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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.



For the company's announcement of quarterly performance results and the full statement of Southeastern Asset Management reported in the article below, see


Source: The Wall Street Journal, August 15, 2013 article


EARNINGS  |  Updated August 15, 2013, 8:08 p.m. ET

Dell Profit Falls 72%; Sales Flat

Results Reflect Continued Decline of PC Market




Dell Inc. showed more evidence that it is giving up today's earnings for a payoff in the future, when the computer maker is likely to be in private hands.

The company on Thursday said net income for its fiscal second quarter dropped 72%, while revenue was essentially flat.

Dell is in the midst of selling itself to Chief Executive Michael Dell and private-equity firm Silver Lake in a deal valued at nearly $25 billion.

The company's results reflect a one-two punch of a sagging market for personal-computer sales and a deliberate strategy to sacrifice earnings for market share.

Dell executives have said that the company is cutting prices on PCs and server systems it sells to companies to land new customers that may buy more profitable software and support services down the road.

Sales in Dell's PC business fell 5%, less severe than the broader decline in that market. But the discounted PCs came at a cost: Operating income for the division selling PCs and related gear fell 71%.

The poor results bolster the case of Dell's directors, who say they decided to sell the company in part because of a string of weak results and executives' inability to anticipate revenue and earnings.

But deal opponents including investor Carl Icahn have said Dell is playing up its financial weaknesses to justify what they say is Mr. Dell's lowball offer for the company.

After a six-month saga, Dell's board two weeks ago approved a revised proposal from Mr. Dell and Silver Lake. Shareholders are slated to vote Sept. 12 on the new offer, which proposes $13.75 a share, plus a 21-cent dividend.

Dell's shares traded at $13.61, down nine cents, in after-hours trading on Thursday. The company reported its results after the close of regular trading.

The Round Rock, Texas, company had been scheduled to report results next Tuesday but announced plans to accelerate the disclosure early Thursday.

Dell's results came a day before an expected court hearing in Mr. Icahn's lawsuit challenging the buyout offer.

A Dell spokesman said that the early financial report was because of the "considerably heightened interest" in Dell.

Mr. Icahn wasn't available for comment.



Dell's results, in part, underscore the pains of Mr. Dell's attempt at a second act. He started the company nearly 30 years ago with a simple but dramatic shift to selling PCs to order by phone and later, over the Web.

That business model is no longer a differentiator. So Mr. Dell has been retooling his company to work more in the mold of International Business Machines Corp., focusing on business customers and supplying them a broad range of hardware, software and services.

Part of Mr. Dell's strategy relies on newer businesses like software to give cubicle dwellers secure access to corporate networks on their smartphones, and new ways to store booming volumes of computerized customer data.

But so far many of those new offerings haven't seriously threatened rivals such as Cisco Systems Inc., Hewlett-Packard Co. and EMC Corp. Bernstein Research analyst Toni Sacconaghi estimates that Dell's newer business lines are unprofitable, stripping out high-margin revenue for tech support and related services for PCs sold to businesses.

Meanwhile, more than half the company's revenue—though a minority of its profit—comes from the shrinking PC business. Dell's server operation also is beginning to face profit squeezes as customers seek cheaper options.

Revenue in the unit that includes servers, networking and data-storage gear rose 8% in the quarter ended Aug. 2, but operating income slid 9%.

Southeastern Asset Management Inc., a large Dell stockholder that has opposed the buyout with Mr. Icahn, said it was "encouraged" by the financial performance of the division. "This further supports our belief that the Michael Dell/Silver Lake freeze-out transaction drastically undervalues the business and its future prospects," the investment firm said in a statement.

The software business posted a $62 million operating loss. Dell continues to spend money to increase research and development and its sales force in those software soft spots, the company said.

"As we have adjusted our pricing, margins have declined, but we continue to make key strategic investments, and we are tightly managing our discretionary operating expenses," Chief Financial Officer Brian Gladden said in prepared remarks.

Operating expenses fell $72 million from three months earlier, a surprising drop for Dell, which hadn't followed through on long-promised cost-cutting measures.

Gross margin continued to fall, to 18.5% from 21.6% a year earlier.

Overall, Dell's net was $204 million, or 12 cents a share, compared with $732 million, or 42 cents, a year earlier. Adjusting for certain items, Dell posted a profit of 25 cents a share.

Revenue rose to $14.51 billion from $14.48 billion.

Write to Shira Ovide at

A version of this article appeared August 16, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Dell's Net Falls 72%, With Vote Looming On Buyout.

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.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

Inquiries about this project and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.