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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.

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Dell discusses value of business that selling shareholders did not see


Source: CNBC, September 23, 2014 interview videos and transcript




Michael Dell on the state of PCs and going private

Jon Fortt | @jonfortt  

Tuesday, 23 Sep 2014 | 5:59 PM ET

Michael Dell: Business strong

Tuesday, 23 Sep 2014 | 10:21 AM ET

CNBC's Jon Fortt spoke with Dell CEO Michael Dell about the beauty of private structure.

I sat down with Dell founder and CEO Michael Dell a year after shareholders approved his bid, backed by Silver Lake and others, to take the company private. Even without seeing Dell's quarterly numbers, it's clearly been a good year: The PC business turned around almost immediately after the transaction closed, led by Dell's core customer: businesses. We talked about the state of the PC business, whether he'll take Dell public again, and cloud start-up valuations.

On rumors that Dell is interested in EMC

You've been strong in storage. Historically you were a very big reseller of EMC. Everybody's talking now about what's going to go on with EMC, because now the activists are after EMC. How interested are you in the storage businesses that EMC continues to be in, because you ratcheted back your reselling of EMC and focused on Dell-owned storage technologies. If pieces of EMC or its intellectual property come up for sale, might you be interested?

Let me first talk about what's going on in storage. If you look at the storage market, some pretty big changes—enormous growth in flash, and the storage elements are getting closer and closer to the processor. That's certainly happening in disk space storage as well. In fact if you look at it from a capacity standpoint and you combine the internal storage in servers—remember disks are moving from external to internal—combine internal and external together, we're No. 1 globally in terabytes shipped in capacity. So we're very interested in the storage market. Certainly as there are opportunities to expand inorganically we'll consider those, but I don't have any comments on a specific idea that may be out there.

Michael Dell: Very fast tablet growth

Tuesday, 23 Sep 2014 | 10:21 AM ET

CNBC's Jon Fortt spoke with Dell CEO Michael Dell about Alibaba; technology IPO valuations, and Dell's tablet growth strategy. Dell also discusses past challenges and how they were overcome.

OK. Do you think about M&A differently now that you're private? Is it harder or easier based on the currency that you're dealing with now as a private company?

We have done a number of acquisitions, really never used stock, we used cash. We did an acquisition of a predictive analytics company recently, StatSoft, about a million users around the world, so we'll continue to make acquisitions. We do feel that with the tremendous number of acquisitions that we've done over the last four or five years we have all of the key technologies that we essentially need. And now we have a big, organic engine that is creating more innovations. We'll file more patents this year than we did last year, so the trend of increasing our research and development absolutely continues. Also, recognize, yes, we'll do acquisitions, but partnerships play an important role. You can't buy everything, you can't do everything yourself, so we're going to work with Oracle and Microsoft, and SAP, and Adobe, and Cloudera, RedHat, there's a lot of great companies in the industry. And we'll continue to leverage the hardware partner ecosystem that's been an important part of what we do.

On being a private company now

Larry Ellison just stepped back from being CEO of Oracle. So I'm trying to think what PC-era founder is still running his company as CEO, and I've got Michael Dell and I'm grasping to figure out any other names. What motivates you now to keep running this company that's different than 30 years ago?

It's a super-exciting time in technology, still. And if you think about what's going on in the cost of access coming down, we're able to bring technology to a billion more people, the impact it's having in society is tremendously exciting. So look: If I wasn't doing it now, I might be depressed because I love doing it, and I'd be bored because it's fascinating and interesting stuff, and you think about what's going on in the whole software-defined data center, the creation of these hyper-efficient clouds to be able to serve up information more easily, the enormous growth of small to medium sized businesses and how they have access to technology, the cybersecurity challenges, the emerging markets embracing technology, it's an enormous amount of fun. And to top it off, we're private! Which is a whole lot of fun, too.

What's fun about being private?

We get to be bold and lead without fear of the guidance. When you have a public company, there's a lot of things that occur as people are thinking about the next quarterly earnings statement. There's a 90-day shot clock. So I'm sure there there are some good things that come from that, but probably there are some bad things on a cumulative basis. So we've been able to unleash a lot of innovation and risk-taking inside the business, we've been investing more aggressively, we've got all of our businesses growing at pretty nice rates now, we think faster than the industry, and we're expanding and investing like never before, because we're not afraid. It's just a whole lot more fun to be thinking more about the medium and long term, and less about the short term.

