Slide 1: Schedule 14A Proxy Statement - Dell Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy
Slide 2: Date Filed
(4) Date Filed:
Slide 3: Explanatory Note
Explanatory Note This amendment to Schedule 14A amends and restates the Dell Consolidated Special Committee Investor Presentation filed as definitive additional materials with the Securities and Exchange Commission on July 8, 2013 to include a non-GAAP financial measures reconciliation table as Appe
Slide 4: Special Committee Investor Presentation, July 2013
DEL July 2013 LS PE C IALC O M M I TT E E I N V E S T O R PR E S E N TAT I O N
Slide 5: Presentation
Presentation Alex Laura Ken Debevoise J.P. Management 1Proxy Morgan Duberstein, Mandl Conigliaro, MacKenzie &Financial (Chairman), to Boston Plimpton Dell’s Chairman Retired Partners Consulting investors advisors LLP Former Partner & solicitor Legal CEO Evercore Group President, of counsel ofGoldman
Slide 6: Agenda
Transaction process 3 Perspectives on Dell today 12 Overview of financial forecasts 22 Evaluation of strategic alternatives 30 2Agenda
Slide 7: The Special Committee Process
Process Alex President Laura Retired Co-Director Covered Janet SVP EVP Investment Ken Chairman Director Other Lead Chairman, Former 3The Special Duberstein &of Mandl Director, Clark experience Conigliaro CFO White Santa Partner President, director Presiding led of computer &of &Governance Infoblox,
Slide 8: Independent Directors
Independent James Partner, McKinsey Product Lead Donald Chairman CEO National Current William Co-Chairman Congressman, Gerard President, MD, Member Klaus Owner Vice CEO, Shantanu President Key Co-founder, Apple Ross Director Other Founder, 41Chairman, product Chairman Philips Perot Independent of Th
Slide 9: Comprehensive Process Delivers Shareholder Value
Going All Comprehensive Shareholder Shifts 5Avoids cash all private high offer business friendly risk at delivers range aofsignificant, and a process levered of transaction highest alternatives and recap certain value terms risks and for evaluated premium to delivers Dell’s ensure buyershareholders
Slide 10: Rigorous Negotiations and Transaction Highlights
$13.65 37% Negotiations Rigorous In Blackstone –Icahn All Increasingly Enterprise Transformation 61Transaction Blackstone Icahn On Premiums total, cash premium July and per did 21 transaction process 1st, Southeastern segment share strategic and not highlights transfers based negative resulted termi
Slide 11: Rigorous Process
Process Rigorous Established Highly The Considered Retained Special Michael Transaction Prior Evercore Aggressive Blackstone Icahn 71On July Special to and competitive Committee’s signing, was 1st, Unaffiliated Dell BCG retained review Southeastern and go-shop, broad favorable requires Committee Ica
Slide 12: Progression of Bids and Key Events
$4 billion Progression Represents Initial 10/23/12 Special 8/20/12 $11.22 $12.00—$13.00) $13.65 $12.90 5/9/13 12/4/12 12/11-12/23/12 3/22/13 Sponsor Aug 821Dell share Sept bids 6/18/13 $13.60 2/5/13 Late Represents BOct C in 10/22/12 declines enters $12.16 Silver of additional Oct Nov $12.70 $13.50
Slide 13: Deteriorating Street Estimates Since Announcement
… ?despite Progression Street 8/21/12 $2.02 Transaction $1.79 $1.81 $1.67 $1.59 $1.66 % $1.54 $1.00 Aug 50% 9Source: since Sept decrease 2/5/13 $1.78 $1.67 $1.57 $1.00 consensus ThomsonOne; 11/15/12 Oct Aug deteriorating announced of (Current Nov in 2012: FY14 FY14 estimates 2/19/13 Dec (50%) Street
Slide 14: Attractive $13.65 per Share Offer Premium
Attractive $13.65/share 63% 77% Significantly Enterprise 7.0x annualized 1Q 6.0x Offer (Final Board 5.0x 4.0x 3.3x4 EBITDA): (Consensus Jun-12 2.0x 3.0x average: 321Source: 410 FY14): Actual (Last 6.7x2 5.4x3 Dell premium multiple FY14 Case): Jul-12 Company premium quarter value (LQA) period Based R
Slide 15: Agenda
Transaction process 3 Perspectives on Dell today 12 Overview of financial forecasts 22 Evaluation of strategic alternatives 30 Agenda 11
