regarding non-employee director compensation, and administers the Company’s Employee Stock Option Plan, 1993 Employee Stock Purchase Plan, Deferred Compensation Plan, Broad-Based Stock Incentive Plan and Executive Bonus Plan.

Governance Committee. The Governance Committee advises the Board of Directors with respect to matters relating to corporate governance, the composition of the Board of Directors, and CEO performance. Specifically the key responsibilities of the Governance Committee are to (1) recommend to the Board the size and composition of the Board and the size, composition and functions of the Board committees; (2) identify, attract, and recommend director candidates who bring knowledge, experience, and expertise that would strengthen the Board; (3) make recommendations to the Board on such matters as the retirement age, tenure and removal of directors; (4) recommend directors for election at the annual meeting of shareholders; (5) manage the Board performance review process and review the results with the Board on an annual basis; (6) manage the CEO performance review process and present recommendations to the Board on an annual basis; (7) recommend to the Board improvements in its governance processes and changes; and (8) review and make recommendations to the Board regarding proposals of shareholders that relate to corporate governance. The Governance Committee will consider nominees recommended by shareholders for election at the Company’s 2004 Annual Meeting of Shareholders, so long as such proposal is received in writing by the Secretary of the Company at the Company’s principal executive offices no less than 60 days and no more than 120 days prior to the Company’s 2004 Annual Meeting, which the Company currently anticipates will be held on November 18, 2004. The Chairman of the Governance Committee serves as the Company’s lead outside director.

Meetings. During fiscal year 2003, there were six meetings of the Board, thirteen meetings of the Audit Committee, six meetings of the Compensation Committee and three meetings of the Governance Committee. Each of the directors attended 75% or more of the total number of meetings of the Board and the meetings of the committees of the Board on which he or she served during the period that he or she served.

Director Compensation

Director Fees. Non-employee directors receive an annual retainer of $40,000 in January, or if they join the Board at a later date, they receive a proportion of the annual fee corresponding to the period for which they serve. The non-employee directors also receive compensation of $2,500 for each session during which they attend a Board meeting, $1,500 for any and all committee meetings attended, $1,250 for each Board meeting and $750 for each committee meeting held by telephone conference, and reimbursement of reasonable out-of-

pocket expenses incurred in attending each meeting. In addition, the chairman of each committee of the Board receives an annual retainer of $5,000. Non-employee directors also received an award of 2,100 restricted stock units under the Non-Employee Directors Restricted Stock Unit Plan, pursuant to which directors are entitled to receive cash compensation as described below. Mr. Massengill, who is an employee of the Company, does not receive any compensation for his services as a director or committee member.

Non-Employee Directors Stock-for-Fees Plan. Under the Company’s Amended and Restated Non-Employee Directors Stock-for-Fees Plan (the “Stock-for-Fees Plan”), $20,000 of the $40,000 annual retainer fee payable to each non-employee director is paid in the form of shares of the Company’s common stock rather than cash. Each non-employee director may elect to receive shares in lieu of any or all of (1) the remaining $20,000 of the annual retainer fee otherwise payable to him or her in cash for that calendar year, and/or (2) the additional $5,000 chairman retainer, and/or (3) the meeting attendance fees otherwise payable to him or her in cash for that calendar year. At the time of the election for a particular calendar year a non-employee director may also elect to defer the receipt of any cash or stock compensation to be paid during the calendar year. A deferral will not change the form (cash or shares) in which the fee is to be paid at the end of the deferral period. Under the Deferred Compensation Plan and Stock-for-Fees Plan, the Company pays a 15% premium to each non-employee director who elects to defer annual retainers or meeting fees to be received in cash and a 25% premium to each non-employee director who elects to defer annual retainer or meeting fees to be received in common stock. The number of shares of common stock payable is determined by dividing the amount of the cash fee the director would have received by the fair market value of the common stock on the date the cash fee would have been paid. The aggregate number of shares issued under the Stock-for-Fees Plan in each of the last three fiscal years was: (1) 4,804 plus the 39,059 deferred stock units reported below under “Deferred Compensation Plan” in fiscal year 2003, (2) 5,701 plus the 44,700 deferred stock units reported below under “Deferred Compensation Plan” in fiscal year 2002, and (3) 35,209 plus the 55,644 deferred stock units reported below under “Deferred Compensation Plan” in fiscal year 2001.

The maximum aggregate number of shares of common stock that may be issued under the Stock-for-Fees Plan is 400,000 shares, subject to adjustments for stock splits and similar events. The Board has the power to suspend, discontinue or amend the Stock-for-Fees Plan at any time, subject to shareholder approval, if required under any law or regulation.

Deferred Compensation Plan. Under the Company’s Deferred Compensation Plan, all directors and employees selected for participation by the Compensation Committee are permitted to defer payment of compensation by the Company. Non-employee directors who elect to participate are permitted to defer between a minimum of $2,000 per calendar year and a maximum of 100% of their compensation payable under the Stock-for-Fees Plan. The deferred stock units carry no voting or investment power. Each participant may elect one or more measurement funds to be used to determine additional amounts to be credited to his or her account balance, including certain mutual funds and a declared rate fund which is credited interest at a fixed rate for each plan year. The fixed interest rate is set prior to the beginning of the plan year. The fixed interest rate for calendar year 2003 is 6.75%, for calendar year 2002 was 7.00%, and for calendar year 2001 was 7.40%.

Pursuant to the terms of the Deferred Compensation Plan, non-employee directors’ deferred compensation in the last three fiscal years was as follows:


		2003		2003		2002		2002		2001		2001
		Deferred		Cash		Deferred		Cash		Deferred		Cash
Director		Stock Units(1)		Deferred(2)		Stock Units(1)		Deferred(2)		Stock Units(1)		Deferred(2)

Peter D. Behrendt			3,639	$	23,000		4,099	$	23,000		0		0
I. M. Booth			3,639	$	29,900		0		0		0		0
Kathleen A. Cote			8,166	$	13,800		7,676	$	25,875		11,467		0
Henry T. DeNero			6,785		0		15,937		0		22,765		0
William L. Kimsey			2,708	$	13,886		0		0		0		0
Michael Lambert			0		0		0		0		0		0
Roger H. Moore			10,483		0		12,890		0		21,412	$	12,075
Thomas E. Pardun			3,639	$	36,225		4,098	$	36,225		0	$	180,000

	Total		39,059	$	116,811		44,700	$	85,100		55,644	$	192,075


(1)	Includes the 25% premium, in the form of common stock, received under the Stock-for-Fees Plan by each non-employee director who elected to defer his or her annual retainer or meeting fees to be received in common stock.

(2)	Includes the 15% premium, in the form of cash, received under the Stock-for-Fees Plan by each non-employee director who elected to defer his or her annual retainer or meeting fees to be received in cash. The premium did not apply to the Chairman’s fee of $180,000 that Mr. Pardun elected to defer in 2001.

Stock Option Plan for Non-Employee Directors. The Company has a Stock Option Plan for Non-Employee Directors (the “Director Stock Option Plan”), under which options to purchase shares of the Company’s common stock are granted to the Company’s non-employee directors. Pursuant to the Director Stock Option Plan, non-employee directors are automatically granted an option to purchase 75,000 shares of common stock upon initial election or appointment to the Board at an exercise price per share equal to the fair market value of the common stock on the date of such initial election or appointment (“Initial Option”). After a non-employee director joins the Board, immediately following each annual meeting of shareholders of the Company, if he or she has been re-elected as a director at such annual meeting, such non-employee director will automatically receive another option to purchase 10,000 shares of common stock at an exercise price per share equal to the fair market value of common stock on the date of grant (“Additional Option”). Both Initial Options and Additional Options vest over a period of four years, with 25% vesting on the first anniversary of the grant date and 6.25% vesting at the end of each fiscal quarter thereafter. Initial Options and Additional Options vest only if the optionee has remained a director for the entire period from the grant date to the vesting date, unless the director retired after reaching age 55, provided at least four years of service to the Company, and does not render services to a competitor of the Company, in which case all options shall immediately vest and be exercisable for a three year period after such director’s retirement. The maximum aggregate number of shares of common stock that may be issued upon exercises of options granted under the Director Stock Option Plan is 2,600,000, subject to adjustments for stock splits and similar events.

Non-Employee Directors Restricted Stock Unit Plan. The Company has a Restricted Stock Unit Plan for Non-Employee Directors (the “Director RSU Plan”), under which restricted stock units are granted to the Company’s non-employee directors. Pursuant to the Director RSU Plan, non-employee directors were granted 2,100 RSUs upon adoption of the plan and will be automatically granted an additional 2,100 RSUs each January 1 thereafter. If a new non-employee director is appointed to the board, the Company pro-rates the initial 2,100 RSU grant. All RSUs vest 100% on the third anniversary of the grant. However, if a director served as a director for at least 4 years and is at least 55 years old when such director ceases to be a director (a “Retired Director”), all unvested RSUs vest immediately upon the director’s termination. If a director ceases to be a director for any reason (except removal) prior to becoming eligible to be a Retired Director, then all of the unvested RSUs granted in the first twelve months prior to such termination shall terminate without

vesting, 1/3 of all unvested RSUs granted within the second twelve month period prior to such termination shall immediately vest and become payable, and 2/3 of all unvested RSUs granted within the third twelve month period prior to such termination shall immediately vest and become payable. When the RSUs vest, within 15 days the Company will pay the director in cash an amount equal to (i) the product of the number of RSUs vested and (ii) the preceding 45-day average trading price of the Company’s common stock as of the date of vesting. However, the payment amount may not exceed 200% of the value of RSUs on the date of the grant, with such value calculated at the preceding 45-day average trading price on the day of the grant.

EXECUTIVE COMPENSATION

The following report of the Company’s Compensation Committee addresses the Company’s policies for fiscal year 2003 as they affected the Company’s Chief Executive Officer and its other executive officers, including the Named Executive Officers in this Proxy Statement. This report shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission, nor shall any information in this report be incorporated by reference into any past or future filing under the Securities Act or the Securities Exchange Act, except to the extent the Company specifically incorporates it by reference into such filing.

Report of the Compensation Committee

The Company’s executive compensation program is administered by the Compensation Committee of the Board of Directors (the “Committee”). The Committee, which is composed entirely of non-employee directors, is responsible for recommending to the Board all elements of compensation for executive officers and approving the compensation for the Chief Executive Officer. The Committee also reviews and approves various other Company compensation policies and matters, reviews and makes recommendations to the Board regarding non-employee director compensation, and administers the Company’s Employee Stock Option Plan, Broad-Based Stock Incentive Plan, 1993 Employee Stock Purchase Plan, Deferred Compensation Plan and Executive Bonus Plan.