On China and Alibaba

How do you look at the China market? There are a number of companies having headaches there. Qualcomm now up on some antitrust charges. Microsoft. Apple can't seem to get the iPhone approved over there in time to launch on their networks. When you look at the opportunities and the dangers of operating in that market, and now Chinese companies reaching out more for a U.S. presence, what do you do? Do you pour more resources into China? Do you put R&D there?

We've been operating in China really since the mid-90s, and my first trip into mainland China was in '89, so we've been there a long time. It's the largest market outside the United States for Dell to sell our products. We also buy a lot of things in China, so a lot going on there. My belief is that the relationship between China and other nations, it's incredibly dependent on each other. And we continue to invest locally in China, building our business there, building up relationships with local suppliers and partners. It's certainly got its complications as you suggested, but it's a very, very large and super-important country for us to be participating in.

Alibaba's IPO was the largest on record. A number of tech companies these days are going public with a structure of founder control. Having been pre-IPO, having been public, now being private again, what do you think of that trend, and what do you think of Alibaba?

I know a little bit about Alibaba, they're a great customer and we appreciate the customer relationship with them very much. It's certainly been an interesting company. It's been good to see Jack Ma succeed so much with that platform. I've seen a few studies that have shown that this founder-controlled shareholder structure seems to be working well, empirically across a large number of companies. As a private company that's not something we think about.

Getty Images

Michael Dell

Will you ever go public again?

I don't have any plans to do that, so we're enjoying being private. Look, we get to take risks and be bold and not think about the short-term, and it's certainly working quite well for us.

On the state of the PC business

A year ago people were afraid, particularly when it came to the PC business. Folks who were looking at doing more aggressive bids than yours for Dell got scared off by the PC business decline. Right after you went private, the PC business seemed to turn around. So boy, did you get a deal, right?

Well, you know, I think, look, there were a number of folks that looked at our company, and a number of them bid, and the shareholder vote was over a year ago. And it's absolutely true that there are lots of PCs out there. That was true then, too. But if you look at the PC part of our business: There are 1.8 billion PCs. About 35 percent of them are over 4 years old. That's not that different than it was a year ago. So I just have a totally different view of this than many others, which is that over time we will create products that are better than the ones we made before. And that will compel people to want to replace their old ones. That has in fact occurred, and that will continue to occur. So for six quarters in a row now, we've been growing our share in the PC market. Now the PC market's changing, right? You have tablets and virtual machines, and the Internet of things, and workstations and gaming and commercial PCs. It's a big space. We're doing well. We're growing, and it's a good business.

It seems like a few years ago you looked at Dell and you said it's about efficiency in manufacturing. That's the secret sauce there. Microsoft is about providing software to as many OEMs as they can. Apple's about vertical integration. What is Dell about now that is unique and is going to define its success?

We're bringing powerful solutions to our customers which are generally businesses and institutions. We have a consumer business but there's been a lot of focus at Dell on building solutions across the whole spectrum. So this is a combination of hardware, software, services together, to be able to virtualize an environment, build out a cloud data center, enable a salesforce to be productive but secure at the same time. We have some fantastic vertical strengths like in healthcare I.T. where we're No. 1 here in this country and signing up new hospitals and care providers at an aggressive rate. I will also say that we continue to have a very efficient supply chain. Maybe some people forgot that. But our cash conversion cycle and the ability to produce the next generation of machines very efficiently continues. So we just introduced our 13th generation of PowerEdge servers. We've been in this business for 20 years. And we're growing, we're expanding, as this goes to software-defined storage networking and the whole layer 3 through 7, we're ideally positioned to attack those markets and we're absolutely doing that. So a lot of the core strengths that we've had, we continue to have those—they're showing up in our strong cash flow and growth as a business—and we've built up a substantial solutions capability. So half the people in Dell are in services, and those are businesses that we're investing in expanding.

What's your expectation for what happens when the Windows XP portion of the corporate PC refresh cycle really does peter out, if it hasn't already? Lenovo is getting a lot stronger. HP continues to be a competitor in the space, both in the U.S. and globally. How do you position yourself to continue to have success?

