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 L L S P E C I A L C O M M I T T E E I N V E S T O R P R E S E N T A T I O N June 2013
Slide 4: Presenters
Presentation Chairman Proxy solicitor & to CEOBoston Dell’s of The investors Consulting Duberstein Alex Group Mandl Group Management (Chairman), Special Committee consultant FormerDebevoise President, 1 & COO Plimpton & CFOLLP of AT&T Morris,Laura Nichols, Conigliaro, Arsht &Retired TunnellPartner L
Slide 5: Agenda
Agenda Transaction process 3 Perspectives on Dell today Overview of financial forecasts 21 12 Evaluation of strategic alternatives 29 2
Slide 6: Process: Special Committee
Process Boeing Energy of Committee Corp. financial Goldman and EVP Company led and Warner Former by Sachs of strategic experienced Santa Chairman, Lambert Americas President, Fe advisors Snyder The and Equity Governance COO 3Special independent Investment & Research CFO Committee Committee, of banke
Slide 7: Directors seeking re-election
Ross for Computers National GrayLoefferler, Other Artedona Adobe seeking Economic Perot experience Other re-election Infrastructure AG Jr. and experience Other Growth Director Hewlett- LLC CEO, as experience Chairman, aIndependent Chairman, Advisory director Philips’ Key Packard product Owner Compon
Slide 8: Going private maximized value
Going private maximized Shifts delivers all business highest and value transaction for Dell’srisks shareholders to buyer All group cash Avoids offer at high a significant, risk of a levered certainrecap premium and delivers Comprehensive superior range value of andalternatives certainty 5evaluated S
Slide 9: Transaction price and go-shop
Transaction price ago-shop cash challenges business newtransaction increases letter process to 6the on highlights 1 Premiums buyer and June at Blackstone significant $4 18th, group billion $13.65 based each terminated of premium per outlining on additional share unaffected participation given inalte
Slide 10: Rigorous, independent process
Process independent management with majority range Michael any ofwas Dell, strategic of bidder the rigorous, financial and management unaffiliated Special diligence and financial advisor objective Committee’s materials shares1 andtoalternatives related and review Established competitive Icahn consen
Slide 11: Progression of going-private process
(CHART) formed 2/5/13 (Pre-GS possible Icahn / Go-shop Southeastern Late report)1 going-private 5/9/13 Octbegins BCG $9.64 Icahn 6/18/13 hired transaction 12/4/12 1/11/13 / Southeastern 3/22/13 Icahn Sponsor (Unaffected)2 were submits Active submit first B declines letter go-shop published letter $1
Slide 12: Consensus estimates deteriorating
(CHART) consensus Aug Dec Jan .estimates despite Feb Mar deteriorating 2/5/13 Oct Sept Transaction Nov financial Aprannounced (Current outlook estimate) 9%(Current) ^ sinceAug Aug Progression Dec 2012: Jan(50%) Feb of FY14 Mar 5/16/13 Oct Street Sept (Q1consensus Nov FY14Apr earnings) EPS Mayestimat
Slide 13: Offer premium and multiples
(CHART) multiple consensus (1/11/13) (Final FY14 since before $13.65/share estimates Board June rumors Case): 2012 2 Based represents ofSignificantly 5.4x3 a possible on last Offer 5.4x quarter going-private multiple exceeds Finalannualized FY14 Dell’s (Lasttransaction Board quarter multiples 1QCase
Slide 14: Agenda
Agenda Transaction process 3 Perspectives on Dell today 12 Overview of financial forecasts 21 Evaluation of strategic alternatives 29 11
Slide 15: Transition from Core Dell to New Dell
Transition networking, Strong growth brand Invest tostorage, “New Continue organically Dell” ESG-related cash depends & generation inorganically peripherals, on “Core Mitigate Leverage Dell” services volatility performance footprint andFund software Integrated 12 & Pull-through 1 as “Core ofoffering
Slide 16: Business segment overview
(CHART) business peripherals; Segment over integration fundamentals $3,093 55%$8,920 services, level of (CHART) and 3margin Q1 ESG operating $2,109 other FY14 including includes Large Services competitive $14,4175 Revenue income portion support servers, accounts ($85) before ($mm) risks ofand networ
Slide 17: Support and Deployment pressures
