UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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SCHEDULE 14A

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Dell Inc.

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Dell Supplemental Investor Materials

July 2013

Agenda

1

Business perspectives

2

Valuation perspectives

7

Appendix

13

Trends in Dell’s PC business put the transformation at risk

Dell remains largely a PC business

Two thirds of Dell’s revenue is driven by PCs

1

Support and Deployment services, which are largely PC-driven, represent a majority of

consolidated operating income

Cash flow that has fueled Enterprise acquisitions is deteriorating

PC business is in secular decline

PC unit forecasts revised downward and sector valuations declining

Dell does not have a meaningful tablet business and lacks a smartphone offering

Transition to enterprise is risky, expensive and a multi-year process

Dell has completed $13bn of acquisitions

Product and sales force integration remains a work in progress

Growth of Cloud represents a substantial threat

Proposed transaction shifts all business risks to the buyer

Source: BCG

Note: PC business, or PCs, representative of EUC segment

¹

Includes desktop, mobility and third-party software and peripherals revenue in FY13

2

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 growth rate of 55% in 2013 is unchanged from our

prior estimate”

38% decrease in IDC '16E shipment forecasts since June 2012

Recent industry research forecasts continued PC deterioration

3

Source: IDC, Gartner, Morgan Stanley, Barclays

1

Represents 2012-15E CAGR

2

Based on preliminary IDC estimates

3

Based on IDC data

PCs

IDC estimates

2005-11A CAGR

Historical: 9.7%

2012-16E

CAGR

7.4%

8.4%

4.3%

1.7%

Other sources: 2012-16E CAGR

(~1.5%)

PC market outlook continues to show a secular decline

250

300

350

400

450

500

550

'09

'10

'11

'12

'13

'14

'15

'16

Jun '12

Sep '12

Dec '12

Mar '13

Jun '13

2

1

Gartner (Jun '13):   0.5%

Morgan Stanley

(Jun '13): (5.3%)

Barclays (Mar '13): (6.7%)

PC exposure will likely continue to weigh on Dell’s share price,

regardless of the Enterprise trajectory

Source: Company filings; FactSet

Note: Market data from 1/11/08 to 1/11/13

1

PC revenue includes desktops and notebooks

2

Unaffected multiple shown at stock price of $10.88 as of 1/11/13 before transaction rumors

4

Dell NTM P/E multiple

$37

$28

$10

$20

$30

$40

FY08

FY13

0.0x

5.0x

10.0x

15.0x

20.0x

Dell’s NTM P/E

multiple peaked at

15.4x

in June ‘08

Returns for Dell’s acquisition program remain uncertain

Significant future integration and investment still required

5

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

A number of acquisitions have required additional investments to

reposition for growth or new business opportunities

Current returns are lagging the 15% IRR target by the Company due, in

part, to required additional investments

As the environment continues to evolve rapidly, additional investments and

acquisitions are likely to be required to complete the transformation

Agenda

6

Valuation perspectives

7

Appendix

13

Business perspectives

2

Icahn / Southeastern’s sum-of-the-parts valuation implies

unrealistic multiples

How can Dell be worth 12.0x EBITDA when its closest peer, HP, trades at 4.6x EBITDA?

EUC

ESG

Services

Cost

opportunity

DFS

Net cash

Software,

other

Total

Icahn / Southeastern

value per share

Implied

FV / EBITDA

$2.00

3.0x

$5.57

15.4x

$6.78

7.9x

$1.66

6.0x

$2.43

$3.31

$0.60

$22.34

12.0x

Source: Icahn / Southeastern presentation to ISS (6/24/13), Company filings

Note: Metrics based on LQA Q1 FY14 figures; Net cash based on cash and debt as of Q1 FY14; PC-centric peers include Acer, ASUS and Lenovo

Commentary

7

n

Dell's

consolidated

unaffected

multiple

was

3.3x,

which

includes

higher

growth

ESG

businesses

n

PC-centric

peers'

median

EBITDA

multiples

are

down

over

20%

since

unaffected

date

with

Dell

business

underperforming

vs.