In commercial PCs, according to IDC data, we grew faster than all those guys in the last quarter. And so we're very focused on commercial even though we have a fast-growing consumer business. Certainly a big part of our growth is in the data center and software and services. I do think that the replacement cycle is going to be an ongoing trend for quite some time. Because as I said earlier, 1.8 billion of these PCs out there, they're not all going to get replaced in the next six-nine months. We're not ready for that, and neither is the world capacity for memory, processors, displays, disk drives, etc. So this is going to take some time. You also have the Windows Server 2003 expiration which is going to drive the replacement of some 28 million or so servers. And so we're very well positioned for that, particularly here in North America with a very strong share, No. 1 in Asia-Pacific and Japan, the only company in the top five to be growing in racks and blades. I think the workloads are moving in our direction, and we'll hold our own against the competitors. I will tell you that the kind of absolute returns in our business are healthy, so the business is strong, we're certainly paying down debt at a rapid rate, paying down already $2.4 billion in the first six months of the year. But the beauty of the private structure is that we get to focus our attention essentially 100 percent on our customers. And so that's cranking out all kinds of new innovations and services, and the growth has accelerated. So it's a lot of fun.

On making the services business work

Are you confident that the services model has legs going forward? Because Cisco is having some success at it, HP continues to struggle to be profitable at the level that they and Wall Street would like in services. What makes the difference?

On a financial level we're growing our services business significantly faster than the American competitors, not as fast as the Indian competitors, but we're somewhere in the middle. But growth has been accelerating, we have a fabulous cybersecurity business called SecureWorks. It's at the very top of the Gartner Magic Quadrant, and we're signing up customers at an aggressive rate. And we continue to grow carefully into new verticals.

How do you protect margins in that, because that's the trick, right? To have healthy margins in a services business.

Knowledge. Expertise. And knowing what the customer's actually trying to accomplish. So we're not winning based on having the lowest price, we're winning because we know more about solving the customer's problem and it's more valuable to them.

On competitors trying to spread fear

Take me inside your war room for those days or even hours after you announced that you're going private, and Meg Whitman and HP put out that release saying, "Oh, they're going through this process, it's going to be chaotic, they're going to be off their game, you need to come over to HP." The numbers show it seems you managed to execute through that pretty well. What did you tell your team, what did you do to communicate to customers what was going on inside Dell?

Give 100 percent of the credit to the hardworking team members across the company. 100,000-plus of them, who basically didn't get distracted and stayed focused on serving our customers. And what I did was I told them that it's going to be OK. I told them that, look, I'm very close to the process, I can't tell you everything that's going on, but I believe we're going to have a great outcome here, and it's going to be OK, don't worry. Fortunately I had enough trust with the team over 30-plus years that they stayed focused, and you're absolutely right. We gained share all through that period. Our Net Promoter Scores did quite well. And our teams did not get distracted.

People must have been worried about their jobs.

There was some of that, but that all in the end turned out to be just rumor-mongering.

On cloud valuations

You were an early adopter of software as a service both internally and externally to interface with customers, and that whole arena of social has really exploded. Are the valuations getting out of control?

I'm sure you can find a better guest to ask that question.

Not in here. Not in this room!

I'm not going to opine on the valuations of ...

But I mean, when you look at things to buy—because you've purchased companies in this space in the past, particularly when it comes to dealing with small business, certainly those types of companies must be more expensive now than they were three or so years ago when I remember some acquisitions that you did.

You know, we're free-cash flow people. So we absolutely look at getting a return on our investment in a potential acquisition. And certainly some of the prices are pretty inflated.

On new platforms

I guess what goes up must come down. What's your tablet strategy? Do you think of the tablet as being different from the PC? Do you view it at this point as being an evolution of the PC? And as you look at the commercial customer that's your core customer, how do think about how best to serve them, in terms of form factor and the software you might want to put on it?

We see the notebook as a lineal descendant of the desktop, and the tablet is a lineal descendant of the notebook. If you think about a tablet, a keyboard, you separate those two, you put them together—now it's a notebook. So, first half of the year our PC business, without tablets, grew 15-16 percent. If you include tablets, it was up in the 20s. So we have very, very fast tablet growth, both in Windows and Android, and both in commercial and in consumer. And certainly there's growth there. We see the 7 and 8-inch platform as more of a secondary machine as opposed to replacement, but there's also this interesting 2-in-1 transformer-type machines, and that's a very fast-growing category. And we're all over that. We just showed at the Intel IDF Forum a new thinnest-in-the-world, 8.4-inch OLED screen tablet, 2560 x 1600 resolution, 3D camera, only 310 grams, fantastic, super-light tablet. So we're absolutely in that space, and we see a full spectrum of personal devices from high-performance workstations that we make for Adobe Illustrator and Dassault Catia, Wall Street, the ultrarugged machines that you can throw out of the 4th floor of a building and they'll do just great. You can submerge them in water, run over them with a truck, they keep going. To the commercial, managed secure, reliable machines, consumer PCs—we've got the whole landscape covered.