	*Compensation Philosophy*

The Company’s executive compensation programs are based on the belief that the interests of the executives should be closely aligned with the Company’s shareholders. To support this philosophy, a significant portion of each executive’s compensation is placed at-risk and linked to the accomplishment of specific results that are expected to lead to the creation of short-term and long-term value for the Company’s shareholders. The Company’s compensation policies and programs are designed to:


	•	attract, develop, reward and retain highly qualified and productive individuals;

	•	motivate executives to improve the overall performance and profitability of the Company, as well as the business group for which each is responsible, and reward executives only when specific measurable results have been achieved;

	•	encourage accountability by determining salaries and incentive awards based on each executive’s individual performance and contribution;

	•	tie incentive awards to financial and non-financial metrics which drive the performance of the Company’s common stock to further reinforce the linkage between the interests of the shareholders and the executives; and

	•	ensure compensation levels are both externally competitive and internally equitable.

In furtherance of these goals, the Company’s executive compensation policies, plans and programs consist of base salary, annual incentive compensation, long-term retention/incentive awards, including stock options, restricted stock units and restricted stock grants, a deferred compensation plan and other benefits.

The Committee considers all elements of compensation and the Company’s compensation philosophy when determining individual components of pay. The Committee does not follow any principles in a mechanical fashion; rather, the members use their experience and judgment in determining the mix of compensation for each individual. In addition to the experience and knowledge of the Committee and the Company’s Human Resources staff, the Committee utilizes the services of independent human resources consultants who provide competitive data from independent survey sources of peer companies in competition for similar management talent. The surveys include data from direct competitors of the Company and from other companies in the high-technology industry with similar size and performance characteristics. Most of the companies included in these surveys are also included in the Dow Jones Technology, Hardware and Equipment Index (see “Stock Performance Graph” at page 17).

While there is no specific formula that is used to set pay in relation to this market data, executive officer base salary and individual bonus target amounts are generally set at the median total cash compensation level for comparable jobs in the marketplace. However, depending upon the Company’s business groups’ performance against predetermined financial and non-financial goals, amounts paid under the Company’s performance-based compensation program may lead to total cash compensation levels that are lower or higher than the median levels for comparable jobs. The Committee also reviews the compensation levels of the executive officers for internal consistency.

The Company intends to provide a total compensation opportunity for executive officers that is above average, but with an above-average amount of the total compensation opportunity at risk and dependent upon Company performance. In all cases, the Committee considers the total potential compensation payable to each of the executive officers when establishing or adjusting any element of his or her compensation package.


	*Executive Compensation Components*

The Company’s executive compensation package consists primarily of the following components:

Base Salary. Executive base salaries are reviewed annually, and base salary levels are generally targeted at or below the median of competitive data. The base salaries of individual executives can and do vary from this salary benchmark based on such factors as the competitive environment, the executive’s experience level and scope of responsibility, current performance, future potential and the overall contribution of the executive. The Committee exercises its judgment based on all the factors described above in making its decisions. No specific formula is applied to determine the weight of each criterion.

Annual Incentive Compensation. The Company’s Incentive Compensation Plan (the “ICP”) formally links cash bonuses for executive officers and other participating employees to the Company’s semiannual operating performance. The Committee and the Board of Directors approve the ICP prior to the commencement of each six-month period. For fiscal year 2003, the ICP was weighted towards operating results at the corporate level and on key operational measures that included primarily financial performance metrics and Company operational goals.

The Committee establishes target awards under the ICP for each executive officer, expressed as a percentage of the executive’s semiannual base salary. The Committee then biannually establishes operating and/or financial performance goals under the ICP. The bonus pool payable under the ICP for each biannual period can vary from 0% to 200% of the aggregate target bonuses, depending upon the Company’s performance against the pre-established goals. Individual awards to executive officers can also vary from their targets, depending upon the size of the bonus pool and their individual performance. Because the Company exceeded all of the financial and other performance goals under the ICP in fiscal 2003, ICP cash awards equivalent to approximately 200% of the target awards were made to executive officers for the six months ended December 27, 2002 and ICP cash awards equivalent to approximately 100% of the target awards were made to executive officers for the six months ended June 27, 2003.

Stock Options and Restricted Stock Grants. The Committee views the grant of stock options and restricted stock to be a key long-term incentive reward program. Executive officers, as well as other employees, are eligible to receive periodic grants of incentive stock options and non-qualified stock options pursuant to the Company’s Employee Stock Option Plan and are eligible to receive options, restricted stock and other stock-based compensation under the Company’s Broad-Based Stock Incentive Plan. Stock options are granted with an exercise price equal to the fair market value per share of the Company’s common stock on the date of grant. Vesting periods for the options and restricted stock are utilized to encourage retention of executive officers and reward long-term performance and commitment to the Company. The Employee Stock Option Plan prohibits the repricing of options. The Committee believes that options, because they are granted with an exercise price per share equal to the market value of the common stock on the date of grant, and restricted stock, are an effective incentive for officers to create value for the Company’s shareholders and are an excellent means of rewarding executives who are in a position to contribute to the Company’s long-term growth and profitability.

While all executive officers are eligible to receive stock options or restricted stock, the award of any stock option or restricted stock grant, as well as the size of the grant each executive receives, is determined by the Committee in consultation with the Vice President of Human Resources and the Chief Executive Officer (except in the case of their own stock option or restricted stock grants), and recommended to the Board for approval. In the case of the Chief Executive Officer’s compensation, the award of stock options or restricted stock is approved by the Committee. The amount of each executive’s stock option and restricted stock grant is determined by the Committee based upon the executive’s individual performance, the executive’s current compensation package, the value of the executive’s unvested stock options and restricted stock, comparable company and competitive company practices, and the Committee’s appraisal of the executive’s anticipated long-term future contribution to the Company. The stock options and restricted stock granted to the Named Executive Officers in fiscal year 2003 are set forth in the Summary Compensation and Option Grants tables beginning at page 14.

Long-Term Retention Awards. The Company has an executive retention program through which the Company grants cash and stock option awards to key employees whose retention is deemed critical to the Company’s future success. The purpose of the program is to retain participants by providing a significant incremental opportunity for capital accumulation and to focus participants on increasing the value of the Company’s common stock. Awards under the executive retention program usually consist of a cash award and a stock option grant. The awards (cash and stock options) vest in accordance with schedules designed to maximize the retention value of the awards to the executives receiving the awards. Certain executive officers continued to receive cash payments in 2003 under awards granted prior to 2001.

Special Retention Award. In fiscal year 2003, each of the Chief Executive Officer and the President and Chief Operating Officer received special retention awards of restricted stock units under amended and restated Long-Term Retention Agreements (“LTR Agreements”). These awards are intended to add incentives for the executives to advance the long-term interests of the Company. Pursuant to the LTR Agreements, Mr. Massengill and Mr. Shakeel were respectively granted 1.4 million and 1.0 million “share units” subject to certain adjustment, vesting, forfeiture and repayment provisions.

Benefits. Benefits offered to executive officers serve a different purpose than do the other elements of total compensation. In general, they provide a safety net of protection against the financial catastrophes that can result from illness, disability or death. Benefits offered to executives are largely those that are offered to the general employee population, with some variation, primarily with respect to the availability of expanded medical benefits, life insurance allowance, financial planning benefits and eligibility for participation in the non-qualified deferred compensation plan. The Committee believes that the compensation paid or payable pursuant to the executive benefits and the benefit plans available to regular employees generally are competitive with the benefit packages offered by comparable employers. From time to time, the Company’s Human Resources Department obtains data to ensure that such benefit plans and programs remain competitive and reports its findings to the Committee.


	*Chief Executive Officer Compensation*

Mr. Massengill was elected Chief Executive Officer of the Company in January 2000 and Chairman of the Board of Directors in November 2001. His compensation package has been designed to encourage both short-term and long-term performance of the Company as well as align his interests with the interests of the shareholders. The majority of his compensation, including stock options, annual incentive bonuses and long-term retention awards, is at-risk. He does not have an employment contract, but is subject to the Company’s Change of Control Severance Plan and has a Long Term Retention Agreement (both of which are described in “Employment Agreements, Termination of Employment and Change of Control Arrangements” beginning on page 18). The process of establishing the compensation for the Chief Executive Officer’s compensation and the criteria examined by the Committee parallel the process and criteria used in establishing compensation levels for the other executive officers. The Company’s overall performance and Mr. Massengill’s individual performance are critical factors in the Committee’s determination.

Mr. Massengill’s annual base salary is set at $700,000. The incentive compensation plan awards paid to Mr. Massengill for fiscal year 2003 totaled $1,050,000. During fiscal 2003, he received stock option grants under the Company’s Employee Stock Option Plan totaling 400,000 shares. These options vest over three years. Pursuant to his LTR Agreement, Mr. Massengill was granted 1.4 million “share units” subject to certain adjustment, vesting, forfeiture and repayment provisions. The share units vest in three installments, 25% on July 1, 2003, 30% on July 1, 2004 and 45% on July 1, 2005 so long as he remains employed with the Company. Within fifteen days of each vesting period, the Company is obligated to pay Mr. Massengill a cash amount equal to the product of the number of share units vesting and the average closing price of the Company’s common stock for the preceding forty-five day period, but in no event more than $9.22 per share unit. In the event that Mr. Massengill’s employment is terminated due to a change in control of the Company, then any unvested portions will automatically vest and the amounts as previously described will become payable. In the event of his death, then the next unvested portion immediately vests and becomes payable, and all remaining amounts are forfeited. In the event his employment is terminated for any other reason, he will immediately forfeit all unvested amounts.

The Committee’s decisions regarding Mr. Massengill’s stock option, restricted stock unit and restricted stock grants were based on its subjective assessment of his performance and of the importance of his leadership to the Company’s successful return to profitability, as well as its expectations for his future contributions in leading the Company.


	*Policy Regarding Section 162(m) of the Internal Revenue Code*

Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the company’s Chief Executive Officer or any of the four other most highly compensated executive officers. Certain performance-based compensation, however, is exempt from the deduction limit. It is the Committee’s intention that, so long as it is consistent with its overall compensation objectives and philosophy, executive compensation will be deductible for federal income tax purposes. The Employee Stock Option Plan has been structured so that any taxable compensation derived pursuant to the exercise of options granted under such plan should not be subject to these deductibility limitations. Bonuses under the ICP and cash awards and restricted stock awards under the executive retention program do not satisfy all the requirements of Section 162(m), but the Committee has determined that these plans are in the best interests of the Company and its shareholders since the plans permit the Company to recognize an executive officer’s contribution as appropriate.