peers

n

How

can

Dell's

Enterprise

business

be

valued

at

more

than

double

software-centric

peers

like

Microsoft

(7x)

and

purer-plays

positioned

for

next-gen infrastructure like EMC (7x)

n

Discounted multiple due to heavy profit contribution from servers, which

are under increasing competitive pressure

n

Nearly

twice

the

multiple

of

pure

play

CSC

trading

at

4x

EBITDA

n

Dell

Services

much

more

PC

driven

than

peers,

which

should

drive

a

discount to value

n

$500mm

in

annual

cost

savings

are

arbitrary

and

unidentified

n

Significant portion of cost savings are likely to be reinvested in business to

protect margins and competitive position

n

How

can

cost

savings

be

valued

at

a

multiple

that

is

nearly

double

Dell's

consolidated unaffected multiple of 3.3x?

n

Overvalues

segment

reporting

income

by

not

stripping

out

~$250mm

in

DFS income per Icahn / Southeastern May 9th letter

n

Majority of cash flow generated in foreign jurisdictions

BCG “75% Case”

is based on an aspirational cost savings target,

not

concrete initiatives

Source: Dell management estimates, BCG estimates, Wall Street estimates as of 6/28/13

1

Q1 FY14 operating income of $590mm annualized

2

Based on Dell’s Q1 FY14 consolidated operating margin

Implies an unrealistic

consolidated

operating margin of

10% vs. 4% today

BCG evaluated the impact if

management achieved 75% of the

aspirational cost savings of $3.3bn

Many of the categories of cost

savings were not specifically

identified

Significant portion (~$1.5bn of

$3.3bn) is already embedded in

Final FY14 Board Case

Significant portion of any cost

savings will need to be reinvested in

the business / would not drop to the

bottom line

BCG 75% Case FY15 forecast is

~50% higher than current Street

consensus

8

Given aggressive margin expansion assumptions, the BCG 75% Case

was deemed by the Special Committee to be aspirational at best

$3.0

$2.4

Forecasted operating income ($ in billions)

Commentary

$3.9

$3.6

$4.5

$5.7

$5.5

$2.5

$2.9

Final FY14 Board Case

LQA Q1 FY14

BCG 75% Case

Wall Street Consensus

$2.0

$3.0

$4.0

$5.0

$6.0

FY13E

FY14E

FY15E

FY16E

FY17E

2

1

Modest potential sponsor returns depending on the case

Source: Evercore Partners presentation to Board of Directors (2/4/13)

9

IRRs using BCG 75% Case are unrealistic

Sub-20% IRR using Wall Street consensus

1

2

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

transaction

after

extensive

due

diligence

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

10

Source: Company filings, FactSet; Market data as of 6/28/13

1

Assumes HP’s CY13E P/E multiple of 6.9x

$1.25

$1.00

$0.84

EPS:

97% premium

133% premium

$13.65

$8.67

$6.92

$5.85

Silver Lake /

Michael Dell

Final FY14

Board Case

Wall Street

Consensus

LQA

Q1 FY14

57% premium

1

Assuming HP’s CY13E P/E

Absent transaction, where would the analyst price targets be?

Current earnings

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

0.90

Brean Capital

12.00

1.74

6.9x

0.96

Credit Suisse

9.00

1.55

5.8x

1.05

Deutsche Bank

13.00

1.75

7.4x

1.00

FBN Securities

11.00

1.45

7.6x

0.90

Goldman Sachs

13.00

1.53

8.5x

1.12

Jefferies

10.00

1.60

6.3x

1.30

Monness, Crespi, Hardt & Co.

13.00

1.77

7.3x

1.06

Raymond James

13.00

1.60

8.1x

1.05

Sanford Bernstein

15.00

1.60

9.4x

1.01

Topeka

13.50

1.83

7.4x

1.13

UBS

9.75

1.75

5.6x

0.97

Mean

$12.02

$1.67

7.2x

$1.04

Median

$12.50

$1.67

7.4x

$1.03

11

% decline since

pre-LBO leak:

(38%)

(38%)

1

Source: Bloomberg, FactSet, Wall Street research

Note: Excludes Wall Street research that does not provide price targets pre-LBO leak or FY14E EPS estimates as of May 2013

    All estimates as of November 2012, post Dell’s Q3 FY13 earnings, except for Goldman Sachs (December 2012) and Credit Suisse (January 2013)

1

Pre-LBO leak Wall Street estimates with price targets

Agenda

Business perspectives

2

Valuation perspectives

7

12

Appendix

13

HP’s recent performance has been superior to Dell’s

Revenue

breakdown

–

Q1

FY14

(May)

Revenue

breakdown

–

Q2

FY13

(April)

Q2 FY13

Q1 FY13

QoQ var.

