SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT Under Section 13(e) of the Securities Exchange Act of 1934 Amendment No. 6
DELL INC. (Name of Issuer)
Dell Inc. Denali Holding Inc. Denali Intermediate Inc. Denali Acquiror Inc. Silver Lake Partners III, L.P. Silver Lake Technology Associates III, L.P. SLTA III (GP), L.L.C. Silver Lake Group, L.L.C. Silver Lake Partners IV, L.P. Silver Lake Technology Associates IV, L.P. SLTA IV (GP), L.L.C. Silver Lake Technology Investors III, L.P. Mr. Michael S. Dell Susan Lieberman Dell Separate Property Trust MSDC Management, L.P. MSDC Management (GP), LLC (Name of Persons Filing Statement)
Common Stock, par value $0.01 per share (Title of Class of Securities)
24702R101 (CUSIP Number of Class of Securities)
Lawrence P. Tu Karen King Senior Vice President and General Counsel Chief Legal Officer Dell Inc. Silver Lake Partners One Dell Way 2775 Sand Hill Road, Suite 100 Round Rock, Texas 78682 Menlo Park, California 94205 (512) 338-4400 (650) 233-8120 Michael S. Dell c/o Dell Inc. One Dell Way Round Rock, Texas 78682 (512) 338-4400
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Persons Filing Statement)
With copies to:
Jeffrey J. Rosen, Esq. Richard Capelouto, Esq. Steven A. Rosenblum, Esq. William D. Regner, Esq. Chad Skinner, Esq. Andrew J. Nussbaum, Esq. Michael A. Diz, Esq. Simpson Thacher & Bartlett LLP Gordon S. Moodie, Esq. Debevoise & Plimpton LLP 2475 Hanover Street Wachtell, Lipton, Rosen & Katz 919 Third Avenue Palo Alto, California 94304 52 West 52nd Street New York, New York 10022 (650) 251-5000 New York, New York 10019 (212) 909-6000 (212) 403-1000
This statement is filed in connection with (check the appropriate box):
x The filing of solicitation materials on an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
¨ The filing of a registration statement under the Securities Act of 1933.
¨ A tender offer.
¨ None of the above.
Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: x
Check the following box if the filing is a final amendment reporting the results of the transaction: ¨
CALCULATION OF FILING FEE
Transaction Valuation* Amount of Filing Fee $20,747,146,376.79 $2,829,910.77
* Set forth the amount on which the filing fee is calculated and state how it was determined. * Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: In accordance with Exchange Act Rule 0-11(c), the filing fee of $2,829,910.77 was determined by multiplying 0.0001364 by the aggregate merger consideration of $20,747,146,376.79. The aggregate merger consideration was calculated as the sum of (i) the product of (a) 1,781,176,938 outstanding shares of common stock (including shares subject to restricted stock units and shares of restricted stock) as of March 25, 2013 to be acquired in the merger, multiplied by (b) the per share merger consideration of $13.65, plus (ii) the product of (x) 25,482,624 shares of common stock underlying outstanding employee stock options with an exercise price of $13.65 or less, multiplied by (y) $6.46, representing the difference between the $13.65 per share merger consideration and the $7.19 weighted average exercise price of such options. x Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule, and the date of its filing.
Amount Previously Paid: $2,829,910.77 Form or Registration No.: Schedule 14A Filing Party: Dell Inc. Date Filed: March 29, 2013
Introduction
This Amendment No. 6 to Rule 13E-3 Transaction Statement on Schedule 13E-3, together with the exhibits thereto (the “Transaction Statement”) is being filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), jointly by the following persons (each, a “Filing Person,” and collectively, the “Filing Persons”): (i) Dell Inc., a Delaware corporation (the “Company”) and the issuer of the common stock, par value $0.01 per share (the “Common Stock”) that is subject to the Rule 13e-3 transaction, (ii) Denali Holding Inc., a Delaware corporation (“Parent”), (iii) Denali Intermediate Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Intermediate”), (iv) Denali Acquiror Inc., a Delaware corporation and wholly-owned subsidiary of Intermediate (“Merger Sub” and, together with Parent and Intermediate, the “Parent Parties”), (v) Silver Lake Partners III, L.P., a Delaware limited partnership, (vi) Silver Lake Technology Associates III, L.P., a Delaware limited partnership, (vii) SLTA III (GP), L.L.C., a Delaware limited liability company, (viii) Silver Lake Group, L.L.C., a Delaware limited liability company, (ix) Silver Lake Partners IV, L.P., a Delaware limited partnership, (x) Silver Lake Technology Associates IV, L.P., a Delaware limited partnership, (xi) SLTA IV (GP), L.L.C., a Delaware limited liability company, (xii) Silver Lake Technology Investors III, L.P., a Delaware limited partnership, (xiii) Mr. Michael S. Dell, an individual and Chairman and Chief Executive Officer of the Company, (xiv) Susan Lieberman Dell Separate Property Trust (and, together with Mr. Dell, the “MD Investors”), (xv) MSDC Management, L.P., a Delaware limited partnership and (xvi) MSDC Management (GP), LLC, a Delaware limited liability company.
