Dell Shares : Growth Priorities

Dell Files Tender Offer for Perot Systems

DELL-Janet W — Fri, 02 Oct 2009 15:02:00 GMT

We're moving right along with the acquisition of Perot Systems! Today, we commenced our tender offer to acquire the company.

What is a tender offer you ask?

The tender is a formal process of making a public offer directly to Perot's shareholders to buy their shares at the previously stated price of $30 per share. The offer was filed with the Securities and Exchange Commission. To learn more, I encourage you to read the tender offer, the press release we issued, and take a look at the ad that appears in today's Wall Street Journal.

We've taken some other steps getting us closer to closing the deal. Since the merger announcement on September 21, we have submitted competition law filings in the United States and some other countries. As a result, we are now in a waiting period that the government may choose to shorten or extend pending any antitrust concerns. These filings and waiting periods are pretty typical for any transaction of this type.

We have also begun integration planning with Perot Systems. Teams are being put in place to oversee this integration planning, which includes organizational resource alignment, financial reporting implications, systems integration plans, and other typical things associated with an integration process. While we are engaged in the planning process, we are also mindful that that we cannot combine the two companies until we close the transaction.

So what happens next with the tender offer?

Unless extended, the tender offer begins today and ends at midnight on November 2. Perot shareholders have this period to tender their shares for the offer price of $30 per share. Upon acceptance for payment of shares in the tender offer, Perot Systems becomes a subsidiary of Dell.

Today's news represents the next step in the acquisition process, and when completed, this bigger and better Dell is expected to help customers grow and thrive with a broader range of IT services and solutions.

We look forward to sharing with you more details through this exciting process. Once we close on the acquisition, you'll be hearing more detailed thoughts about our services strategy, organization, key initiatives and financial information. At that time, Dell leaders will provide more detail around our growth, synergy and integration plans.

Until then, your questions and comments are welcome.

SPECIAL NOTE: This blog post is for informational purposes only, and is not an offer to purchase or a solicitation of an offer to sell securities. The tender offer is being made only pursuant to the Offer to Purchase, Letter of Transmittal and related materials that Dell and DII- Holdings Inc. have filed with the SEC on a Tender Offer Statement on Schedule TO on October 2, 2009. In addition, Perot Systems has filed a Solicitation Recommendation Statement on Schedule 14D-9 with respect to the tender offer on October 2, 2009. The Tender Offer Statement (and related materials) and the Solicitation/Recommendation Statement contain important information that should be read carefully before any decision is made with respect to the tender offer. Those materials may be obtained free of charge from D.F. King & Co., Inc., the information agent for the tender offer, toll-free at (800) 488-8095 (banks and brokers call collect (212) 269-5550). In addition, all of those materials (and all other offer documents filed with the SEC) are available at no charge on the SEC's website at www.sec.gov.

Dell - Perot Systems

Robert L Williams — Mon, 21 Sep 2009 11:00:00 GMT

Today, Dell and Perot Systems entered a definitive agreement for Dell to acquire Perot Systems in a transaction valued at $3.9 billion. Terms of the pairing were approved by boards of both companies.

We anticipate the combination will close by end of Dell's fiscal 4th quarter, pending regulatory approval, and will be funded with existing cash. Perot Systems' current CEO, Peter Altabef will lead the combined services units of joint Perot Systems' and Dell's services units. The new business unit will be called Perot Systems, a Dell Company and will be run out of Perot's current Plano, Texas campus.

This acquisition is about our strategy to provide next-generation IT service delivery and grow our enterprise revenue base. This is a key acquisition in our strategy to transform the company and IT services will be a significant part of our strategy and we have been focused on finding the right asset in this space, which Perot Systems provides. Perot Systems' expertise in infrastructure & operations, business processes, application development services strongly complements Dell's existing services offerings and global reach. Not only do they have a robust services portfolio, but they have tremendous segment expertise, including growth areas such as healthcare and government.