	COMPENSATION COMMITTEE

	Peter D. Behrendt, Chairman
	I. M. Booth
	Michael D. Lambert
	Roger H. Moore

Summary Compensation Table

The following table sets forth the compensation paid to the Company’s Chief Executive Officer in fiscal 2003 and the four other most highly paid executive officers who were serving as executive officers at the end of fiscal 2003 (collectively, the “Named Executive Officers”).



								Long-Term Compensation


								Awards						Payouts
				Annual
				Compensation**							Securities					All Other
								Restricted			Underlying			LTIP		Compen-
				Salary		Bonus		Stock			Options/SARs*			Payouts		sation
Name and Principal Position		Year		($)		($)		Awards($)(1)			(#)			($)		($)

Matthew E. Massengill			2003		700,000		1,050,000		0			400,000			0		3,140	(9)
	Chairman and Chief		2002		671,154		1,193,750		1,606	(2)		650,000			750,000		2,000
	Executive Officer		2001		640,385		350,000		1,543,750	(7)		710,000	(3)(4)		875,000		3,375
Arif Shakeel			2003		550,000		727,500		0			250,000			0		3,710	(9)
	President and		2002		506,731		884,340		643	(2)		400,000			200,000		0
	Chief Operating		2001		433,481		206,500		812,500	(7)		400,000	(5)		325,000		0
	Officer
D. Scott Mercer(6)			2003		337,500		556,875		0			125,000			0		61,863	(9)
	Senior Vice President		2002		227,163		274,110		465,000	(7)		225,000			0		0
	and Chief Financial Officer
Raymond M. Bukaty(6)			2003		281,539		240,500		0			75,000			75,000		3,260	(9)
	Vice President,		2002		227,025		153,000		468,150	(2)(7)		115,000			75,000		2,000
	General Counsel and Secretary
David C. Fetah			2003		268,462		228,250		0			75,000			0		5,155	(9)
	Vice President,		2002		251,538		158,310		0			100,000			100,000		96,578
	Human Resources		2001		247,308		65,000		325,000	(7)		125,000	(4)(8)		75,000		73,595


*	The Company does not grant Stock Appreciation Rights.


**	The amount of prerequisites and other personal benefits received by each of the Named Executive Officers for the years indicated did not exceed the lesser of $50,000 or 10% of the individual’s total annual salary and bonus, which represents the threshold reporting requirement.


(1)	Based on the $10.68 closing price of the Company’s common stock on June 27, 2003, the number and value of the restricted stock holdings of the Company’s common stock of the Named Executive Officers on that date were as follows: Mr. Massengill: 285,000 shares, $3,043,800; Mr. Shakeel: 150,000 shares, $1,602,000; Mr. Mercer: 90,000 shares, $961,200; Mr. Bukaty: 75,000 shares, $801,000; and Mr. Fetah: 60,000 shares, $640,800.

(2)	Prior to January 4, 2002, SageTree was a subsidiary of the Company. This value represents restricted stock awards of 62,500 shares of SageTree’s common stock granted to Mr. Massengill, 25,000 shares granted to Mr. Shakeel, and 35,000 shares (valued at $899) granted to Mr. Bukaty that were granted under the SageTree 2000 Stock Incentive Plan and vested 25% immediately on January 2, 2002, the date of grant, and 25% annually thereafter. Dividends are payable on shares of restricted stock at the same rate and time and in the same form in which dividends are payable on other outstanding shares of SageTree’s common stock.

(3)	This number includes options held by Mr. Massengill to purchase 500,000 shares of common stock of the Company, 100,000 shares of common stock of Cameo and 110,000 shares of common stock of Keen. In fiscal 2002, the Company discontinued the operations of Cameo and Keen, subsidiaries of the Company. These options were cancelled in September 2002.

(4)	In fiscal 2002, the Company sold all the assets of Connex, a subsidiary of the Company. As a result, in September 2002, with respect to options and shares of stock held in Connex by the directors of the Company and Named Executive Officers; the Company purchased the outstanding shares of Connex for $0.1168 per share. The aggregate consideration received by the Named Executive Officers in such transactions was $15,883.


(5)	Includes options held by Mr. Shakeel to purchase 300,000 shares of common stock of the Company, 50,000 shares of common stock of Cameo and 50,000 shares of common stock of Keen. In fiscal 2002, the Company discontinued the operations of Cameo and Keen, subsidiaries of the Company. These options were cancelled in September 2002.

(6)	Mr. Mercer and Mr. Bukaty became executive officers of the Company in fiscal year 2002 and therefore no information is provided prior to such year.

(7)	These restricted stock awards of the Company’s common stock were granted under the Company’s Broad-Based Stock Incentive Plan. The number and vesting schedules of the restricted stock awards of the Company’s common stock of the Named Executive Officers are as follows: (i) Mr. Massengill: 475,000 shares, vesting 40% on January 1, 2003 and 60% on January 1, 2004; (ii) Mr. Shakeel: 250,000 shares, vesting 40% on January 1, 2003 and 60% on January 1, 2004; (iii) Mr. Mercer: 150,000 shares, vesting 40% on January 31, 2003 and 60% on January 31, 2004; (iv) Mr. Bukaty 75,000 shares, vesting 40% on January 1, 2004 and 60% on January 1, 2005; and (v) Mr. Fetah: 100,000 shares, vesting 40% on January 1, 2003 and 60% on January 1, 2004. Dividends are payable on shares of restricted stock at the same rate and time and in the same form in which dividends are payable on other outstanding shares of the Company’s common stock.

(8)	Includes options held by Mr. Fetah to purchase 100,000 shares of common stock of the Company and 25,000 shares of common stock of Keen. In fiscal 2002, the Company discontinued the operations of Keen, a subsidiary of the Company. These options were cancelled in September 2002.

(9)	The amounts reported in this column for fiscal year 2003 include (i) the Company’s matching contributions to the Retirement Savings and Profit Sharing Plan on behalf of Mr. Massengill ($2,000), Mr. Shakeel ($2,000), Mr. Bukaty ($2,000) and Mr. Fetah ($2,000) (ii) the taxable portion of Company-paid life insurance premiums on behalf of Mr. Massengill ($1,140), Mr. Shakeel ($1,710), Mr. Bukaty ($1,260) and Mr. Fetah ($1,094) and (iii) relocation expenses paid by the Company on behalf of Mr. Mercer ($61,863) and Mr. Fetah ($2,061).

Option/ SAR Grants in Last Fiscal Year

The following table sets forth information regarding stock options to purchase stock of the Company granted to the Named Executive Officers during fiscal year 2003 and the potential realizable value at certain assumed rates of stock price appreciation for the option term. These assumed rates are in accordance with the rules of the Securities and Exchange Commission and do not represent the Company’s estimate of future stock price. Actual gains, if any, on stock option exercises will be dependent on the future performance of the Company’s common stock.



	Individual Grants								Potential Realizable
									Value at Assumed
	Number of		% of Total						Annual Rates of Stock
	Securities		Options/SARs*		Exercise				Price Appreciation for
	Underlying		Granted to		or Base				Option Term
	Options/SARs*		Employees in		Price		Expiration
Name	Granted(1)		Fiscal Year		($/Sh)		Date		5%($)		10%($)

Matthew E. Massengill		400,000		7.1650		3.85		9/23/2012		968,498		2,454,363
Arif Shakeel		250,000		4.4781		3.85		9/23/2012		605,311		1,533,977
D. Scott Mercer		125,000		2.2391		3.85		9/23/2012		302,656		766,989
Raymond M. Bukaty		75,000		1.3434		3.85		9/23/2012		181,593		460,193
David C. Fetah		75,000		1.3434		3.85		9/23/2012		181,593		460,193


*	The Company does not grant Stock Appreciation Rights.

(1)

All options to purchase shares of common stock of the Company were granted under the Company’s Employee Stock Option Plan and were granted at fair market value on date of grant. Options become exercisable as to 25% of total number of shares granted after six months from date of grant, 25% after twelve months from date of grant, 25% after twenty-four months from date of grant and 25% after thirty-six months from date of grant. All options have a term of 10 years, subject to earlier termination in


	connection with termination of employment. The Employee Stock Option Plan is administered by the Compensation Committee, which has broad discretion and authority to construe and interpret the plan.

Aggregated Option/ SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/ SAR Values

The following table sets forth the option exercises in fiscal 2003, and the number of shares covered by exercisable and unexercisable options held by the Named Executive Officers on June 27, 2003, and the aggregate gains that would have been realized had these options been exercised on June 27, 2003, even though these options were not exercised, and the unexercisable options could not have been exercised, on June 27, 2003.



					Number of Securities				Value of Unexercised
					Underlying Unexercised				In-the-Money
					Options/SARs*				Options/SARs*
	Shares				At Fiscal Year End(#)				At Fiscal Year End($)(2)
	Acquired on		Value Realized
Name	Exercise (#)		($)(1)		Exercisable		Unexercisable		Exercisable		Unexercisable

Matthew E. Massengill		600,000		4,132,422		1,023,146		874,484		3,733,112		5,535,923
Arif Shakeel		451,926		2,843,114		422,501		515,924		1,860,993		3,415,428
D. Scott Mercer		0		0		143,750		206,250		1,066,188		1,493,063
Raymond M. Bukaty		125,000		792,281		127,468		148,175		519,514		919,967
David C. Fetah		100,000		658,503		148,558		154,687		800,648		1,067,704


*	The Company does not grant Stock Appreciation Rights.


(1)	This value is based on the market value on the date of exercise of shares covered by the exercised options, less the option exercise price.

(2)	These amounts represent the difference between the exercise price of in-the-money options and the market price of the Company’s common stock on June 27, 2003, the last trading day of fiscal 2003. The closing price of the common stock on that day on the New York Stock Exchange was $10.68. Options are in-the-money if the market value of the shares covered thereby is greater than the option exercise price.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consists of Messrs. Behrendt, Booth, Lambert and Moore. Until November 29, 2001, Mr. Pardun served on the Compensation Committee. No member of the Compensation Committee during fiscal 2003 was a current or former officer or employee of the Company. There are no Compensation Committee interlocks between the Company and other entities involving the Company’s executive officers and Board members who serve as executive officers or board members of such other entities.

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total shareholder return of the Company’s common stock with the cumulative total return of the S&P 500 Index and the Dow Jones US Technology, Hardware and Equipment Index for the five years ended June 27, 2003. The graph assumes that $100 was invested on June 27, 1998, in the Company’s common stock and each index and that all dividends were reinvested. No cash dividends have been declared on the Company’s common stock. Shareholder returns over the indicated period should not be considered indicative of future shareholder returns.