Slide 16: Dell Transition: Core Dell and New Dell
Transition Characteristics End Strong Fund Enterprise Solutions “New Services 2ą(Solutions) 12“Core User & Dell“2 brand Dell” Pull-through “New inorganically Declining growth to Faster “New Expanding includes Dell” Dell growth Dell” strategy demand includes revenue mobility, margins Outpace depends
Slide 17: Key Segment Observations
Source: 113 client, Services management ~15% of Large Represents Headwinds Support ESG other Commoditization Emerging Weak Cloud, EUC pressure revenue Q1 operating Segments Dell Key $645 $370 $224 $136 ($85) $14,417 $2,109 $8,920 $3,093 $295 Services1 EUC2 ESG3 Software4 Services segments FY14 obser
Slide 18: Support and Deployment Services
Primarily Support In Does However, 14 EUC, ESG, drive and growth unit extended pressures unit Deployment sales sales of growth Cloud warranty, Support (although –represents isisan an tied and under installation important attractive atto Deployment lower unit secular a challenge sales margins) busine
Slide 19: Significant Acquisition Investment, Returns Lagging
Returns Significant Over Sales A Current As 15number the$13bn force environment returns foroffuture integration Dell’s spent acquisitions areintegration on acquisition lagging continues acquisitions benefits have theand program to required 15% and evolve investment since cross-selling IRR remain FY0
Slide 20: New Dell Faces Scale Challenges
“New Key Modest Remains Weak Risk Scale Storage 7.2% Data Hitachi 8.8% HP 33.4% Systems 9.6% (Gartner: R&D ($ 12% $4,523 $5,488 $6,302 $3,399 5%3 $2,560 $1,072 2% Networking 1.9% Huawei 2.9% Lucent Alcatel- 2.6% Juniper 2.1% Brocade 2.0% 9.1% Server Oracle Others 3.0% IBM Dell 4.5% Cisco 3.6% Fujits
Slide 21: Recent PC Market Outlook
Recent On “…the “Our 38% 550 (mm) 500 8.4% shipme 450 nts 2005-11A ldwide Wor 1.7% Other (~1.5%)2 300 Morgan Dec Barclays 250 ‘09 PC 321Source: 17 June market shipments ‘10 CAGR Gartner Jun ‘12 350 decrease tablet 7.4% sources: lack 400 industry 4.3% ‘11 IDC, ‘13 Stanley1 Represents 28, PCs (Mar CAG
Slide 22: PC Profit Pool Shifting
Tablets ~30% PC FY12 ~(9%) Dell strength weakness Total Dell’s Source: 1Note: 18Profit profit Tablets: PCs: Std ~4% profit Represents FY17 CAGR build-to-order CAGR expected pool BCG / pools Value: Prem: CAGR $38bn pool ~(7%) represents $8bn shifting $34bn =$26bn $4bn to Dell’s $38bn $30bn CAGR conti
Slide 23: Core Dell Provides Cash Flow for New Dell
Revenue Provides Cash Product –Sales Cloud The “Core “New Dell’s ¹Source: Includes Largest speed flow force Dell” Dell,” rate represents BCG integration absorbs procurement customers desktop, of has integration business operating and is drives including transformation 19 fueled critical “New asignif
Slide 24: PC Exposure Weighs on Dell Valuation
PCUnaffected $40 Dell’s $37 Dell Source: FY13 FY08 0.0x 5.0x 10.0x 15.0x 20.0x 21Note: Prior 20PCrevenue1 exposure $30 PC revenue to Market NTM announcement, Company revenue1 $20 P/E $10 will ($bn) multiple data includes multiple likely Dell filings; from andshown desktops NTM next Dell’s continue 1
Slide 25: Agenda
Transactionofofprocess Agenda Perspectives Evolution Evaluation 21 on financial strategic Dell3today forecasts alternatives 12 22 30
Slide 26: Key Financial Deterioration
Free (43%) Continued Key 22 (8%) Revenue % (28%) Source: <SUP>1</SUP> well 2as Non-GAAP Final (25%) LQA Based mgn: metrics as cash 1Q FY14 other Company 8.4% 8.2% on FY14 flow deterioration $0.2bn Board operating EPS ($ items. inTo -billions, filings Case Case2 d
Slide 27: Forecasting Performance vs. Plan
Forecasting Source: 123 expenses well Q Revenue: EPS: EPS Non-GAAP 2Revenue uarterly Excludes In addition, as – Dell other Company associated Dell revenue has severance has diluted1 items. to missed has been highlight filings; and missed See with poor 4and EPS of Appendix special significant De
Slide 28: Internal Forecasts Missed and Revised Down
