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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.



Source: The Wall Street Journal, July 11, 2013 article and video


MANAGEMENT  |  July 11, 2013, 7:59 p.m. ET

Building a Better Dell: More R&D, Less PCs

Silver Lake is betting it and company founder can restore the computing icon to its former luster.


If the Dell buyout closes, what might a new Dell look like? Keep an eye on private-equity fund Silver Lake, which says it is just as savvy in helping fix companies as in buying them. Shira Ovide reports on digits. (Photo: AP)

Private-equity firm Silver Lake Partners may soon be wagering $1.4 billion on a bet that many analysts think is sheer folly: To restore computing icon Dell Inc. to its former luster.

Silver Lake executives and founder Michael Dell have been discussing turnaround plans for months, according to people close to the group. One person familiar with the investor group's thinking said they are "taking Michael's strategy, and cubing it."

So what exactly is that strategy? From what little information is available, it likely will be a quicker and more ruthless implementation of what Mr. Dell has unsuccessfully put forth as chief executive so far: Boosting sales of back-office computing networks, storage to keep and analyze data, software to protect information on employees' smartphones from theft, and services to keep companies' technologies running smoothly together.

The group also plans to expand the company's roughly $1.1 billion in annual spending on new product research-and-development, where it now lags behind other tech companies, a person familiar with the buyout group said. Dell's investment in research, development and engineering was 2% of sales in the most recent fiscal year. At EMC Corp. and Hewlett-Packard Co., R&D took 11.8% and 2.8% of revenue, respectively.

It also wants to fix a sales force that Dell insiders concede doesn't now do an adequate job selling anything other than PCs and servers.


Another of the investment group's likely first big decisions: a strategy for Android, Google Inc.'s fast-growing software for mobile gadgets.

It isn't clear how Silver Lake and Mr. Dell will implement their plans, nor whether they will need to significantly shrink Dell's 110,000-person workforce to afford to invest in growth areas. Mr. Dell has said the $57 billion in annual revenue company's market share in fast-growing software and service products is less than 1%. Roughly two-thirds of Dell's revenue is tied to selling PCs.

Lessons gleaned from past investments in Skype and others suggest once Silver Lake fixes on a strategy, it moves quickly and aggressively but not always successfully.

The buyout group has been dismissive of taking a slash-and-burn approach at Dell if it completes the $24.4 billion deal, according to people familiar with the matter.

Dell executives previously have identified $3.3 billion in potential cost cuts, but didn't specify how to implement them. Dell's smaller scale recent cost-cutting efforts have been more than offset by increased spending, Dell directors have said.

"The cleanup is going to be messy," said Brian Marshall, an analyst with researcher ISI Group. "What they have to do in my opinion is take a look at their cost structure…They could be a lot smaller."

Silver Lake, which was started in 1999 and manages more than $23 billion in investor capital and assets, acquired majority ownership of Skype in 2009 from eBay Inc. Silver Lake quickly replaced 29 of the top 30 Skype senior executives.

At Skype, Silver Lake recruited well-regarded Cisco Systems Inc. executive Tony Bates as chief executive, people familiar with the matter said, and pushed for new revenue, such as a version for business videoconferencing and a kind of "click to call" advertising that gave users a prompt to place a Skype call to a business.

Silver Lake doubled the size of Skype's product development team in less than two years, the company said, and resolved a dispute with the firm's founders that had threatened the company. Early on, Silver Lake's team micromanaged Skype management to the point where it was tough to complete projects, said a former Skype manager. A person familiar with Silver Lake's position said Skype management set the terms of the stock options, and that those terms were made clear to all employees.

About 18 months after Silver Lake bought 70% of Skype, the firm agreed to sell it to Microsoft Corp. for $8.5 billion, or a roughly $5 billion windfall for Silver Lake and its investment partners.

Among its stumbles is telecom-gear company Avaya Inc., which Silver Lake and others bought in 2007. It has struggled with slipping sales and an onerous debt load. Silver Lake said its investments since 2007 have an aggregate 20% annual growth rate.

People familiar with Silver Lake's approach acknowledge it will be tricky to get Dell on solid footing. Many of the big decisions will have immediate repercussions. Jumping on Android, for instance, could affect its relationship with Microsoft, which is extending a $2 billion loan for the buyout.

Mr. Dell is slated to control roughly 76% of Dell's stock, and it is unclear how the two sides will resolve any disagreements.

Blackstone Group LP and two other private-equity firms believed the potential reward of remodeling Dell wasn't worth the risk, according to people briefed on those firms' discussions about Dell.

A person familiar with Blackstone decision said executives there believed Dell's newer businesses selling software and service to corporations, the likely heart of the company' growth strategy, are too weak to develop into lasting businesses soon.

Odds have significantly improved for passage next week of the $24.4 billion buyout, but it isn't done yet. Billionaire investor Carl Icahn on Thursday said he plans to raise the potential price of an alternative transaction he has pushed for Dell to stay public.

Write to Shira Ovide at

 A version of this article appeared July 12, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Building A Better Dell May Take More R&D, Less PCs.

Copyright ©2013 Dow Jones & Company, Inc. All Rights Reserved


This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

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