TOTAL RETURN TO STOCKHOLDERS

(Assumes $100 investment on 6/27/98)

(WESTERN PERFORMANCE GRAPH)

Total Return Analysis




	6/27/98		7/3/99		6/30/00		6/29/01		6/28/02		6/27/03


Western Digital Corporation		100.00		56.67		44.44		35.11		28.89		94.93

S&P 500 Index		100.00		122.76		131.66		112.13		91.96		92.19
Dow Jones US Technology, Hardware & Equipment		100.00		173.04		236.46		141.99		85.78		102.77

The stock performance graph shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission, nor shall it be incorporated by reference into any past or future filing under the Securities Act or the Securities Exchange Act, except to the extent the Company specifically incorporates it by reference into such filing.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the securities laws of the United States, the directors and officers of the Company and persons who beneficially own more than 10% of the Company’s common stock are required to report their initial ownership of the Company’s equity securities and any subsequent changes in that ownership to the Securities and Exchange Commission and the New York Stock Exchange. Specific due dates for these reports have been established, and the Company is required to disclose in this Proxy Statement any late filings during fiscal year 2003. To the Company’s knowledge, based solely on its review of the copies of such reports required to be

furnished to the Company with respect to fiscal year 2003 and the responses to annual directors and officers questionnaires, all of these reports were timely filed, except for one Form 4 for Mr. Joseph Carrillo, V.P. Corporate Controller, which inadvertently omitted the disposition of 2,792 shares held in his 401(k) account.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND

CHANGE OF CONTROL ARRANGEMENTS

Employment Arrangements

The Company has an agreement with Mr. Mercer, dated October 19, 2001, relating to his employment with the Company. Mr. Mercer joined the Company as Senior Vice President and Interim Chief Financial Officer effective October 22, 2001. The agreement sets forth Mr. Mercer’s compensation, including commuting arrangements, and provides that upon commencement of his employment, the Company would recommend that Mr. Mercer receive an option to purchase 225,000 shares of the Company’s common stock, vesting over three years, and 150,000 shares of restricted stock, vesting 40% on January 31, 2003 and 60% on January 31, 2004. Vesting will cease upon termination of Mr. Mercer’s service as Senior Vice President and Chief Financial Officer of the Company.

Long-Term Retention Agreements

The Company entered into Amended and Restated Long Term Retention Agreements (“LTR Agreements”) with each of Mr. Massengill and Mr. Shakeel, effective December 20, 2002, amending and restating prior long term retention agreements with each of them. The LTR Agreements are intended to add incentives for the executives to advance the long term interests of the Company. Pursuant to the LTR Agreements, Mr. Massengill and Mr. Shakeel were respectively granted 1.4 million and 1.0 million “share units” subject to certain adjustment, vesting, forfeiture and repayment provisions. The share units vest in three installments, 25% on July 1, 2003, 30% on July 1, 2004 and 45% on July 1, 2005 so long as the executive remains employed with the Company. Within fifteen days of each vesting period, the Company is obligated to pay each executive a cash amount equal to the product of the number of share units vesting and the average closing price of the Company’s common stock for the preceding forty-five day period, but in no event more than $9.22 per share unit.

In the event that the executive’s employment is terminated due to a change in control of the Company, then any unvested portions will automatically vest and the amounts as previously described will become payable. In the event of the executive’s death, then the next unvested portion immediately vests and becomes payable, and all remaining amounts are forfeited. In the event the executive’s employment is terminated for any other reason, he will immediately forfeit all unvested amounts.

Change of Control Severance Plan

Effective March 29, 2001, the Company’s Board of Directors adopted a Change of Control Severance Plan covering certain executives of the Company and its subsidiaries, including each of the currently employed Named Executive Officers. The Change of Control Severance Plan provides for payment of severance benefits to each participating executive officer in the event of termination of his or her employment in connection with a change of control of the Company. The plan provides for two levels of severance benefits. The severance benefits are payable if the Company and its subsidiaries terminate the employment of the executive officer without cause or the employee voluntarily terminates his or her employment for good reason (generally consisting of adverse changes in responsibilities, compensation, benefits or location of work place, or breach of the plan by the Company or any successor) within one year after a change of control or prior to and in connection with, or in anticipation of, such a change. The plan is effective until March 29, 2006, and may be extended by the Board of Directors until March 29, 2011.

For each of the Named Executive Officers and other executive officers of the Company subject to Section 16 of the Exchange Act, the severance benefits generally consist of the following:


	(1) a lump sum payment equal to two times the executive officer’s annual base compensation plus the target bonus as in effect immediately prior to the change in control or as in effect on the date of notice of termination of the executive officer’s employment with the Company, whichever is higher;

	(2) 100% vesting of any non-vested stock options granted to the executive officer by the Company;

	(3) extension of the period in which the executive officer’s options may be exercised to the longer of (a) 90 days after the date of termination of his or her employment with the Company and (b) the period specified in the plan or agreement governing the options;

	(4) continuation for a period of 24 months of the same or equivalent life, health, hospitalization, dental and disability insurance coverage and other employee insurance or welfare benefits, including equivalent coverage for his or her spouse and dependent children, and a car allowance equal to what the executive officer was receiving immediately prior to the change in control, or a lump sum payment equal to the cost of obtaining coverage for 24 months if the executive officer is ineligible to be covered under the terms of the Company’s insurance and welfare benefits;

	(5) a lump sum payment equal to the amount of in-lieu payments that the executive officer would have been entitled to receive during the 24 months after termination of his or her employment if the executive officer, prior to the change in control, was receiving any cash-in-lieu payments designed to enable the executive officer to obtain insurance coverage of his or her choosing; and

	(6) acceleration of all awards granted to the executive officer under the Company’s Executive Retention Plan adopted in 1998 or any similar plan.

Any health and welfare benefits will be reduced to the extent of the receipt of substantially equivalent coverage by the executive officer from any successor employer. Generally, the benefits will be increased to the extent the Named Executive Officer has to pay taxes associated with “excess parachute payments” under the Internal Revenue Code, such that the net amount received by the executive officer is equal to the total payments he or she would have received had the tax not been incurred.

Executive Bonus Plan

Effective May 16, 1994, the Company’s Board of Directors adopted the Western Digital Corporation Executive Bonus Plan (the “Executive Bonus Plan”). Certain members of management and other highly compensated employees of the Company and its subsidiaries, including each of the currently employed Named Executive Officers, are eligible to participate in the Executive Bonus Plan. The Executive Bonus Plan provides for a benefit to be paid by a separate trust in connection with a change in control of the Company or the Company’s insolvency. The value of each executive’s benefit equals the assets in the trust allocable to the executive. As of June 27, 2003, for all of the Named Executive Officers, the aggregate benefit was equal to $240,091. The Executive Bonus Plan may be terminated or modified by the Company at any time until one year before an event triggering a payment obligation under the plan. No termination or amendment can decrease a participant’s potential benefits under the plan as of the date of termination or amendment. The plan was amended and restated effective January 2000. The amended and restated Executive Bonus Plan is filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K, filed September 25, 2002.

PROPOSAL 2

APPROVAL OF THE AMENDMENT TO

THE 1993 EMPLOYEE STOCK PURCHASE PLAN

General

The Company seeks shareholder approval of an amendment to its 1993 Employee Stock Purchase Plan (the “ESPP”) to authorize issuance of an additional 3,000,000 shares of the Company’s common stock. The ESPP was adopted with shareholder approval in 1993. Initially 3,500,000 shares were authorized to be issued under the plan. The plan was amended by the shareholders in 1996, 1997, 1999 and 2002 to authorize issuance of an additional 1,500,000, 2,000,000, 4,000,000 and 4,000,000 shares, respectively, of the Company’s common stock. The ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Internal Revenue Code of 1986, as amended (the “Code”).

As of October 2, 2003, employees had purchased 12,776,665 shares of the Company’s common stock under the ESPP. Approximately 1,964 employees are currently enrolled in the ESPP, of which 2 are executive officers of the Company. The purpose of the ESPP is to maintain competitive equity compensation programs and to provide an incentive for employees of the Company and its participating subsidiaries to acquire a proprietary interest in the Company through the purchase of common stock and, therefore, more closely align the interests of the employees and the shareholders. The Board believes that the proposed increase in the number of shares issuable under the ESPP is necessary and appropriate at this time, in order for the Company to continue offering the ESPP to its current and future employees.

The following is a brief summary of the principal features of the ESPP. The summary is qualified by and subject to the full text of the ESPP. The ESPP, as proposed to be amended, was filed as an appendix to the copy of this Proxy Statement that was filed electronically with the Securities and Exchange Commission and can be reviewed on the Securities and Exchange Commission’s website at http://www.sec.gov or on the Company’s website under “Investor Relations” at http://www.westerndigital.com. Shareholders may also obtain a copy of the ESPP by contacting the Company’s Investor Relations office at the address or telephone number given under “Annual Report” at the end of this Proxy Statement.

Summary

The Board of Directors has appointed the Compensation Committee of the Board (the “Committee”), which consists of not less than three non-employee directors, as the administrator of the ESPP. The Board may at any time amend or terminate the ESPP, except that no amendment may be made that would cause the ESPP to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code. Subject to certain limitations imposed by Section 423 of the Code, any person who is employed by the Company (or any of its majority-owned subsidiaries that are not excluded from participation by the Committee) for at least 20 hours per week and more than five months in a calendar year is eligible to participate in the ESPP, provided that the employee is employed on the first day of an offering period.

The ESPP has a series of 24-month offering periods (each, an “Offering Period”) commencing on each February 1 and August 1. The last day of each six-month exercise period during each Offering Period under the ESPP, i.e., each July 31 and January 31, is an exercise date under the ESPP. The purchase price per share is equal to the lower of 85% of the fair market value of the Company’s common stock on the date of commencement of a 24-month Offering Period or 85% of the fair market value of the common stock on the exercise date of the option. The fair market value of the common stock on a given date is the closing price of the common stock on the New York Stock Exchange for that date. The closing price of the common stock on the New York Stock Exchange on October 2, 2003, was $13.46 per share.

The purchase price of the shares is accumulated by payroll deductions during an Offering Period. The deductions may be any whole percentage amount between 1% and 10% of a participants eligible compensation on each payroll date during the Offering Period. A participant may discontinue his or her participation in the ESPP at any time during the Offering Period. A participant may withdraw all, but not less than all, of the

payroll deductions credited to his or her account under the ESPP, automatically terminating his or her participation in the ESPP. In addition, a participant may, no more than four times in any calendar year, reduce or increase the rate of payroll deductions. Failure to remain in the continuous employ of the Company or its majority-owned subsidiaries for at least 20 hours per week during an Offering Period will be deemed to be a withdrawal from that offering.