Revenue

$27,582

$28,359

(3%)

Memo: PC revenue

$7,584

$8,204

(8%)

Operating income

$2,370

$2,236

6%

% margin

8.6%

7.9%

EPS

$0.87

$0.82

6%

Source: Company filings, Wall Street research

Note: Dell and HP segments include internal revenue; HP revenue breakdown calculations exclude Corporate Investments and HP Financial Services

1

Excludes one-time $250mm gain from vendor settlements

Services

15%

Software

2%

EUC

(desktop

and

mobility)

48%

EUC S&P

14%

ESG

21%

Q1 FY14

Q4 FY13

QoQ var.

Revenue

$14,074

$14,314

(2%)

Memo: PC revenue

$6,891

$6,870

0%

Operating income

$590

$704

(16%)

% margin

4.2%

4.9%

EPS

$0.21

$0.29

(28%)

Enterprise

Services

22%

Software

3%

PSG

(desktop

and

mobility)

28%

Printers

22%

Enterprise

Group

25%

Q1 FY14 (May) QoQ results

Q2 FY13 (April) QoQ results

13

1

1

Forward-looking statements

14

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,” “anticipates,” “plans,” “expects,” “will,” and similar

expressions, other than historical facts, constitute forward-looking statements within the meaning of the safe

harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors or risks that could cause our

actual results to differ materially from the results we anticipate include, but are not limited to: (1) the occurrence of

any event, change or other circumstances that could give rise to the termination of the merger agreement; 

(2) the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed

merger or the failure to satisfy other conditions to completion of the proposed merger, including that a

governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; 

(3) the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters

delivered pursuant to the merger agreement; (4) risks related to disruption of management’s attention from the

Company’s ongoing business operations due to the transaction; and (5) the effect of the announcement of the

proposed merger on the Company’s relationships with its customers, operating results and business generally.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the

forward-looking statements included in these materials represent our views as of the date hereof. We anticipate

that subsequent events and developments will cause our views to change. However, while we may elect to update

these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

These forward-looking statements should not be relied upon as representing our views as of any date subsequent

to the date hereof. Additional factors that may cause results to differ materially from those described in the

forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended

February 1, 2013, which was filed with the SEC on March 12, 2013, under the heading “Item 1A—Risk Factors,”

and in subsequent reports on Forms 10-Q and 8-K filed with the SEC by the Company. 

Additional information and where to find It

15

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 mailed to the Company’s stockholders.  Stockholders are urged to read the proxy statement and any

other documents filed with the SEC in connection with the proposed merger or incorporated by reference in the proxy

statement because they contain important information about the proposed merger.

Investors will be able to obtain a free copy of documents filed with the SEC at the SEC’s website at http://www.sec.gov. In

addition, investors may obtain a free copy of the Company’s filings with the SEC from the Company’s website at

http://content.dell.com/us/en/corp/investor-financial-reporting.aspx or by directing a request to: Dell Inc. One Dell Way,

Round Rock, Texas 78682, Attn: Investor Relations, (512) 728-7800, investor_relations@dell.com.

The Company and its directors, executive officers and certain other members of management and employees of the

Company may be deemed “participants” in the solicitation of proxies from stockholders of the Company in favor of the

proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in

the solicitation of the stockholders of the Company in connection with the proposed merger, and their direct or indirect

interests, by security holdings or otherwise, which may be different from those of the Company’s stockholders generally, is

set forth in the definitive proxy statement and the other relevant documents filed with the SEC. You can find information

about the Company’s executive officers and directors in its Annual Report on Form 10-K for the fiscal year ended

February 1, 2013 (as amended with the filing of a Form 10-K/A on June 3, 2013 containing Part III information) and in its

definitive proxy statement filed with the SEC on Schedule 14A on May 24, 2012.