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: Dell Special Committee Investor Presentation, June 2013
D E L2013 June 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 4: Presentation team and advisors
Presentation Special Legal Financial Management Proxy Alex Debevoise Group Morris, J.P. Evercore Boston 1MacKenzie Morgan Mandl counsel solicitor Consulting Committee Nichols, Partners advisors &Partners (Chairman), to consultant Plimpton Dell’s Arsht Group investors &LLP Former TunnellPresident, LL
Slide 5: Agenda
Transactionofofprocess Agenda Perspectives Overview 2Evaluation on financial strategic Dell3today forecasts alternatives 13 21 29
Slide 6: Special Committee composition and process
Process Alex President Laura Retired Co-Director Covered Janet SVP EVP Investment Ken Chairman Director Other Lead Boeing Chairman, Former 3The Special Duberstein &of Mandl Director, Clark experience Conigliaro CFO Company White Santa Partner President, director Presiding led of computer &of &Govern
Slide 7: Independent directors of Dell
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, James product Chairman Philips Perot Independent
Slide 8: All-cash offer delivers comprehensive 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 9: Rigorous negotiations
$13.65 37% Negotiations Rigorous In Blackstone n–Icahn Transformation 61Transaction All Blackstone Icahn Increasingly Enterprise Premiums total, premium cash and per did and 21process Southeastern transaction share strategic and not Southeastern transfers based segment resulted terminated negative o
Slide 10: Rigorous, established process
Process Rigorous Established Highly The Considered Retained Special Michael Transaction Prior go-shop 71submitted Unaffiliated Special tocompetitive Committee’s signing, was Aggressive Dell BCG review a broad favorable letter requires Committee rigorous, agreed shares to3of assist on range leading s
Slide 11: Progression of bids and price
$4Unaffected Progression Represents 8/20/12 Initial 10/23/12 Late $11.22 $12.16 BCG 12/11-12/23/12 Sponsor 12/4/12 $12.70 Go-shop $13.60 $13.25 $12.90 Announces 2/5/13 Active 3/22/13 Blackstone 4/18/13 Special 5/13/13 Icahn 5/9/13 Aug Dell 10/22/12 11/30/12 8211/11/13 Represents billion share Sept O
Slide 12: Street estimates since August 2012
… since Progression 8/21/12 11/15/12 2/19/13 Street 5/16/13 Transaction 2/5/13 $1.66 $1.67 $1.78 $1.79 $1.81 $2.02 % $1.54 $1.57 $1.59 $1.00 Aug 50% 9Source: despite Sept decrease (Current consensus ThomsonOne; (Q2 (Q4 (Q1 Aug (Q3 Oct deteriorating announced of FY13 FY14 2012: FY13 Nov inFY14 estima
Slide 13: Attractive premium and multiple
Attractive $13.65/share 63% 77% Significantly Enterprise 7.0x Jun-12 1Q Offer Dell 4321Source: 10Based Represents FY14): (Consensus 6.0x premium multiple Jul-12 Company on5.0x premium value 6.7x2 Street last Final represents unaffected exceeds Aug-12 to (Last (Final 4.0x quarter /EBITDA): next avera
Slide 14: Robust transaction terms
Terms Robust “Majority Michael No Active and Blackstone Icahn Transaction Agreement Special Silver 11 financing Icahn did and Lake protect 45-day go-shop Committee Dell’s not Southeastern ofby terminated and requires the condition follow and “go-shop” Michael neutrality Michael unaffiliated” maximiz
Slide 15: Agenda
Transactionofofprocess Agenda Perspectives Overview Evaluation 12 on financial strategic Dell3today forecasts alternatives 13 21 29
Slide 16: Dell's transition from Core to New Dell
Transition “Core End Strong Dell Characteristics Continue Global Mitigate Fund “New Enterprise Faster Expanding Higher Outpace Invest Leverage 2¹Integrated 13 “Core “New User strategy &Dell“2 Dell“1 growth organically brand scale expansion recurring Dell” Dell” Pull-through market volatility cash fo
Slide 17: Enterprise Solutions Group snapshot
Snapshot Enterprise 5% 56% 38% YoY Revenue Storage Networking Peripherals Servers Key Heavy 86% Significant Deployment 32% 88% Operating Segment Q1 ESG Services Software % Source: Note: 1corporate operating 14Sum Variance margin FY14 observations growth: from operating margin: 136 Fiscal of revenue
