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: Explanatory Note
Explanatory Note This amendment to Schedule 14A amends and restates the Dell Supplemental Investor Materials filed as definitive additional materials with the Securities and Exchange Commission on July 5, 2013 to include a non-GAAP financial measures reconciliation table as Appendix A and certain ot
Slide 3: Dell Supplemental Investor Materials July 2013
Dell Supplemental Investor Materials July 2013
Slide 4: Agenda
Agenda Business perspectives 2 Valuation perspectives 7 Appendix 13 1
Slide 5: Trends in Dell's PC business put the transformation at risk
Trends in Dell’s PC business put the transformation at risk Dell remains largely a PC business 1 Two thirds of Dell’s revenue is driven by PCs Support and Deployment services, which are largely PC-driven, represent a majority of consolidated operating income Cash flow that has fueled Enterprise acqu
Slide 6: Recent industry research forecasts continued PC deterioration
Recent industry research forecasts continued PC deterioration PC market outlook continues to show a secular decline On June 28, 2013, Morgan Stanley lowered its 2013 PC unit forecast from -5% to -10% “…the lack of catalyst until C4Q will likely drive disappointing near-term results” “Our tablet unit
Slide 7: PC exposure will likely continue to weigh on Dell's share price
PC exposure will likely continue to weigh on Dell’s share price, regardless of the Enterprise trajectory $40 Dell’s NTM P/E 20.0x multiple peaked at Dell NTM P/E multiple $37 15.4x in June ‘08 15.0x $30 $28 10.0x $20 5.0x $10 0.0x FY08 FY13 Source: Company filings; FactSet Note: Market data from 1/1
Slide 8: Returns for Dell's acquisition program remain uncertain
Returns for Dell’s acquisition program remain uncertain Significant future integration and investment still required Over $13bn spent on acquisitions since FY08 to transform Dell into a solutions-oriented business Sales force integration benefits and cross-selling synergies taking longer to achieve
Slide 9: Agenda
Agenda Business perspectives 2 Valuation perspectives 7 Appendix 13 6
Slide 10: Icahn / Southeastern's sum-of-the-parts valuation implies unrealistic multiples
Icahn / Southeastern’s sum-of-the-parts valuation implies unrealistic multiples Icahn / Southeastern Implied value per share FV / EBITDA Commentary n Dell's consolidated unaffected multiplewas 3.3x, which includes higher $2.00 growth ESG businesses EUC 3.0x n PC-centric peers' median EBITDA multiple
Slide 11: BCG "75% Case" is based on an aspirational cost savings target
BCG “75% Case” is based on an aspirational cost savings target, not concrete initiatives Forecasted operating income ($ in billions) Commentary BCG evaluated the impact if management achieved 75% of the aspirational cost savings of $3.3bn Implies an unrealistic Many of the categories of cost consoli
Slide 12: Modest potential sponsor returns depending on the case
Modest potential sponsor returns depending on the case 1 IRRs using BCG 75% Case are unrealistic 2 Sub-20% IRR using Wall Street consensus Highlights why Michael Dell had to subsidize Silver Lake’s returns by rolling his shares at a lower price ($13.36 vs. $13.65) 3 other sponsors passed on the tran
Slide 13: Substantial downside risk to Dell shareholders if transaction rejected
Substantial downside risk to Dell shareholders if transaction rejected $13.65 represents substantial premium to implied Dell share prices using current HP P/E multiples 1 Assuming HP’s CY13E P/E $13.65 57% premium 97% premium 133% premium $8.67 $6.92 $5.85 Silver Lake / Final FY14 Wall Street LQA Mi
Slide 14: Absent transaction, where would the analyst price targets be?
Absent transaction, where would the analyst price targets be? 1 Current earnings Pre-LBO leak Wall Street estimates with price targets estimates Broker Price target FY14E EPS Implied P/E ratio FY14E EPS (May 2013) Argus Research $14.00 $1.90 7.4x $1.13 Baird 11.00 1.76 6.3x 0.91 BMO 11.00 1.57 7.0x
Slide 15: Agenda
Agenda Business perspectives 2 Valuation perspectives 7 Appendix 13 12
Slide 16: HP's recent performance has been superior to Dell's
HP’s recent performance has been superior to Dell’s Q1 FY14 (May) QoQ results Q2 FY13 (April) QoQ results Q1 FY14 Q4 FY13 QoQ var. Q2 FY13 Q1 FY13 QoQ var. Revenue $14,074 $14,314 (2%) Revenue $27,582 $28,359 (3%) 1 1 Memo: PC revenue $6,891 $6,870 0% Memo: PC revenue $7,584 $8,204 (8%) Non-GAAP ope
Slide 17: Appendix A: Reconciliation to non-GAAP financials
Appendix A: Reconciliation to non-GAAP financials Reconciliation to non-GAAP financials – Q4 FY13 and Q1 FY14 Reconciliation to non-GAAP operating income Q4 FY13 Q1 FY14 GAAP operating income $698 $226 Amortization of intangibles 188 196 Severance and facility actions and acquisition related costs 6
Slide 18: Appendix A: Reconciliation to non-GAAP financials (cont'd)
Appendix A: Reconciliation to non-GAAP financials (cont’d) There are limitations to the use of the non-GAAP financial measures presented in this presentation. Dell’s non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companie
Slide 19: Appendix A: Reconciliation to non-GAAP financials (cont'd)
Appendix A: Reconciliation to non-GAAP financials (cont’d) The following is a summary of the costs and other items excluded from the most comparable GAAP financial measures to calculate non-GAAP financial measures: • Severance and Facility Actions and Acquisition-related Costs - Severance and facili
Slide 20: Appendix A: Reconciliation to non-GAAP financials (cont'd)
Appendix A: Reconciliation to non-GAAP financials (cont’d) • Other Items - Dell also adjusts GAAPfinancial results for expenses associated with Dell's proposed merger. These expenses consist of professional fees incurred by Dell in connection with Dell's proposed merger as well as the reimbursement
Slide 21: Forward-looking statements
Forward-looking statements Any statements in these materials about prospective performance and plans for the Company, the expected timing of the completion of the proposed merger and the ability to complete the proposed merger, and other statements containing the words “estimates,” “believes,” “anti
Slide 22: Additional information and where to find it
Additional information and where to find It In connection with the proposed merger transaction, the Company filed with the SEC a definitive proxy statement and other relevant documents, including a form of proxy card, on May 31, 2013. The definitive proxy statement and a form of proxy have been mail