This combination allows Dell to gain a scalable asset that we can leverage our direct customer footprint to build out rapidly. We think we can add on other assets (including ours), and globalize Perot Systems into a strong global service company. Perot Systems' world-class services innovation brings several key service offerings we don't enjoy today. Another critical element to understand regarding this announcement is that Dell and Perot Systems are very familiar with each other from a capability and cultural standpoint. We have enjoyed a longstanding relationship over the past several years and with our announcement today take this relationship to the next level, which will allow us to deliver the best possible value for our customers. The pairing results in a compelling combination of companies that have similarly strong, relationship-based business cultures, and that are known for focus on helping customers thrive by using IT for greater effectiveness and productivity.

There will be more details about this acquisition once we close and satisfy the customary regulatory requirements involved. In the end, our strategic mission remains the same -- to provide disruptively great value to our customers... while balancing our financial goals of liquidity, profitability, growth. Thanks and we welcome your questions as always.

Rob

Additional Information

The planned tender offer described in this blog posting has not yet commenced. The description contained in this blog posting is not an offer to buy or the solicitation of an offer to sell securities. At the time the planned tender offer is commenced, Dell will file a tender offer statement on Schedule TO with the Securities and Exchange Commission (the "SEC"), and Perot Systems will file a solicitation/recommendation statement on Schedule 14D-9 with respect to the planned tender offer. The tender offer statement (including an offer to purchase, a related letter of transmittal and other tender offer documents) and the solicitation/recommendation statement will contain important information that should be read carefully before making any decision to tender securities in the planned tender offer. Those materials will be made available to Perot Systems's stockholders at no expense to them. In addition, all of those materials (and all other tender offer documents filed with the SEC) will be made available at no charge on the SEC's website: www.sec.gov.

Steve Felice, President of Small and Medium Business, Discusses SMB Business Environment

Robert L Williams — Tue, 28 Jul 2009 18:09:00 GMT

As a follow-up to our Analyst meeting, I recently sat down with Steve Felice, president of Small and Medium Business, to discuss a range of topics that have received investor attention including:

Dell's Go-to-Market Strategy
Differentiation in the Channel
Indirect Model in Asia
Current Macro Environment

Please watch the video below. If you would like to get more details from our analyst meeting, you can view the presentations and webcast from this meeting by clicking here. As always, I look forward to your questions and comments!

-Rob

(Please visit the site to view this media)

Review of Dell's 2009 Analyst Meeting

Robert L Williams — Tue, 14 Jul 2009 19:00:00 GMT

Dell Equity Analyst Meeting

Today more than 200 participants, including analysts and investors, joined us in Austin for Dell's Analyst meeting. There were also a record breaking number of webcast attendees for this meeting, where we broke our record of 400, rising to nearly 500 participants. This meeting was an opportunity to hear directly from Dell's senior leadership on our near-term operating agenda and long-term strategy and address questions or concerns. The presentations from this meeting are available for viewing online,

This year, the meeting and briefings took place the same day. Dell executives discussed the company's strategy and operating agenda along with a financial overview and update on its four customer segments.

We are competing in a rapidly changing environment. As a result, we are improving our core business performance while expanding and extending across a broader set of customer solutions. Key messages delivered today were Dell's differentiated view of how to win in enterprise, our strategic mission "to provide disruptively great value to our customers", and that both these items will be realized through a combination of internal investments, partnerships and inorganic growth.

The meeting was opened by Michael Dell, Chairman of the Board and CEO, where he discussed Dell's key assets, view on the enterprise, and long-term priorities. Michael noted that Dell has a strong presence and currently holds #1 or #2 share position in most key segments. He also covered strategic priorities to deliver operating income and cash flow growth as well as the requirements needed to win longer-term.

Brian Gladden, CFO, followed and built on striking the optimal balance between liquidity, profitability and growth. Brian reviewed Dell's operating agenda, gave an update on the solid progress on $4B cost reductions, and provided a long-term value creation framework that articulated Dell's vision for revenue growth, profitability and cash flow generation. He also stated that Dell is well positioned to benefit from an economic recovery and will continue to provide strong liquidity.