Slide 18: New Dell faces key challenges
“New Key Modest Remains Weak Risk Storage 16.4% (Gartner: NetApp Hitachi Networking 8.8% Alcatel-Lucent Juniper Brocade Huawei R&D ($ 5%3 Server CSCO $5,488 NTAP $904 14% EMC $2,560 ORCL 12% $4,523 6% $6,302 HPQ 3% $3,399 2% Oracle Fujitsu Cisco IBM (IDC: Dell HP Others Source: 21Note: 3Wyse Acquisi
Slide 19: Worldwide PC market deterioration
Worldwide 550 ‘09 IDC Jun Mar 2005-11A 2012-16E PCs 8.4% Other 38% Asian Dell’s Emerging PC 321Source: 16Represents Based market competition shipments ‘10 ‘12 500 ‘13 estimates decrease 7.4% sources: vendors share ‘11 Sep IDC, on Jun 450 threats CAGR fundamentals outlook 4.3% shipments preliminary I
Slide 20: Tablets and PC profit pools
Tablets PCs: Tablets: ~(7%) ~30% PC $30bn $26bn FY12 Dell Std Value: ~(9%) ~4% Total $5bn $21bn Dell’s Source: 1Note: 17Profit profit / weakness strength Prem: CAGR $38bn profit Represents FY17 CAGR build-to-order CAGR $4bn expected pool BCG $8bn pools $34bn pool represents shifting =to Dell’s $38bn
Slide 21: Core Dell revenue funds New Dell transformation
Revenue Provides Cash Product –Sales Cloud The “Core “New Dell’s ¹Source: 18 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 fueled critical “New asignif
Slide 22: Trading multiples and revenue mix
Trading Revenue “New Total 34% 66% 23% 77% FY08 FY13 Dell Source: 21Note: 3Wyse 19 Acquisitions NTM FY13 has revenue Fiscal $61bn $57bn Dell” represents NTM Company multiples suffered mix“Core year 6.4x 3.3x3 trend NTM2 metrics include severe ended 12.9x pressured filings; next Dell” 6.6x3 EV based
Slide 23: Agenda
Transactionofofprocess Agenda Perspectives Evolution Evaluation 20 on financial strategic Dell3today forecasts alternatives 13 21 29
Slide 24: Continued deterioration of key financial metrics
Continued Key $56.9 (8%) $62.1 Revenue $56.3 $56.5 Operating $3.7 (28%) $5.1 $2.4 Final EPS1 $0.84 $1.25 $1.58 (25%) $2.10 Free FY12 $3.0 (43%) $5.2 % 2¹Source: 21 Excludes Based mgn: metrics cash FY14 FY13 Company 8.2% 8.4% onflow income1 deterioration one-time $0.2bn Board ($5.2% 6.4% billions, fi
Slide 25: Forecasting quarterly results vs. plan
Forecasting Quarterly FY12 EPS Revenue Results Board Q1 FY14 FY13 Q2 Q3 Q4 Revenue: (Apr) EPS: 1Source: 22Excludes (Apr) (Jul) (Oct) (Jan) EPS Dell plan vs. Company Dell revenue has one-time hasmissed has been filings; and missed $250mm poor 4EPS of Dell 7the inperformance out alast gain challenging
Slide 26: Internal forecasts since July 2012
3Internal July Scenario 9/21 Preliminary Final $63.0 FY13 1.70 (23%) 4.0 57.5 $2.27 $5.2 (9% (1%) 56.9 Revenue FY14 1.58 Op. $66.0 Time $2.50 EPS $5.6 (26%) 1.84 (25%) 4.2 (9%) 59.9 ~4 (14%) 1.59 (12%) 3.7 (7%) 56.0 ~2 (21%) 1.25² (19%) 3.0 1% 56.5 Cumulative ²¹Source: 23 Excludes Based weeks mo. In
Slide 27: BCG scope and cost savings
BCG During ??Full Scope ??Future ??Prospects ??Strategy –??Financial 1Source: 24 Two Categories Savings Based retained of cost access the BCG on of BCG assumed of fall savings Dell the cases for of each to towork of PC costs Dell’s Dell management’s evaluate to 2012, business business realization ph
Slide 28: BCG base case assumptions
external Combined Lower BCG Organizational Simplification Market Source: 25 validated identified revenue shift performance BCG market market toand de-layering value business and opportunities dynamics revenue labor operating tracking segments performance and oftransport for PCs BCG’s income / tablet
Slide 29: Dell operating income vs. Street
Dell Operating Street Final LQA $2.0 $4.0 $5.0 $6.0 $3.9 $3.6 $3.7 $4.5 $2.4 $2.5 $3.0 $5.7 $5.5 FY13 BCG 1Source: 261Qsignificantly $3.9 $3.4 $3.3 $4.0 $3.8 FY14 1Q 75% 25% Base FY14 – consensus FY17E Dell FY141 $3.9 $3.4 $2.9 $3.2 $3.0 income Case Case: Case Case: operating Board FY15 management,
Slide 30: Q1 FY14 results and key observations