Internal (12%) 57.5 4.0 59.9 4.2 $66.0 $5.6 $63.0 $5.2 1.59 1.84 1.70 $2.50 $2.27 ~4 56.0 (23%) (26%) (25%) (9%) missed Cumulative (50%) (46%) (14%) ~8 (9% (1%) 3.7 1.58 56.9 (7%) ~2 (21%) (19%) 1% 3.0 FY14 1.253 56.5 EPS op. Non-GAAP FY13 Revenue Source: Scenario frame Time <SUP>1</SUP> Appendix 32
Slide 29: BCG Scope and Full Prospects Review
BCG During Full Scope Future Prospects Strategy –Financial 1Source: Two 25Categories Savings access retained of cost of the BCG Based of BCG the cases for assumed fall savings each toof PC Dell’s Dell towork of on to costs business evaluate business 2012, model Dell senior realization phased transfo
Slide 30: BCG Validated Management Forecast
Slow enterprise ?Combined Tablets Other Lower BCG Organizational Simplification Market Source: 26 validated created identified Dell revenue growing shift performance BCG business market to a and “base de-layering value business and opportunities transformation rapidly labor revenue operating segment
Slide 31: Forecasted Cost Savings Commentary
not 21Source: Forecasted Implies operating consolidated 10% management the Many $3.3bn Significant identified savings reinvested would line ~50% Given 27 Commentary consensus was BCG $2.4 $3.0 Q1 Based aspirational concrete deemed vs. FY14 25% "75% evaluated 75% Base of higher aggressive notan
Slide 32: Key Observations on Q1 FY14 Results
Margin Source: 28 Note: Non-GAAP Key Revenue ESG consensus BRIC down Gross respectively lowest Trailing 21flow Seeobservations Free down revenue Non-GAAP Dell 17% margin and cash point pressure Dell 12 above China fiscal and 35% months flow Q1 since management, up percentage 24% Street FY14 YoY tren
Slide 33: Agenda
Transactionofofprocess Agenda Perspectives Evolution Evaluation 29 on financial strategic Dell3today forecasts alternatives 12 22 30
Slide 34: Levered Recapitalization Benefits and Challenges
Full Benefits Levered—Significantly Utilize Enhance -+ 30Potential Significant Ability Delivers Dividend Remove Eliminate range cash Challenges dividend toof competitive revenue upfront payers focus long-term flow time strategic to required on dividend cash rewarded and increase—Constrained core alt
Slide 35: Strategic Alternatives Benefits and Challenges
Full Benefits +Grow Transform- acquisitions +Opportunity +Immediate -Sale +De-risks strategic We 31Transaction Views thoroughly range to Enterprise, validated Challenges standalone ofareas High value strategic size toevaluated improve ative by interloper likely creation Software, fact plan alternati
Slide 36: Summary of Icahn and Southeastern Proposals
Summary Overview Implies Icahn Southeastern Together, Management Total $7.5bn $2.9bn $5.2bn 1To 2have Rahul 32Southeastern Icahn’s elect anet asks and purchased Merchant, combined Dell net secured ~$10.00 afunding nominations they slate of Southeastern that financing cash Icahn (~50% team still sold
Slide 37: Leveraged Recap Elevates Financial Risk
Leveraged Elevated Elevates FY14E Plan Potential Few Significantly Weak Dell Dramatically 33 will precedents Deteriorating financial operating Dell’s risks remain adverse recap weaker elevated due position risk –largely considerations employee, income particularly to cash profile financial leverage
Slide 38: Highly Leveraged Recap Analysis
Highly June Total vs. Cash No Stub leverage strongly Break-even Final Few LQA None Pro Gross Unrealistic18th available cash leveraged $9.94 54321transaction public forma 6 Break-even 34Final /large-cap available Final LQA July precedents equity Q1 FY14 in leverage debt tech Cash capitalized levels F
Slide 39: Southeastern and Icahn Letters Inconsistent
March May June To Icahn Southeastern On How The 35 match February Special 9th 18th can and has 22nd letter: their $13.65 been failed letter: Southeastern Committee letter: 8th, has rhetoric inconsistent $12.00 to $14.00 in openly Southeastern provide $15.00 cash, per and concepts stands per opposed
Slide 40: Highfields, Clear Channel Precedent