On the first day of each Offering Period, each eligible employee enrolled in the ESPP is granted an option to purchase on each exercise date during the Offering Period up to the number of shares of common stock determined by dividing the amount of the participant’s total payroll deductions to be accumulated during each exercise period during the Offering Period by 85% of the lower of the fair market value of the common stock at the beginning of the Offering Period or on the exercise date, subject to certain limitations specified in the ESPP. Options to purchase common stock under the ESPP may not be transferred by a participant other than by will or under the laws of descent and distribution and may be exercised during a participant’s lifetime only by the participant.

In the event any change is made in the Company’s capitalization, such as a reorganization, restructuring, reclassification, stock split or stock dividend, which results in an increase or decrease in the number of outstanding shares of common stock or a change of common stock into or an exchange of common stock for a different number or kind of shares, appropriate adjustments will be made to the shares subject to purchase under the ESPP and in the purchase price per share. In the event of a dissolution or liquidation of the Company, any options outstanding under the ESPP will terminate unless the Committee determines otherwise. If all or substantially all of the assets of the Company are sold or if the Company is merged with or into another corporation, outstanding options under the ESPP will be assumed or equivalent options will be substituted unless the Committee elects to permit all outstanding options (including those not then otherwise exercisable) to be exercised immediately prior to the sale or merger.

The Board may amend the ESPP at any time in any respect, provided that it cannot amend the ESPP in any way that will cause it to fail to meet the requirements under Section 423 of the Code, including its shareholder approval requirement. The Board may terminate the ESPP at any time, in its discretion.

Federal Income Tax Consequences

Because the ESPP is designed to qualify under Sections 421 and 423 of the Code, no income will be taxable to a participant at the time of the grant of the option or the purchase of the shares. Upon disposition of the shares, the participant will generally be subject to tax; the amount of the tax will depend upon the participant’s holding period. The Company is not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income reported by the participant that is attributable to a disqualifying disposition of shares (i.e., shares that are sold within two years after the grant of an option or within one year after the purchase of such shares).

The foregoing is a brief description of the federal income tax treatment that will generally apply to shares purchased under the ESPP, based on federal income tax laws in effect on the date of this Proxy Statement. The exact federal income tax treatment of shares purchased under the ESPP will depend on the specific circumstances of the participant. No information is provided herein with respect to estate, inheritance, gift, state or local tax laws, although there may be certain tax consequences upon the disposition of any acquired shares under those laws.

Interest of Certain Persons in Matters to be Acted Upon

Each of the executive officers of the Company qualifies for participation under the ESPP and thus is eligible to purchase common stock under the ESPP at a discount below the market price. If Proposal 2 is approved, additional shares will be available for sale under the ESPP. However, participation in the ESPP is voluntary and is dependent upon each eligible employee’s election to participate and his or her determination as to the level of payroll deductions. Accordingly, future purchases by executive officers and other eligible employees under the ESPP are not determinable. No options have been granted with respect to the shares of common stock that are the subject of this Proposal 2, and no such shares have been issued.

Vote Required and Board of Directors Recommendation

The affirmative vote of a majority of the shares of the Company’s common stock represented in person or by proxy at the Meeting and entitled to vote is required for approval of the amendment to the Company’s 1993 Employee Stock Purchase Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 2 TO APPROVE THE AMENDMENT TO THE COMPANY’S 1993 EMPLOYEE STOCK PURCHASE PLAN.

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information with respect to the Company’s equity compensation plans as of June 27, 2003, which plans were as follows: the Company’s 1993 Employee Stock Purchase Plan, Non-Employee Directors Stock-for-Fees Plan, Employee Stock Option Plan, Broad-Based Stock Incentive Plan and Stock Option Plan for Non-Employee Directors. The table does not include the additional 3,000,000 shares of the Company’s common stock that will be available for awards under the Company’s Amended and Restated 1993 Employee Stock Purchase Plan if Proposal 2 is approved by the shareholders.

(a)

(b)

(c)

Number of Securities

Remaining Available

Number of Securities to

Weighted-average

for Future Issuance

be Issued upon Exercise

Exercise Price of

Under Equity Compensation

of Outstanding Options,

Outstanding Options,

Plans (Excluding Securities

Plan Category

Warrants and Rights

Reflected in Column(a))

Equity compensation plans approved by security holders

15,342,705

8.5668

11,007,656

(1)

Equity compensation plans not approved by security holders(2)

9,658,743

(3)

4.2217

1,455,617

Total

25,001,448

6.8882

12,463,273


(1)	Includes 3,529,600 shares of common stock that may be issued under the 1993 Employee Stock Purchase Plan and 179,529 shares of common stock that may be issued under the Non-Employee Directors Stock-for-Fees Plan.

(2)	Shares of common stock may be issued under the Company’s Broad-Based Stock Incentive Plan, as stock options, restricted stock or other incentive stock grants.

(3)	Does not include an aggregate of 870,000 shares of restricted stock currently outstanding which vest through 2005.

Broad-Based Stock Incentive Plan

On September 30, 1999, the Company’s Board of Directors approved the Broad-Based Stock Incentive Plan (the “Broad-Based Plan”) under which options to purchase shares of common stock and stock awards may be granted. This plan is was intended to qualify as “broadly-based” under the New York Stock Exchange shareholder approval policy at the time of its adoption and was not submitted to the Company’s shareholders for approval. The New York Stock Exchange recently amended its shareholder approval policy for equity compensation plans, and if we make material revisions to the plan in the future, we will be required to obtain shareholder approval. Currently, 16,241 employees are eligible to participate in the plan. This plan has not been submitted to the Company’s shareholders for approval. Initially, 20,000,000 shares of Company common stock were authorized for issuance as stock options, restricted stock awards and stock unit awards under the Broad-Based Plan (subject to adjustments to prevent dilution). As of June 27, 2003, options to purchase 4,651,010 shares of common stock granted under the Broad-Based Plan were exercisable and 1,455,617 shares were available for grant, under the plan.

The purpose of the Broad-Based Plan is to enable the Company to attract, retain and motivate its key employees and other personnel, and to further align the interests of such persons with those of the shareholders of the Company. The Broad-Based Plan is administered by the Compensation Committee or another committee appointed by the Board of Directors. The committee has broad discretionary authority to construe and interpret the plan. With respect to awards that are not intended to satisfy the conditions of Rule 16b-3 under the Securities Exchange Act, or Section 162(m) of the Internal Revenue Code, the committee may delegate the authority to grant awards to a sub-committee composed of one or more directors of the Company. Any person who is an employee, prospective employee, consultant or advisor of the Company is eligible to be a recipient of an award under the Broad-Based Plan.

Under the Broad-Based Plan the following awards may be granted either individually or two or more awards may be granted in tandem or in the alternative.


	•	Stock Options Awards. The committee administering the plan may grant options to purchase common stock of the Company. The options are not incentive stock options under Section 422 of the Internal Revenue Code. The purchase price per share of common stock subject to an option granted under the plan will equal or exceed 100% of the fair market value of such common stock on the date of grant. The term of each option granted under the plan will not exceed 10 years from the date of its grant.

Options granted under the plan vest as determined by the committee. The committee may reduce or eliminate any restrictions on a participant’s right to exercise an option.


	•	Restricted Stock Awards. The committee administering the plan may award shares of restricted stock, the grant, issuance, retention and/or vesting of which shall be subject to such terms and conditions as the committee deems appropriate. Notwithstanding satisfaction of any completion of service or performance goals, the number of shares granted, issued, retainable and/or vested under a restricted stock award may be reduced by the committee.

	•	Stock Unit Awards. The committee administering the plan may grant stock unit awards, the grant, issuance, retention and/or vesting of which shall be subject to such terms and conditions as the committee determines. A “stock unit” is a bookkeeping entry representing an amount equivalent to the fair market value of one share of the Company’s common stock. Stock units represent an unfunded and unsecured obligation of the Company, unless otherwise provided by the committee. The committee may provide for the stock units to be settled in cash or shares of common stock of the Company. Notwithstanding satisfaction of any completion of service or performance goals, the number of stock units granted, issued, retainable and/or vested under a stock unit award may be reduced by the committee.

No award, or any interest in an award may be transferred in any manner, other than by will or the laws of descent and distribution, unless the agreement evidencing an award expressly states that it is transferable.

The committee may in its discretion provide financing to a participant in a principal amount sufficient to pay the purchase price of any award and/or to pay the amount of taxes required by law to be withheld with respect to any award. Any such loan shall be subject to all applicable legal requirements and restrictions pertinent thereto.

The committee may, through the terms of the award or otherwise, provide for lapse of restrictions on an option or restricted stock, either immediately upon a change of control of the Company (as defined in the plan), or upon termination of the eligible employee’s employment within 24 months following a change of control. The committee may also provide for the exercise, payment or lapse of restrictions on an award which is only effective if no provision is made in the change of control transaction.

The board may amend, alter or discontinue the plan or any agreement evidencing an award made under the plan, in its sole discretion, and the committee may amend, alter or discontinue any agreement evidencing an award under the plan, including:


	•	increasing the maximum number of shares of common stock available for issuance under the plan;

	•	reducing the exercise price of outstanding options;

	•	after the date of a change of control, impairing the rights of any award holder, without such holder’s consent, under any award granted prior to the date of any change of control; or

	•	extending the term of the plan;

provided, however, that the board may not, under the recently adopted New York Stock Exchange rules regarding shareholder approval of equity compensation plans materially revise the plan by:


	•	materially increasing the number of shares available under the plan;

	•	expanding the types of awards available under the plan;

	•	materially extending the term of the plan; or

	•	materially changing the method of determining the strike price of options granted under the plan;

reduce the class of persons eligible to participate in the plan without prior shareholder approval unless it no longer intends for the plan to qualify as “broadly-based” under the New York Stock Exchange shareholder approval policy.

The Broad-Based Plan will terminate September 30, 2009, unless the Board of Directors terminates it sooner. The Broad-Based Plan is filed as Exhibit 10.34 to the Company’s Quarterly Report on Form 10-Q, filed May 15, 2000.

AUDIT COMMITTEE

The following is the report of the Audit Committee of the Company with respect to the Company’s audited financial statements for the fiscal year ended June 27, 2003. This report shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission, nor shall any information in this report be incorporated by reference into any past or future filing under the Securities Act or the Securities Exchange Act, except to the extent the Company specifically incorporates it by reference into such filing.