Steve Schuckenbrock, President of Large Enterprise, walked us through our higher-value & higher-margin enterprise vision which addresses innovation and virtualization in next-generation data centers vs. our competitors' full-stack approach. He also reviewed how Dell is delivering steady growth in its core business while powering enterprise efficiency through innovation without legacy. For example, we approach services very differently from our competitors. We believe services should be customizable, a la carte, and available remotely. We let customers choose which services they want and when they want them. And we provide solutions where consultants are available - but not required.

Paul Bell, President of Public Sector business, addressed how Dell is aligning its global organization for balanced geographic expansion via vertical solutions designed for three unique customer bases -Education, Government, and Healthcare. Paul mentioned the challenges in this segment due to the macro environment, but also highlighted opportunities that exist internationally as well as those related to stimulus funds. Requirements needed to win in the Public sector include deep expertise in the sector-specific challenges, solutions investments, technology leadership, and solid partnerships.

Steve Felice, President of Small & Medium Business, presented Dell's plans to lead in the SMB space through innovative solutions and its go-to-market strategy. Steve reviewed the varied needs across the customer base of Small Businesses and Medium Businesses as well as regional opportunities to grow the business. He highlighted the solutions and product offerings that will help drive growth in each of these areas along with the benefits offered through SMB's go-to-market strategy. Having a multi-channel strategy will enable Dell to expand presence in under-represented geographies and drive incremental growth in enterprises and solutions.

Ron Garriques, President of Dell's Consumer Group, walked through consumer's brand architecture, its multi-channel customer portfolio and how it's bringing a disruptive approach to PCs. Dell grew to 33,000 retail stores globally in two years. Clearly, there is a lot of opportunity to continue to grow in this retail space. Ron reviewed Consumer's plan to grow faster than the industry through aggressively managing costs to reflect the multi-channel infrastructure, expanding global presence, and offering competitive products. He also reviewed plans to reinvigorate Dell.com to create a destination for all customers.

If you haven't already seen the presentations, I encourage you to watch a replay of them here.

As always, we welcome any questions or comments.

-Rob

Dell Seeing Demand Stabilization, Expects Slight Seq. Revenue Growth with Modest Margin Pressure in Q2

Robert L Williams — Mon, 13 Jul 2009 19:37:00 GMT

This afternoon after the close of the financial markets, we shared a press release announcing that year-over-year demand for our information-technology products appears to have stabilized, and that we expect to report a slight sequential revenue increase in our fiscal second-quarter 2010, which ends July 31. In the announcement, we also said that we anticipate a modest decline in Q2 gross margins, the result of higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand. Also, we shared that over the longer horizon we are targeting 5-7 percent compounded annual sales growth, operating income at or above 7 percent of revenue, and cash flow from operations exceeding net income. It's important to point out that such results are dependent on broad global economic improvement accompanied by higher worldwide IT spending, including sustained double-digit growth rate in demand for computer systems. As always is the case with announcements like these, I highly encourage you to read the complete press release for additional details and disclosures.

This news was released prior to our analyst meeting, which will take place Tuesday, July 14^th here in Austin, TX and is available live via webcast on Dell.com/Investor. The analyst meeting is an opportunity for analysts, investors, and you to listen to Dell Leadership and review our strategy and financial overview, and ask questions directly to the executives which you can do via the web this year. At the analyst meeting, Dell executives will discuss the company's strategy and operating agenda along with a financial overview and update on its four customer segments.

As always, our IR team is here to answer your questions.

- Rob

CFO Brian Gladden Discusses Dell Q1 Fiscal Year 2010 Performance

Robert L Williams — Thu, 28 May 2009 20:15:00 GMT

Dell announced first-quarter fiscal-year 2010 financial results on May 28^th. Brian Gladden, Senior Vice President and CFO, discusses the results and the company's outlook. Please review earnings materials on the Dell Investor Relations Q1 events page. All comparisons are year-over-year unless otherwise noted.

We announced Q1 results today. Revenue was down 23% to $12.3 billion. EPS was $0.15 per share and cash from operations was $761 million.

I am pleased to have Brian Gladden join us on Dell Shares to provide his view on the first quarter, the economy, industry demand, and the company's outlook.

(Please visit the site to view this media)

Also, we strongly encourage investors to read the full press release and earnings presentation; and listen to our conference call that can be found on the investor relations web site. As always, we encourage you to ask questions or leave comments on Dell Shares.