Highfields, In Transaction Stock Clear 7/30/08: 14% 1/29/07: 1/1/07 $0 (75%) Similarities Founder Declining Leverage Small Source: 36 response Channel price float 4/20/08 Company The /Clear levels sponsor growth and holder performance to completed acquisition dissident Dell highlights Communications
Slide 41: Dramatic Price Underperformance After Votes Against Deals
Dramatic Price Announce Target TGC Dynegy VaxGen Cablevision Randolph Lear Eddie Cornell Corning Mean Median Average Source: Note: 37 American Industries performance Includes (17.4%) Bauer Acquirer stock Companies FactSet, (13.7%) Blackstone OXiGENE Natural 1-year underperformance Bank Voted Systems
Slide 42: Substantial Downside Risk Assuming Silver Lake Deal Fails
Substantial Assuming $13.65 Silver $5.88 $6.95 $8.72 EPS: 1Source: 38 $1.25 Lake represents 57% Company Assumes HP’s downside $1.00 /premium Final CY13E $0.84 substantial HP’s filings, FY14 risk 96% CY13E P/E1 Wall FactSet; topremium Dell premium Street P/E shareholders Market multiple 132% LQA to i
Slide 43: Conclusion: Comprehensive Process Delivers Shareholder Value
Conclusion: All Comprehensive Shareholder Highest Shifts Avoids 39 cash all high price offer business friendly transaction risk available at range aofsignificant, and a process levered of transaction following delivers alternatives and recap certain highest terms exhaustive risks and evaluated premi
Slide 44: Agenda - Appendix
Transaction Agenda Perspectives 31Evolution 22 Evaluation 41 Appendix 40 30 2 ofofprocess on financial strategic Dell today forecasts alternatives
Slide 45: Appendix A: Reconciliation to Non-GAAP Financials
Appendix Reconciliation 241 calculated 11, In For 2 order FY12,A: to using the highlight Reconciliation toEPS an non-GAAP assumed impact significant to of tax financials non-GAAP vendor rate changes of settlements 20.6% – period financials and FY12 over aisdiluted calculated and period, FY13 we
Slide 46: Appendix A: Reconciliation (cont'd)
Appendix Reconciliation 142 employees key IncludesA: merger-related in Reconciliation Q1 to FY14 non-GAAP costs, tofinancials non-GAAP which consist – financials ofQ1 transaction FY13 (cont’d) andexpenses Q1 FY14associated with Dell’s proposed merger as well as expenses associated with special
Slide 47: Appendix A: Reconciliation
Appendix There 43 companies usefulness intangible value economic charges management financial substitute accordance See measure. non-GAAP above is are that not measures We limitations for effect A: assets for of in with financial included are compensates encourage Reconciliation those gross Dell’s r
Slide 48: Appendix A: Reconciliation
Appendix The 44 to related pursuant costs. costs, employees, integration acquisitions Severance impacted future, presented Dell’s • customer business included significantly amount measures comparisons calculate following Acquisition-related and past ittofrom Amortization Severance acquisitions.
Slide 49: Appendix A: Reconciliation
Appendix 45 reimbursement Board expenses these current changes certain mentioned • believed Company reconciliation available acquisition-related excluded about adjustments merger which cannot considered with GAAP. items the of the be key vendor would operating The Other period they Directors. t
Slide 50: Forward-looking Statements
Forward-looking Any statements safe occurrence for transaction; attention business Actual anticipate obligation those heading 10-Q 46 the harbor statements and described proposed results “Item generally. from 8-K that to containing of provisions (3) do any may filed subsequent 1A—Risk the the in so.
Slide 51: Additional Information
Additional In statement or Investors Company’s The investor_relations@dell.com. Company the amended 47 connection incorporated proposed other Company relevant with will and ininformation website favor merger, with be athe and by form able documents filing of reference its the atthe and of to directo