Report of the Audit Committee

The Audit Committee represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries, and has general responsibility for oversight and review of the accounting and financial reporting practices, internal controls and accounting and audit activities of the Company and its subsidiaries. The Audit Committee acts pursuant to a written charter. The Audit Committee Charter was originally adopted by the Board of Directors on September 6, 1995 and was most recently amended on September 28, 2000. A copy of the amended charter was attached as Exhibit B to the Company’s Proxy Statement for its 2001 Annual Meeting of Shareholders. The Board of Directors has determined that each of the members of the Audit Committee qualifies as an “independent” director under the rules of the New York Stock Exchange. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the financial reporting process, accounting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Company’s auditors are responsible for performing an independent audit of the financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

The Audit Committee has reviewed the audited financial statements of the Company for the fiscal year ended June 27, 2003 with management and has discussed with KPMG LLP, the Company’s independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees) relating to the conduct of the audit. In addition, the Audit Committee has received written disclosures and a letter from KPMG LLP regarding its independence from the Company as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with KPMG LLP the independence of that firm. Based upon such reviews and discussions, the Audit Committee has recommended to the Board of Directors of the Company that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2003, for filing with the Securities and Exchange Commission.


	AUDIT COMMITTEE

	Henry T. DeNero, Chairman
	Kathleen A. Cote
	William L. Kimsey
	Thomas E. Pardun

PROPOSAL 3

RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS

The accounting firm of KPMG LLP, certified public accountants, has served the Company as its auditors since its incorporation in 1970. The Board of Directors has again selected KPMG to serve as the Company’s independent accountants for the fiscal year ending July 2, 2004. Their selection is not required to be submitted for shareholder approval, but the Board of Directors has elected to seek ratification of its selection of the independent accountants by the affirmative vote of a majority of the shares represented and voted at the Meeting. If a majority of the shares represented do not ratify this selection, the Board of Directors will reconsider its selection of KPMG and will either continue to retain this firm or appoint new auditors upon recommendation of the Audit Committee. One or more representatives of KPMG are expected to be present at the Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Following are the fees paid by the Company to KPMG for the fiscal years ended June 27, 2003 and June 28, 2002:


Description of Professional Service	2003		2002

*Audit Fees* — professional services rendered for the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Form 10-Q’s	$	708,000	$	645,000
*Audit-related Fees* — professional services rendered to the Company and its subsidiaries that are reasonably related to the performance of the audit or review of the Company’s financial statements		42,000		20,000
*Tax Fees* — professional services rendered for tax compliance and other related tax services		315,000		182,000
*All Other Fees* — None		0		0

The Audit Committee considered the provision of the non-audit services listed above by KPMG and determined that the provision of such services was compatible with maintaining the independence of KPMG.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 3 TO RATIFY THE SELECTION OF KPMG LLP AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JULY 2, 2004.

SHAREHOLDER PROPOSALS FOR 2004

Shareholder proposals which are intended to be presented by shareholders at the Company’s 2004 Annual Meeting of Shareholders must be received by the Secretary of the Company at the Company’s principal executive offices no later than June 9, 2004, in order to be considered for inclusion in the proxy statement and form of proxy/voting instruction card relating to that meeting pursuant to Rule 14a-8 under the Securities Exchange Act. In addition, the Company’s Bylaws require that, among other things, shareholders give written notice of any proposal or the nomination of a director to the Secretary of the Company not less than 60 days nor more than 120 days prior to the scheduled 2004 Annual Meeting of Shareholders. The Company currently anticipates that the Company’s 2004 Annual Meeting of Shareholders will be held on November 18, 2004. Shareholder proposals or the nominations for director that do not meet the notice requirements set forth above will not be acted upon at the 2004 Annual Meeting.

ANNUAL REPORT

The Company’s 2003 Annual Report on Form 10-K has been mailed to shareholders and posted on the Internet at www.westerndigital.com concurrently with the mailing of this Proxy Statement. The information on the Company’s web site is not incorporated herein and shall not be deemed to be a part of this proxy solicitation material. The Company will provide, without charge, a copy of its 2003 Annual Report on

Form 10-K for the year ended June 27, 2003 (without the exhibits thereto) and/or a copy of the exhibits to its 2003 Form 10-K, upon the written or oral request of any shareholder or beneficial owner of common stock. Requests should be directed to the following address:

Raymond M. Bukaty

Secretary

Western Digital Corporation

20511 Lake Forest Drive

Lake Forest, California 92630-7741

(949) 672-7000

OTHER MATTERS

The Board of Directors of the Company does not know of any other matters that are to be presented for action at the Meeting. Should any other matters come before the Meeting or any adjournments and postponements thereof, the persons named in the enclosed proxy will have the discretionary authority to vote all proxies received with respect to such matters in accordance with their judgment.

DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS

In accordance with the rules of the Securities and Exchange Commission, where the Company has received the consent of the shareholders and has not received contrary instructions from such shareholders, only one Proxy Statement is being delivered to multiple shareholders that share the same address. Upon oral or written request the Company will deliver promptly a separate copy of this Proxy Statement to a shareholder at a shared address to which a single copy of this Proxy Statement was delivered. If you are a shareholder at a shared address to which a single copy of this Proxy Statement was delivered and you desire to receive a separate copy of this Proxy Statement, or if you desire to notify the Company that you wish to receive a separate proxy statement in the future, or if you are a shareholder at a shared address to which multiple copies of this Proxy Statement was delivered and you desire to receive one copy in the future, you may notify the Company’s transfer agent of your desire via telephone at 1 (800) 937-5449, or by writing to American Stock Transfer & Trust Company, 59 Maiden Lane, New York, New York 10009.

VOTING VIA THE INTERNET OR BY TELEPHONE

Shareholders may submit proxies by mail, telephone or the Internet. Your telephone or Internet proxy authorizes the proxies named on the enclosed proxy card to vote your shares to the same extent as if you marked, signed, dated and returned the enclosed proxy card. Shareholders may submit proxies telephonically by calling 1 (800) 690-6903 (within the U.S. and Canada only, toll-free), then entering their 12-digit Control Number located on the proxy card and following the simple recorded instructions. Shareholders may submit a proxy via the Internet by going to the web site at www.proxyvote.com, then entering their 12-digit Control Number and following the simple instructions. The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions and to confirm that shareholders’ instructions have been recorded properly. Proxies submitted via the Internet or by telephone must be received by 11:59 p.m. Eastern Standard Time on November 19, 2003. If you submit your proxy by telephone or Internet there is no need to return the enclosed proxy card. Submitting your proxy via the Internet or by telephone will not affect your right to vote in person should you decide to attend the Meeting. The Company’s general counsel has advised the Company that the Internet voting procedures that have been made available by the Company for its shareholders are consistent with the requirements of applicable law.

EXPENSES OF SOLICITATION

The cost of preparing, assembling and mailing the Notice of Annual Meeting of Shareholders, this Proxy Statement and form of proxy/voting instruction card, the cost of making such materials available on the

Internet and the cost of soliciting proxies will be paid by the Company. Proxies may be solicited in person or by telephone, facsimile or other means of communication by certain of the directors, officers, and regular employees of the Company who will not receive any additional compensation for such solicitation. The Company will also engage D.F. King & Co., Inc. in connection with the Annual Meeting for a fee that is not expected to exceed $12,000 plus a reasonable amount to cover expenses. The Company will also reimburse brokers or other persons holding stock in their names or the names of their nominees for the expenses of forwarding soliciting material to their principals.

Lake Forest, California

October 7, 2003

SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE OR PROVIDE VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET. A PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.

EXHIBIT A

WESTERN DIGITAL CORPORATION

AMENDED AND RESTATED

1993 EMPLOYEE STOCK PURCHASE PLAN

(as proposed to be amended)

The Western Digital Corporation 1993 Employee Stock Purchase Plan (the “Plan”) shall be established and operated in accordance with the following terms and provisions.

1. Definitions.

As used in the Plan the following terms shall have the meanings set forth below:


	(a) “Board” means the Board of Directors of the Company.

	(b) “Code” means the Internal Revenue Code of 1986, as amended.

	(c) “Committee” means the committee appointed by the Board to administer the Plan as described in Section 4 below.

	(d) “Common Stock” means the common stock, $0.01 par value, of the Company.

	(e) “Company” means Western Digital Corporation, a Delaware corporation.

	(f) “Continuous Employment” means the absence of any interruption or termination of service as an Employee with the Company and/or its Participating Subsidiaries. Continuous Employment shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute.

	(g) “Eligible Compensation” means, with respect to each Participant for each pay period, the full salary and wages paid to such Participant by the Company or a Participating Subsidiary, including commissions, bonuses (to the extent not excluded below), overtime pay and shift differentials. Except as otherwise determined by the Committee, “Eligible Compensation” does not include


	(i) any amounts contributed by the Company or a Participating Subsidiary to any pension plan or plan of deferred compensation,

	(ii) any automobile or relocation allowances (or reimbursement for any such expenses),

	(iii) any amounts paid as a starting bonus or finder’s fee,

	(iv) any amounts realized from the exercise of qualified or non-qualified stock options, or

	(v) any amounts paid by the Company or a Participating Subsidiary for other fringe benefits, such as health and welfare, hospitalization and group life insurance benefits, or perquisites, or paid in lieu of such benefits, such as cash-out of credits generated under a plan qualified under Code Section 125.


	(h) “Eligible Employee” means an Employee who is


	(i) customarily employed for at least twenty (20) hours per week and more than five months in a calendar year, and

	(ii) eligible to participate in the Plan as described in Section 5 below.

	If such person is (a) an Employee due to any classification or reclassification of the person as an employee or common-law employee of the Company or one of its Participating Subsidiaries by reason of action taken by any tax or other governmental authority, or (b) an Employee who has a written employment agreement providing that the Employee shall not participate in the Plan until at least two (2) years of Continuous Employment, then such Employee must be employed for at least

A-1


	two (2) years by the Company or one of its Participating Subsidiaries as well as meet the criteria set forth above in subsections (i) and (ii) in order to be an Eligible Employee.


	(i) “Employee” means each person currently employed by the Company or one of its Participating Subsidiaries. It shall not include any person who is recorded on the books and records of the Company or one of its Participating Subsidiaries as an independent contractor or consultant or a worker provided by a temporary staffing agency.

	(j) “Enrollment Date” means the first day of each Offering Period.

	(k) “Exercise Date” means each July 31 and January 31 during each Offering Period.

	(l) “Exercise Period” means a period commencing on February 1 and terminating on the following July 31 or commencing on August 1 and terminating on the following January 31.