Comments on the Netbook Effect

Robert L Williams — Wed, 29 Apr 2009 18:52:00 GMT

The netbook is a product category that has received considerable attention over the past several months from the media and investment community, so I wanted to share Dell's point of view on it. We see this relatively new product as another category of the notebook market and one that is growing rapidly. In Dell's case, the Inspiron Mini line is an excellent way for us to continue down the path of expanding the number of product platforms designed around specific customer needs and cost points. As for the opportunity, Wall Street analysts estimate netbooks may reach 20 to 30 million units in calendar 2009 while IDC expects total notebook units for 2009 to be approximately 148 million on a worldwide basis. Thus, netbooks are certainly a meaningful and growing part of the overall notebook market with the potential to represent 13 to 20% of total notebook units shipped worldwide this year. Revenue and profit share will be lower given the lower average selling prices for netbooks.

Dell entered this category last fall and currently offers three products in the "netbook" segment in 9, 10 and 12-inch screen sizes. Consistent with Dell's overall consumer approach to differentiate based on industrial design as well as specific functionality in each price point, the Mini line-up is stylish and packed with solid mobility features including integrated 3G mobile broadband connectivity. Dell has also established key cellular broadband partnerships in North America and Western Europe and recently announced a deal in which China Mobile will offer 3G broadband on the Mini 10 inch netbook in China.

We view netbooks as incremental to conventional notebooks with some differences in usage by mature and emerging geographies. In mature markets, we believe netbooks will principally function as secondary devices. People looking for basic email, web access and social networking functions may favor the small screen sizes, keyboards and lower power footprint. They also serve as an excellent travel companion device for those who are highly mobile and looking for a smaller form factor on the road. However, a traditional notebook is generally a better option for consumers looking to perform functions such as photo and video editing or use productivity software applications such as Office. In emerging markets we believe that many first-time and value conscious users may be attracted to netbooks as they offer basic functionality at an attractive price point. Netbook usage may find its way into other areas besides consumer, such as schools and education. Though this may act to reduce overall hardware average selling prices, it also presents an excellent opportunity to increase the addressable industry opportunity and raise margins through attached services, software, etc.

Overall, there are different usage models and applications that will drive people towards different sized devices and technologies. This is a quickly evolving space that will see the introduction of more powerful and more efficient processors from the likes of Intel, so we will watch this play out. Regardless of where these technology improvements take us, Dell's direct relationships with its customers, allow us to deliver what customers want and take them where they want to go with the proper features, whether it is mobile broadband, keyboard configuration, screen size, etc. The growth in this space looks to outpace that of traditional notebooks over the next several years, and Dell will be a part of that growth.

Jeff Clarke, Vice Chairman, Technology and Operations, Discusses Progress on $4B Cost Initiative

Robert L Williams — Fri, 17 Apr 2009 14:50:00 GMT

I recently sat down with Jeff Clarke, Vice Chairman, Technology and Operations, to discuss a range of topics that have received investor attention including:

Declining Client ASPs in the commercial customer business
Desktop and mobility virtualization
Progress on our $4 billion cost initiative
Optimization of our global manufacturing and logistics network
What we are going to do with the savings we realize from some of these initiatives

As always, I look forward to your questions and comments!

(Please visit the site to view this media)

Dell’s Announces Use of Distributors in U.S. and Canada

Robert L Williams — Mon, 23 Mar 2009 16:41:00 GMT

Today, Dell announced it will begin using Ingram Micro Inc. and Tech Data Corporation in the U.S. and Canada to sell Dell products to small and medium businesses. In addition to retail, system integrators and value added resellers, customers now have the choice to use two distributors with whom many partners are already engaged. The initial offering will consist of pre-configured Dell systems which will be competitively priced with similar products available directly from Dell. Currently, these systems include Dell Vostro desktop and notebook configurations in addition to select Dell peripherals. There are plans to broaden the product availability in the future.