You were talking recently about ARM-based servers, saying that right now Intel has got the solution out there that most customers want, who knows what will happen in the future. How closely are you watching ARM and 64-bit, trying to see whether there is a fit there in the future for commercial customers?

ARM is important, and certainly if you look at the number of ARM processors, as the cost has come down, it's a very successful platform for sure. When you go into the business computing realm, you have this thing called applications, right? Operating systems, it's a long tail. And that takes some real effort and time. So look, I don't think it's quite as simple as just showing up with a chip. And we already use ARM processors in pretty large numbers in a variety of things that we provide and products that we make. So this is really less of a hardware/technical problem and more of an applications, software ecosystem, getting the Linux or the LAMP stack on ARM, that's pretty straightforward. But to get it enterprise-ready, that's going to take some time. We're certainly happy for customers to have a variety of choices, and as those ecosystems evolve, we'll be ready.

On entrepreneurship

You're here talking about entrepreneurship among other things. How do you define that now, 30 years into running what has been one of the biggest and most recognizable names in technology? Do you still consider yourself an entrepreneur?

You know, I think entrepreneurship is about taking risk and embracing risk, and looking at things differently and being unafraid. So yeah, that's what we do. It's really fun. We need more of that in the world. You think about where do the next billion jobs come from, they don't actually come from big companies, they come from entrepreneurs, small- and medium-sized businesses. And technology is enabling an enormous number of those new businesses to get started.

On the coming enterprise shakeup

There's been talk of a shakeup starting in enterprise technology. Cisco CEO John Chambers has talked about the number of companies that won't be around in a few years. How do you feel from your dual standpoint. You're very much in the enterprise market as a competitor, but at the same time you don't have to be on the 90-day shot clock that you talked about. What's going to determine which of the enterprise players is around in three years, and do you agree there will be a winnowing, as Chambers suggests?

I don't know if it will be quite as dramatic as John has suggested, but certainly growth is important. There are some companies in our space that have had a fairly long time since they've grown. We're not one of them, we're growing. So at the end of the day, business is not altogether that complex in the sense that if you have a business that's growing its revenues, growing its profits, that's a good thing; and if you have a business that is not growing either both or one of those, that's not a good thing. So we're totally in the good category, and our intent is to stay there. I think what's happening is, you've got a number of these firms that have incumbent businesses. And they become somehow reliant or dependent on their margin structure, and new things come along like the software-defined network, or software-defined storage, or network function virtualization, or the microprocessor disrupts the minicomputer or the mainframe, or the proprietary is disrupted by the open, and that creates a difficult situation if you're trying to protect your profits. And so we grew up in the microprocessor age. It's all about open, and I like to attack new markets. Being a private company we have the real liberty to be able to do that without a this obsession of the short-term.

On what lies ahead

A year ago, a year-plus, you were in the throes of this battle for the future of your company. And it seemed to be especially personal because your name is on the company. What kinds of conversations did you have, maybe with your family, with your kids, about why you were doing what you were doing, and a year removed from that, what are you proudest of and what do you regret?

You know, it was a lot harder than I thought it was going to be. And you guys and others covered that story quite well—maybe too well. There was a lot of made-up stuff that was in the ether there. I'm certainly proud that—I thought it would go well? It's gone much better than I thought it would go. What did I tell my kids and my wife? Well, until we announced it I didn't tell them anything, because that's kind of the way these things work. But once it was announced, I told them what I was doing, why I was doing it, and it was a difficult thing, for sure. But we got through all that, the business is doing really well, we're growing and expanding. Like you said, our team at Dell really held together and continued to persevere. So whatever challenges we had in doing that it's all been worth it. We're super-excited about the next chapters ahead. And I'm still a pretty young guy as far as CEOs go. Certainly younger than the average CEO.

Certainly younger than Larry Ellison. Think you're going to stick around until you're 70-plus?

We'll see. We'll see. Could be.

Will you be private until you're 70-plus?

Could be.

Jon Fortt

CNBC On-Air Editor



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