Support and Deployment pressures Support Deployment is tiedand to unit Deployment –sales an important in both as Cloud EUC driver providers andofESG Dell’sIn typically profitability EUC, unit manage sales 14 Support equipment growthand is under in-house Deployment secular with pressure is less anapp
Slide 18: New Dell faces competitive risks
“New FY14 and sales2 software 5%3 Wyse 1Dell” (CHART) Acquisitions and 2 Based faces services (IDC: integration oninclude latest with 2012) ~1% reported AppAssure, and (Gartner: share competitive fiscal Weak 2012) Boomi, year position risks (IDC: 3 Clerity, Dell 15 2012) inR&D Source: keyCompellent,
Slide 19: PC market fundamentals deteriorating
(CHART) competition 7.4% declined 2012-16E 8.4% toCAGR PC 11.1% 4.3% intensifying market 1.7% (~1.5%)1 in FY13 fundamentals Gartner: PCfrom market 0.5% 15.0% are outlook Morgan deteriorating in FY08 continues Stanley2: Emerging rapidly to(1.9%) deteriorate threats 16 Source: Barclays: from 38%IDC, n
Slide 20: PC profit pools shifting
PC profit each Dell strength strength segment Dell pools weakness Dell (Premium: shifting weakness FY12 to$800+; segments PC FY17 profit Standard: Dell’s where poolsbuild-to-order Dell $500-$799; shifting is weak to lower Value: Source: model margin <$500) less BCGsuited value 17 Note: Tablets segme
Slide 21: Transformation is in early stages
“Core“New drives integration threat year party software The Dell” “Newspeed Dell” into and Dell” and solutions “New of operating peripherals as transformation a Dell” majority is income inclosely very revenue of is is Support early linked critical projected instages FY13 “Core and “Core by Sales Dep
Slide 22: Trading multiples pressured
Trading Force10, and continuing software enterprise multiples InSiteOne, transition asvalue of pressured FY13; as Kace, Total of “Core 1/11/13 revenue Make, by dependence Dell” Ocarina, and NTM2includes Street EV Perot, on consensus /PC mobility, EBITDA Quest, revenue estimates RNA desktop, NTM2 Rev
Slide 23: Agenda
Agenda Transaction process Perspectives on Dell today Evolution of financial forecasts 21 3 12 Evaluation of strategic alternatives 29 20
Slide 24: Continued deterioration of financial performance
Freerate (28%) tax cash %and mgn: flow 1,740mm (CHART) 8.2% 6.4% weighted (43%) Source: average % Company mgn:shares 8.4%filings 5.2% outstanding 1Continued Excludes Finaldeterioration one-time FY14 Board $250mm ofCase Dell’s gain LQAfinancial in1Q Q4FY14 FY13 performance Final and $70mm FY14 21Boar
Slide 25: Forecasting has been poor
Forecasting 1has settlements Quarterly been poor revenue in a challenging and EPS performance environmentRevenue: 22 Source: DellCompany has missed filings; 7 outDell of the management last 9 quarters planvs. 1 Excludes Board plan one-time EPS: Dell $250mm has missed gain in 4 of Q4the FY13 last and
Slide 26: Internal forecasts revised downwards
Internal after (19%) $250mm Plan 9/21 approving (21%) forecasts gain Case ~2 inPreliminary plan, mo. Q4 have FY13 56.5 Dell been1.252 significantly and FY14 steadily $70mm FY14 Board revised EPS gain missed CaseOp. in downwards (1/18/13) Q2 Inc. FY13 and($bn) revised Final $2.27 from Revenue FY14 ve
Slide 27: BCG retained to evaluate business options
BCG retained Company management’s $3.3bn implemented – Categories information productivity to aspirational evaluate ofScope costs business cost cost have oftakeout savings BCG been andwork options identified target included: ofDuring $3.3bn1 for 25% Future the–case fall Two ofofthe but cost 2012, PC
Slide 28: BCG validated base case forecast
BCGbusiness “base Dell Simplification validated case” forecast segments and business labor for growing Dell, performance and transport grounded organically challenges savings in external in from line Market market with building-to-stock the shift dynamics market to value Lower Combined Market segmen
Slide 29: Dell significantly underperforming
Dell significantly (0.2%) FY13 – FY17E underperforming CAGR BCGBCG75%forecasts Case: 9.3% 26 Source: $3.9 $3.9Dell 1 Operating management, income BCG($ forecasts, in billions)Wall BCG Street Baseestimates Case: (6.2%) as of $3.9 6/21/13 1 1Q FY14 operating income of $590mm annualized (CHART) BCG 25%
Slide 30: Margin pressure continues in Q1 FY14
Margin financing YoY, respectively pressure receivables trend Gross Non-GAAP continues margin percentage inQ1 Q1FY14 FY14atresults 27 lowest Source: ($point in Dell billions, since management, Q3 except FY11perTrailing FactSet share data) 12 Note: months Key Dell observations free fiscal cash year f