So why are we doing this? In response to partner feedback, Dell is expanding its partner program by providing multiple routes-to-market: direct, PartnerDirect, and distribution. This change offers another solution for partners that have immediate business needs. Customers seeking specific technology requirements will still have the opportunity to take advantage of Dell's build-to-order product line through its PartnerDirect program. This partner expansion is another demonstration of Dell's ability to be fast and flexible and continuing to provide value to our customers.

How does this fit into our strategy? Dell's growth strategy involves reaching more customers worldwide, including expanding our relationships with value-added resellers and distributors. We are committed to create efficient solutions and product leadership across all of our businesses. In May 2007, Dell announced the company would explore new ways to reach customers. This led to the inception of the PartnerDirect program, which has grown to a global business with more than 35,000 registered partners worldwide.

Our current indirect business generates more than $12 billion of Dell's run-rate annual revenue. We expect this new route-to-distribution to provide another vehicle where customers can choose Dell as their solution. In February, we reported on the growth of this PartnerDirect program. We've seen a lot of progress in our PartnerDirect program and will continue to pursue opportunities that create valuable customer solutions and offer long-term growth. For more information on today's announcement, check out Greg Davis' blog and vlog, where he discusses PartnerDirect and our new distributor partnership.

CFO Brian Gladden Addressed Investors at Morgan Stanley’s Annual Technology Conference

Robert L Williams — Wed, 04 Mar 2009 19:45:00 GMT

Brian participated in a fireside chat at the Morgan Stanley Annual Technology Conference yesterday. You can sign up and be notified in advance via email of these events. He started off by providing a brief overview of our latest quarterly and fiscal year results and then did some Q&A. In his message to investors, Brian emphasized profitability and liquidity as the two foremost priorities for us in this current economic environment and expressed confidence in our ability to extract further cost improvements in the business and emerge in a stronger competitive position. As a short recap, I've included a few questions and answers Brian took during the meeting. I encourage you listen to the full webcast by clicking here. As always, please provide your comments on Dell Shares.

1. How would you characterize the current demand environment?

The demand environment continues to be pretty tough year to date and we are seeing a lot of customers deferring purchase decisions due to the economy.
We expect broad-based challenging environment to continue as budgets are likely to remain pressured at least through the first half of 2009.
Our demand in Q4 was more linear than Q3 but the trends late in Q4 and in early Q1 are still negative.
Do not know what magnitude of slowdown will be - but we will be nimble enough to rapidly adjust to the realities of the demand environment.

2. How are you going to maintain gross margins in this environment?

We have made significant progress in taking cost out of the box but there's more work to be done.
We continue to make progress on the price and sell-to-value side of the equation as we introduce new products and will place an emphasis on smart pricing of these products.
Progress here has provided a buffer to declining volumes late in the year and enabled us to remain competitive and deliver stable gross margins.
We are confident in our ability to extract cost improvements even in a slowing demand environment and emerge in a stronger competitive position.

3. Why haven't you made more acquisitions?

Historically, our focus has been on organic growth... that model has worked for us successfully in the past.
Having said that, we have made 9 acquisitions in the last year and a half and will continue to look for more opportunities that make strategic sense.
We continue to look for opportunities in enterprise products, software and services, but it take two willing parties to make an acquisition work.
In this environment, there's not much M&A activity going on because companies are not willing to sell at these low valuations.

4. Can you comment a little bit on how you are managing working capital at Dell?

Liquidity is #1 priority for us in this environment.
During this period of declining revenue growth, we are aggressively managing our cash conversion cycle.
For inventory, we have reduced our strategic buys, which also helps us benefit from cost deflation.
Our payables have been impacted by the demand environment but we do not expect any significant structural changes.
Given the current demand environment we would like to maintain our cash conversion cycle, and we continue to believe there are opportunities to improve our cash conversion cycle over time.

5. Where should we expect to see Dell 2 years from now?

We will take advantage of this downturn to reshape our revenue portfolio and better position us competitively.
Over time, our goal is to move the weight of our portfolio to higher margin offerings and recurring revenue streams.
We will accomplish this by migrating to a solutions-driven business with an increased mix of enterprise products, services and bundled solutions.
We will also make strategic acquisitions as necessary that fit our model.