Margin Non-GAAP Operating Diluted Free Consensus $13.5 3.0 0.8 $0.35 V % Q1 $14.4 3.2 1.0 $0.43 ($0.4) Key Revenue ESG BRIC Gross Trailing 1Source: 27 ariance Free Variance growth margin FY14 FY13 (2.8%) (28.2%) (8.5%) (41.6%) observations cash revenue 4.3% (39.1%) (2.4%) (50.9%) profit margin and N
Slide 31: Agenda
Transactionofofprocess Agenda Perspectives Evolution Evaluation 28 on financial strategic Dell3today forecasts alternatives 13 21 29
Slide 32: Strategic alternatives: recap, dividend and separation
Full range Enhanced Levered Regular Delivers Benefits DFS EUC Separation Provides Utilize Dividend Remove Potentially Ability Significantly Challenges Weak Constrained Diminishing Limited Potential Significant 29 public cash todividend cash recap revenue upfront opportunity competitive payers focus
Slide 33: Strategic alternatives: transformative acquisitions and sale
Full Transformative Sale Grow Benefits Opportunity Immediate De-risks Limited Challenges -High We 30 Transaction Views thoroughly range tointerloper Enterprise, strategic validated number standalone of value to strategic size improve evaluated acquisitions risk of creation Software, by likely target
Slide 34: Icahn/Southeastern proposal overview
Summary Overview Shareholders $12.00 Illustrative Total $8.8bn $3.3bn $5.2bn 12 Key Draft Proposed Counterparty Arrangements Commitment Tax Management 2¹Icahn Merchant, 31 $9.2bn Icahn’s directors implications Special net of /and Southeastern cash in Dell net bridge definitive of funding nominations
Slide 35: Leveraged recap elevates risk
Leveraged Elevated Elevates FY14E Significantly Dell Poor Highly Deteriorating Dramatically 32 will public-market levered operating Dell’s risks remain recap weaker elevated cash due risk largely considerations income to flow equity profile financial leverage risk metrics a has PC story profile decl
Slide 36: Near-term liquidity shortfalls
Cash $13.4 $0.3 $1.7 $0.5 $1.4 $17.3 Assumes $12.00 Near-term Liquidity Shortfalls 1H Adjustments Variance Incremental Icahn Adjusted $3.9bn $9.35 ~$8.50 Significant 21Note: 33 Assumes Icahn/Southeastern cash available All /dividend Southeastern dividend potential generation to cash funding values d
Slide 37: Illustrative recap value per share
Multiple Illustrative Icahn/ Shares Value Stub Pre-transaction Add: -Pro 80% 12% + $7.2 ~ $13.65 87% 1.8 38% $11.1 Highly Negative After Break Final Memo: 4.1x 4.2x Given 3.3x Significant 321Note: 34 $12.00 Final LQA Unaffected $8.50 2.6 $6.0 0.4 forma 5.1x 5.4x equity Pro FY14 xadjusting The $2.7 p
Slide 38: Leveraged recap precedents and stock performance
Highfields, shareholders, Stock 1/1/07 $0 $15 $30 $45 1/29/07: Clear S&P 7/30/08: Offer Similarities (71%) Founder Declining Leverage Small Source: 35 500 price: Channel price float 4/14/08 Company The /Clear levels sponsor growth and holder performance to $36.00 acquisition Clear Dell highlights Co
Slide 39: Dramatic underperformance of recap targets
Dramatic Target Dawson Acquirer Charles Declining TGC Cablevision VaxGen Dynegy Announce 08/13/10 Price LBO Median Mean 1-year 2-year (13.7%) (17.4%) (90.0%) ISS (59.9%) (54.1%) For Average Source: Note: 36 For rec. Industries performance Includes stock 10.7% NA NA FactSet, and (42.9%) (58.6%) Geoph
Slide 40: Conclusion: comprehensive process delivers superior value
Conclusion: All Comprehensive Shareholder and 37 cash delivers offerfriendly transaction superior at range a significant, process value ofdelivers alternatives and and certain certainty highest termsevaluated premium tovalue ensure forvalue shareholders was maximized Highest price available followin
Slide 41: Forward-looking statements
Forward-looking Any statements safe occurrence for transaction; attention business Actual anticipate obligation Additional 2013, 10 38 Q the harbor statements and which proposed results generally. from 8that to containing factors of Kprovisions (3) was do filed any may subsequent the the in so. merg
Slide 42: Additional information and where to find it
Additional In statement or Investors Company’s The investor_relations@dell.com. Company the amended 39 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