	(m) “Exercise Price” means the price per share of shares offered in a given Offering Period determined as provided in Section 10 below.

	(n) “Fair Market Value” means, with respect to a share of Common Stock as of any Enrollment Date or Exercise Date (or New Exercise Date, as the case may be), the closing price of such Common Stock on the New York Stock Exchange on such date, as reported in The Wall Street Journal. In the event that such a closing price is not available for an Enrollment Date or an Exercise Date, or New Exercise Date, the Fair Market Value of a share of Common Stock on such date shall be the closing price of a share of the Common Stock on the New York Stock Exchange on the last business day prior to such date or such other amount as may be determined by the Committee by any fair and reasonable means.

	(o) “New Exercise Date” means the new exercise date set by the board in the case of a sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation or other entity in certain circumstances as described in Section 15(b).

	(p) “Offering Period” means a period of twenty-four (24) months during which an option granted pursuant to the Plan may be exercised. A new Offering Period shall begin on each February 1 and August 1.

	(q) “Participant” means an Eligible Employee who has elected to participate in the Plan by filing an enrollment agreement with the Company as provided in Section 7 below.

	(r) “Participating Subsidiary” means any Subsidiary other than a Subsidiary excluded from participation in the Plan by the Committee, in its sole discretion.

	(s) “Plan” means this Western Digital Corporation 1993 Employee Stock Purchase Plan, as amended.

	(t) “Subsidiary” means any corporation, domestic or foreign, of which the Company owns, directly or indirectly, not less than 50% of the total combined voting power of all classes of stock or other equity interests and that otherwise qualifies as a “subsidiary corporation” within the meaning of Section 424(f) of the Code or any successor thereto.

2. Purpose of the Plan.

The purpose of the Plan is to provide an incentive for present and future Employees of the Company and its Participating Subsidiaries to acquire a proprietary interest (or increase an existing proprietary interest) in the Company through the purchase of Common Stock. It is the intention of the Company that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. Accordingly, the provisions of the Plan shall be administered, interpreted and construed in a manner consistent with the requirements of that section of the Code.

3. Shares Reserved for the Plan.

There shall be reserved for issuance and purchase by Participants under the Plan an aggregate of 18,000,000 shares of Common Stock, subject to adjustment as provided in Section 15 below. Shares of

A-2

Common Stock subject to the Plan may be newly issued shares or shares reacquired in private transactions or open market purchases. If and to the extent that any right to purchase reserved shares shall not be exercised by any Participant for any reason or if such right to purchase shall terminate as provided herein, shares that have not been so purchased hereunder shall again become available for the purposes of the Plan unless the Plan shall have been terminated, but all shares sold under the Plan, regardless of source, shall be counted against the limitation set forth above.

4. Administration of the Plan.

(a) The Plan shall be administered by a Committee appointed by, and which shall serve at the pleasure of, the Board. The Committee shall consist of two or more directors, each of whom is a “Non-Employee Director” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, as such rule may be amended from time to time. The Committee shall have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan, all of which actions and determinations shall be final, conclusive and binding on all persons.

(b) The Committee may request advice or assistance or employ such other persons as it in its absolute discretion deems necessary or appropriate for the proper administration of the Plan, including, but not limited to employing a brokerage firm, bank or other financial institution to assist in the purchase of shares, delivery of reports or other administrative aspects of the Plan.

5. Eligibility to Participate in the Plan.

Subject to limitations imposed by Section 423(b) of the Code, any Eligible Employee who is employed by the Company or a Participating Subsidiary on an Enrollment Date shall be eligible to participate in the Plan for the Offering Period beginning on that Enrollment Date.

6. Offering Periods.

The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on each February 1 and August 1 during the term of the Plan. The first such Offering Period shall commence on February 1, 1994, or as otherwise determined by the Committee. The Committee shall have the power to change the duration of Offering Periods with respect to future offerings without shareholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected.

7. Election to Participate in the Plan.

(a) Each Eligible Employee may elect to participate in the Plan by completing an enrollment agreement in the form provided by the Company and filing such enrollment agreement with the Company prior to the applicable Enrollment Date, unless another time for filing the enrollment form is set by the Committee for all Eligible Employees with respect to a given Offering Period. An Eligible Employee may participate in an Offering Period only if, as of the Enrollment Date of such Offering Period, such Eligible Employee is not participating in any prior Offering Period which is continuing at the time of such proposed enrollment.

(b) Payroll deductions for a Participant shall commence on the first payroll date following the Enrollment Date and shall end on the last payroll date in the Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 12.

(c) Unless a Participant elects otherwise prior to the Enrollment Date of the immediately succeeding Offering Period, an Eligible Employee who is participating in an Offering Period as of the last Exercise Date of such Offering Period (the “Prior Offering Period”) shall be deemed (i) to have elected to participate in the immediately succeeding Offering Period and (ii) to have authorized the same payroll deduction for such immediately succeeding Offering Period as was in effect for such Participant immediately prior to the expiration or termination of the Prior Offering Period.

(d) The Committee, in its discretion, may terminate the participation of all Participants in any Offering Period as of the last day of any Exercise Period (a “Termination Date”) and enroll such Participants in the

A-3

new Offering Period commencing immediately following such Termination Date if the Exercise Price determined as of the Enrollment Date for such new Offering Period is lower than the Exercise Price determined as of the Enrollment Date of the Offering Period for which the Participants’ participation is being terminated. In such event, each of such Participants shall be deemed for purposes of this Plan (i) to have elected to participate in such new Offering Period, and (ii) to have authorized the same payroll deduction for such new Offering Period as was in effect for such Participant immediately prior to the Termination Date.

8. Payroll Deductions.

(a) All Participant contributions to the Plan shall be made only by payroll deductions. At the time a Participant files the enrollment agreement with respect to an Offering Period, the Participant shall authorize payroll deductions to be made on each payroll date during the Offering Period in an amount from 1% to 10% of the Eligible Compensation which the Participant receives on each payroll date during such Offering Period. The amount of such payroll deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the Participant’s Eligible Compensation.

(b) All payroll deductions made for a Participant shall be deposited in the Company’s general corporate account and shall be credited to the Participant’s account under the Plan. No interest shall accrue or be credited with respect to the payroll deductions of a Participant under the Plan. A Participant may not make any additional payments into such account. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

(c) A Participant may discontinue participation in the Plan as provided in Section 12. A Participant may at any time during an Offering Period (but no more than four times in any calendar year) reduce or increase (subject to the limitations of Section 8(a) above) the rate of his or her payroll deductions by completing and filing with the Company a change notice in the form provided by the Company. Any such reduction in the rate of a Participant’s payroll deductions shall be effective as of the pay period specified by the Participant in the Participant’s change notice, but in no event sooner than the first pay period ending more than fifteen (15) days after the Participant files the change notice with the Company. Any such increase in the rate of a Participant’s payroll deductions shall be effective as of the first date of the next Exercise Period within such Offering Period.

9. Grant of Options.

(a) On the Enrollment Date of each Offering Period, subject to the limitations set forth in Sections 3, 9(b) and 17 hereof, each Participant shall be granted an option to purchase on each Exercise Date during such Offering Period (at the Exercise Price determined as provided in Section 10 below) up to a number of shares of the Common Stock determined by dividing such Participant’s payroll deductions accumulated during the Exercise Period ending on such Exercise Date by 85% of the fair market value of a share of the Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower, provided that the number of shares subject to the option shall not exceed five (5) times the number of shares determined by dividing 10% of the Participant’s Eligible Compensation over the Offering Period (determined based upon the Eligible Employee’s rate of Eligible Compensation in effect as of the Enrollment Date) by 85% of the Fair Market Value of a share of the Common Stock on the Enrollment Date.

(b) Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted an option under the Plan (i) if, immediately after the grant, such Participant (or any other person whose stock would be attributed to such Participant pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company, or (ii) which permits such Participant’s rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.

A-4

10. Exercise Price.

The Exercise Price of each of the shares offered in a given Offering Period shall be the lower of: (i) 85% of the Fair Market Value of a share of the Common Stock on the Enrollment Date; or (ii) 85% of the Fair Market Value of a share of the Common Stock on the applicable Exercise Date.

11. Exercise of Options.

Unless a Participant withdraws from the Plan as provided in Section 12, the Participant’s option for the purchase of shares will be exercised automatically on each Exercise Date of the Offering Period, and the maximum number of full shares subject to option will be purchased for the Participant at the applicable Exercise Price with the accumulated payroll deductions in the Participant’s account. Any amount remaining in the Participant’s account after an Exercise Date shall be held in the account until the next Exercise Date in such Offering Period, unless the Offering Period has been over-subscribed or has terminated with such Exercise Date, in which event such amount shall be refunded to the Participant.

12. Withdrawal; Termination of Employment.

(a) A Participant may withdraw all but not less than all of the payroll deductions credited to the Participant’s account under the Plan at any time by giving written notice to the Company. All of the Participant’s payroll deductions credited to the Participant’s account will be paid to him or her promptly after receipt of the Participant’s notice of withdrawal, the Participant’s participation in the Plan will be automatically terminated, and no further payroll deductions for the purchase of shares will be made. Payroll deductions will not resume on behalf of a Participant who has withdrawn from the Plan unless written notice is delivered to the Company within the open enrollment period preceding the commencement of an Exercise Period directing the Company to resume payroll deductions.

(b) Upon termination of the Participant’s Continuous Employment prior to the Exercise Date of an Offering Period for any reason, including retirement or death, the payroll deductions credited to the Participant’s account will be returned to the Participant or, in the case of death, to the Participant’s estate, and the Participant’s options to purchase shares under the Plan will be automatically terminated.

(c) In the event a Participant fails to maintain Continuous Employment for at least twenty (20) hours per week during an Offering Period, the Participant will be deemed to have elected to withdraw from the Plan, the payroll deductions credited to the Participant’s account will be returned to the Participant, and the Participant’s options to purchase shares under the Plan will be terminated.

(d) A Participant’s withdrawal from an Offering Period will not have any effect upon the Participant’s eligibility to participate in a succeeding Offering Period or in any similar plan which may hereafter be adopted by the Company.

13. Transferability.

Options to purchase Common Stock granted under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution and are exercisable during a Participant’s lifetime only by the Participant.

14. Reports.

Individual accounts will be maintained for each Participant in the Plan. Statements of account will be given to Participants semi-annually promptly following each Exercise Date, which statements will set forth the amounts of payroll deductions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any.