Slide 31: Agenda
Agenda Transaction process Perspectives on Dell today Evolution of financial forecasts 21 3 12 Evaluation of strategic alternatives 29 28
Slide 32: Full range of strategic alternatives considered
Full range DFS Provides focus long-term required EUC on and core opportunity secular of Utilize high strategic business pressure complexity cashtoalternatives vs. flow share financing from toupside increase PCconsidered industry Potential Significantly dividend Significant 29 competitive Dividend Be
Slide 33: Strategic alternatives considered (cont'd)
Full assets acquisitions key range Sale ofGrow strategic to strategic Enterprise, alternatives Immediate Software, considered value and creation Services (cont’d)De-risks businesses 30 Benefits standalone inChallenges targeted plan areas Transaction We Opportunity thoroughly sizeevaluated to likely
Slide 34: Summary of Icahn proposed tender offer
Summary provide Jonathan Howard all own meeting shares ~13% necessary Silver toChristodoro, tender ofimplement ofIcahn total and except working June shares David proposed Harry Icahn 18th Total Willmott capital Debes, letter and net tender Southeastern and 31 funding Overview Carl Key liquidity offe
Slide 35: Leveraged recap considerations
Leveraged profile Plan company Potential FY14E (~2/3 recap adverse operating ofconsiderations revenues) employee, income Dramatically 32 has vendor Elevated declined and elevated risks customer 46%due since risktoperception profile leverage the July andPoor Significantly uncertainty public-market fo
Slide 36: Liquidity deficiencies
Liquidity diluted potential share cash shares funding deficiencies distribution outstanding shortfall in if Icahn 87.5% Assumes of 1,788 June of shares Icahn funding 18th letter concept elect from 33 tender uncommitted would Note: All onlyvalues fund bridge shown the loan equivalent as($5.2bn), $ in
Slide 37: Illustrative valuation and break-even multiples
34achieve $3,254mm, unaffected to adjusting Multiple for $13.65 before pro expansion liquidity forma transaction valueconstraints, for required parity lossrumors of inisDFS the unrealistic ~40% face Break-even income of ofthe deteriorating Illustrative ofpackage $323mm EV / EBITDA value aggregate fi
Slide 38: Icahn concepts incomplete
Icahn cap $13.65 diligence provide but actions concepts then / ~58% and in be any sold incomplete over cash, Southeastern reconciled? of of72mm shares) many the each key shares of months, May The provisions these concepts Special (~50% 9th alternatives Icahn letter: lack and of Committee hasshares $
Slide 39: Highfields, Clear Channel stub equity precedent
Highfields, shareholders, levered Offer Declining price: stub growth holder $36.00 equity Clearand of 36 1/29/07: Channel anegative Source: 5% stake Clear offered Company industry inChannel Clear a public trends filings, Channel, discloses equity Leverage FactSet, opposed stub the as levels proposed
Slide 40: Voted-down transactions underperformance
Dramatic1-year Average underperformance and 2-year declines for voted of down 17% and transactions 54%, respectively 37 Target stock price performance for voted down transactions (2005—2012) Source: FactSet, ISS Note: Includes transactions 2005 – 2012, U.S. target only
Slide 41: Conclusion: value was maximized
Conclusion: was maximized transaction Highest delivers price available highestfollowing value for exhaustive shareholders process 38 AllShifts cash offer all business at a significant, and transaction certain risks premium to buyer Comprehensive group Avoids range highofrisk alternatives of a levere
Slide 42: Forward-looking statements
Forward-looking the statements provisions of proposed transaction; attention business date disclaim materially 2013, any proposed hereof. under event, any generally. from merger from of within (3) We the obligation merger, change the the the those heading anticipate Private or statements the Company
Slide 43: Additional information
Additional proxy with copy http://content.dell.com/us/en/corp/investor-financial-reporting.aspx investor_relations@dell.com. from Company definitive ended the stockholders ofcard, February documents SEC proxy ininformation on connection inMay 1, connection statement 2013 offiled 31, theand 2013. (as