15. Adjustments Upon Changes in Capitalization.

(a) If the outstanding shares of Common Stock are increased or decreased, or are changed into or are exchanged for a different number or kind of shares, as a result of one or more reorganizations, restructurings, recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends or the like, appropriate

A-5

adjustment shall be made in the number and/or kind of shares, and the per-share option price thereof, which may be issued in the aggregate and to any Participant upon exercise of options granted under the Plan.

(b) In the event of the proposed dissolution or liquidation of the Company, each Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation or entity, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or entity or a parent or subsidiary of such successor corporation or entity, unless the Committee determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Participants shall have the right to exercise the option as to all of the optioned stock. If the Committee makes an option fully exercisable under these circumstances in lieu of assumption or substitution, each Offering Period then in progress shall be shortened and a new Exercise Date shall be set (the “New Exercise Date”), as of which date any Offering Period then in progress will terminate. The New Exercise Date shall be on or before the date of consummation of the transaction and the Committee shall notify each participant in writing, at least ten (10) days prior to the New Exercise Date, that the Exercise Date for his or her option has been changed to the New Exercise Date and that his or her option will be exercised automatically on the New Exercise Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 12. The Exercise Price on the New Exercise Date shall be the lower of: (i) 85% of the Fair Market Value of a share of the Common Stock on the Enrollment Date; or (ii) 85% of the Fair Market Value of a share of the Common Stock on the applicable New Exercise Date.

(c) In all cases, the Committee shall have full discretion to exercise any of the powers and authority provided under this Section 15, and the Committee’s actions hereunder shall be final and binding on all Participants. No fractional shares of stock shall be issued under the Plan pursuant to any adjustment authorized under the provisions of this Section 15.

16. Amendment of the Plan.

The Board may at any time, or from time to time, amend the Plan in any respect; provided, however, that the Plan may not be amended in any way that will cause rights issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code or any successor thereto, including, without limitation, shareholder approval if required.

17. Termination of the Plan.

The Plan and all rights of Employees hereunder shall terminate:


	(a) on the Exercise Date that Participants would become entitled to purchase a number of shares greater than the number of reserved shares remaining available for purchase under the Plan if the final sentence in this Section 17 were not applied; or

	(b) at any time, at the discretion of the Board.

In the event that the Plan terminates under circumstances described in Section 17(a) above, reserved shares remaining as of the termination date shall be sold to Participants on a pro rata basis.

18. Notices.

All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

19. Shareholder Approval.

Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve months before or after the date the Plan is adopted. If such shareholder approval is obtained at a duly held shareholders’ meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company present or represented and entitled to vote thereon.

A-6

20. Conditions Upon Issuance of Shares.

(a) The Plan, the grant and exercise of options to purchase shares of Common Stock under the Plan, and the Company’s obligation to sell and deliver shares upon the exercise of options to purchase shares shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may, in the opinion of counsel for the Company, be required.

(b) The Company may make such provisions as it deems appropriate for withholding by the Company pursuant to federal or state income tax laws of such amounts as the Company determines it is required to withhold in connection with the purchase or sale by a Participant of any Common Stock acquired pursuant to the Plan. The Company may require a Participant to satisfy any relevant tax requirements before authorizing any issuance of Common Stock to such Participant.

A-7

(WESTERN DIGITAL LOGO)

WESTERN DIGITAL CORPORATION
20511 Lake Forest Drive
Lake Forest, California 92630-7741

THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, hereby revoking any proxy previously given, appoints Matthew E. Massengill and Raymond M. Bukaty, and each of them, as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the other side, all the shares of common stock of Western Digital Corporation held of record by the undersigned on October 2, 2003, at the Annual Meeting of Shareholders of Western Digital Corporation to be held on November 20, 2003, and at any postponements or adjournments thereof. The proposals of the Company referred to on the other side are described in the Proxy Statement, dated as of October 7, 2003, which is being delivered herewith in connection with the Annual Meeting.

THIS PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREBY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.

IF YOU HAVE A BENEFICIAL INTEREST IN SHARES HELD BY THE WESTERN DIGITAL CORPORATION 401(k) PLAN, THEN THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS TO THE TRUSTEE OF SUCH PLAN. IF YOU DO NOT SIGN AND RETURN THIS CARD, OR ATTEND THE MEETING AND VOTE BY BALLOT, SUCH SHARES WILL NOT BE VOTED BY THE TRUSTEE.

(IMPORTANT — PLEASE SIGN ON OTHER SIDE)

(WESTERN DIGITAL LOGO)

WESTERN DIGITAL CORPORATION

20511 LAKE FOREST DRIVE

LAKE FOREST, CALIFORNIA 92630

Please sign your name exactly as it appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in full partnership name by authorized person.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY/VOTING INSTRUCTION CARD PROMPTLY USING THE ENCLOSED ENVELOPE. IF YOU CHOOSE TO VOTE YOUR SHARES BY TELEPHONE OR INTERNET, DO NOT RETURN THIS PROXY.

Whether or not you plan on attending the meeting, you are urged to vote your shares by completing and returning this proxy card or transmitting your voting instructions electronically via the Internet or by the phone.

BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on the day before the meeting date. Have your proxy/voting instruction card in hand when you call. You will be prompted to enter your 12-digit Control Number which is located below and then follow the simple instructions the Vote Voice provides you.

BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions up until 11:59 P.M. Eastern Time on the day before the meeting date. Have your proxy/voting instruction card in hand when you access the web site. You will be prompted to enter your 12-digit Control Number which is located below to vote your proxy.

BY MAIL
Mark, sign and date your proxy/voting instruction card and return it in the postage-paid envelope we have provided or return it to Western Digital Corporation, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717, no later than the day before the meeting date.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x	WSTDI1	KEEP THIS PORTION FOR YOUR RECORDS

		DETACH AND RETURN THIS PORTION ONLY

THIS PROXY/VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED.

WESTERN DIGITAL CORPORATION

The Board of Directors recommends a vote FOR
the following nominees and proposals:

For
All

Withhold
All

For All
Except

To withhold authority to vote for any nominee(s), mark “For All Except” and write the number of the nominee(s) for which a vote is to be withheld on the line below.

ELECTION OF DIRECTORS:

01)
02)
03)
04)
05)

Matthew E. Massengill
I.M. Booth
Peter D. Behrendt
Kathleen A. Cote
Henry T. DeNero

06)
07)
08)
09)

William L. Kimsey
Michael D. Lambert
Roger H. Moore
Thomas E. Pardun


Vote On Proposals		For	Against	Abstain

2.	To approve an amendment to the Company’s 1993 Employee Stock Purchase Plan, to increase by 3,000,000 the number of shares of common stock available for issuance to employees of the Company under the plan;	o	o	o

3.	To ratify the selection of KPMG LLP as independent accountants for the Company for the fiscal year ending July 2, 2004; and	o	o	o

4.	To transact such other business as may properly come before the meeting or any adjournment thereof.


	Yes		No

Please indicate if you plan to attend this meeting		o		o

HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household		o		o



Signature [PLEASE SIGN WITHIN BOX]	Date	Signature (Joint Owners)	Date

October 7, 2003

TO: Participants in the Western Digital Corporation 401(k) Plan

As a participant in the Western Digital Corporation 401(k) Plan, you have the right to vote the shares of Western Digital Corporation common stock allocated to your account.

To allow you to do this, we are enclosing a proxy/voting instruction card, which when completed will give instructions to the trustee of the plan, T. Rowe Price Trust Company, on how you wish your shares to be voted. Also enclosed is an Annual Report on Form 10-K, and a Proxy Statement which explains the issues being presented for shareholder approval at the Annual Meeting of Shareholders to be held on November 20, 2003.

In addition to the election of directors and the ratification of the selection of KPMG LLP as independent accountants, the Company is asking for your approval of the amendment to the Company’s 1993 Employee Stock Purchase Plan to increase by 3,000,000 the number of shares of common stock available for issuance under the plan.

Your Board of Directors unanimously recommends that you vote FOR each of these proposals.

As a stock owner in Western Digital Corporation, ONLY YOU CAN VOTE YOUR SHARES through the trustee. No one else has that right. If you do not provide the trustee with voting instructions, your shares will not be voted unless you attend the Annual Meeting and vote in person. Therefore, it is important that your shares, no matter how large or small the amount, be represented at the Annual Meeting of Shareholders.

Please take the time to complete the enclosed card and return it in the enclosed, pre-addressed envelope as soon as possible.

Thank you for your cooperation.

(-s- Raymond M. Bukaty)

Raymond M. Bukaty
Vice President, General
Counsel and Secretary

(WESTERN DIGITAL LOGO)

WESTERN DIGITAL CORPORATION

20511 Lake Forest Drive
Lake Forest, California 92630-7741

THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

(IMPORTANT — PLEASE SIGN ON OTHER SIDE)

(WESTERN DIGITAL LOGO)

WESTERN DIGITAL CORPORATION

20511 LAKE FOREST DRIVE

LAKE FOREST, CALIFORNIA 92630

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY/VOTING INSTRUCTION CARD PROMPTLY USING THE ENCLOSED ENVELOPE. IF YOU CHOOSE TO VOTE YOUR SHARES BY TELEPHONE OR INTERNET, DO NOT RETURN THIS PROXY.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x	WSTDI5	KEEP THIS PORTION FOR YOUR RECORDS

		DETACH AND RETURN THIS PORTION ONLY

THIS PROXY/VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND DATED.

WESTERN DIGITAL CORPORATION

The Board of Directors recommends a vote FOR
the following nominees and proposals:

For
All

Withhold
All

For All
Except

To withhold authority to vote for any nominee(s), mark
“For All Except” and write the number of the
nominee(s) for which a vote is to be withheld on the
line below.

ELECTION OF DIRECTORS:

01)
02)
03)
04)
05)

Matthew E. Massengill
I.M. Booth
Peter D. Behrendt
Kathleen A. Cote
Henry T. DeNero

06)
07)
08)
09)

William L. Kimsey
Michael D. Lambert
Roger H. Moore
Thomas E. Pardun

Vote On Proposals

For

Against

Abstain

To approve an amendment to the Company’s 1993 Employee Stock Purchase Plan, to increase by 3,000,000 the number of shares of common stock available for issuance to employees of the Company under the plan;

To ratify the selection of KPMG LLP as independent accountants for the Company for the fiscal year ending July 2, 2004; and

To transact such other business as may properly come before the meeting or any adjournment thereof.


	Yes		No

Please indicate if you plan to attend this meeting		o		o

HOUSEHOLDING ELECTION - Please indicate if you consent to receive certain future investor communications in a single package per household		o		o



Signature [PLEASE SIGN WITHIN BOX]	Date	Signature (Joint Owners)	Date