On February 5, 2013, the Company, Parent, Intermediate and Merger Sub entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Intermediate. Concurrently with the filing of this Transaction Statement, the Company is filing with the SEC an amended proxy statement (the “Proxy Statement”) under Regulation 14A of the Exchange Act, relating to a special meeting of the stockholders of the Company at which the holders of the Common Stock will be asked to consider and vote on a proposal to adopt the Merger Agreement. The adoption of the Merger Agreement by the affirmative vote of the holders of (i) at least a majority of the outstanding shares of Common Stock entitled to vote thereon and (ii) at least a majority of the outstanding shares of Common Stock entitled to vote thereon held by stockholders other than the Parent Parties, Michael S. Dell and certain of his related family trusts, any other officers and directors of the Company and any other person having any equity interest in, or any right to acquire any equity interest in, Merger Sub or any person of which Merger Sub is a direct or indirect subsidiary are conditions to the consummation of the Merger. A copy of the Proxy Statement is attached hereto as Exhibit (a)(1) and a copy of the Merger Agreement is attached as Annex A to the Proxy Statement.
Under the terms of the Merger Agreement, at the effective time of the Merger, each share of Common Stock outstanding immediately prior to the effective time of the Merger (other than certain excluded shares and shares held by any of the Company’s stockholders who are entitled to and properly exercise appraisal rights under Delaware law) will be converted into the right to receive $13.65 in cash, without interest (the “Merger Consideration”), less any applicable withholding taxes, whereupon all such shares will be automatically canceled upon the conversion thereof and will cease to exist, and the holders of such shares will cease to have any rights with respect thereto other than the right to receive the Merger Consideration. Shares of Common Stock held by any of the Parent Parties (including the shares held by Michael S. Dell and certain of his related family trusts, which shares will be contributed to Parent prior to the Merger) and by the Company or any wholly-owned subsidiary of the Company will not be entitled to receive the Merger Consideration.
Except as otherwise agreed to in writing prior to the effective time of the Merger by Parent and a holder of an option to purchase shares of Common Stock (each, a “Company Stock Option”), each Company Stock Option granted under the Company’s stock plans other than the Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan (the “2002 Plan”) and the Dell Inc. 2012 Long-Term Incentive Plan (the “2012 Plan”), whether vested or unvested and whether with an exercise price per share that is greater or less than or equal to $13.65, that is outstanding immediately prior to the effective time of the Merger, will be canceled and converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Common Stock subject to such Company Stock Option and (ii) the excess, if any, of $13.65 over the exercise price per share of Common Stock subject to such Company Stock Option, less such amounts as are required to be withheld or deducted under applicable tax provisions. Parent has indicated to the Company that it intends to request, pursuant to the Merger Agreement, that the Company, before the completion of the Merger, commence a tender offer (the “option tender offer”) to purchase for cash, at prices to be determined by Parent, each tendered Company Stock Option granted under the 2002 Plan and the 2012 Plan, whether vested or unvested and whether with an exercise price per share that is greater or less than or equal to $13.65, that is outstanding immediately prior to the effective time of the Merger. Subject to the terms and conditions of the option tender offer, which conditions would include the consummation of the merger, each such Company Stock Option that is validly tendered and not withdrawn by the holder thereof would be canceled in exchange for the applicable cash payment promptly after the completion of the Merger. Also in accordance with the Merger Agreement, Company Stock Options granted under the 2002 Plan and the 2012 Plan that are outstanding immediately prior to the effective time of the Merger and not accepted for cancellation and payment in the option tender offer would be converted at the effective time of the Merger into options to purchase, on substantially the same terms and conditions (including vesting conditions) applicable to such Company Stock Option immediately prior to the effective time of the Merger, shares of Parent common stock. Notwithstanding the provisions of the Merger Agreement, Mr. Dell would not participate in the option tender offer and his Company Stock Options will be canceled for no consideration in connection with the Merger.
Except as otherwise agreed to in writing prior to the effective time of the merger by Parent and a holder of an award of restricted stock units with respect to shares of Common Stock (each a “Company RSU Award”) with respect to any of such holder’s Company RSU Awards, each Company RSU Award, whether vested or unvested, that is outstanding immediately prior to the effective time of the Merger, will be canceled and converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Common Stock subject to such Company RSU Award multiplied by (ii) $13.65, less such amounts as are required to be withheld or deducted under applicable tax provisions, subject to the recipient remaining in service until the vesting date applicable with respect to such awards. For purposes of unvested Company RSU Awards, any performance-based vesting condition will be treated as having been attained at the “target” level, and awards that are subject to performance-based vesting conditions will be deemed to vest ratably on the last day of each fiscal year during the portion of the performance period applicable to such awards that occurs following the effective time of the merger. In addition, holders of Company RSU Awards will receive any additional amounts related to dividend equivalents credited with respect to such Company RSU Awards prior to the effective time. Notwithstanding the provisions of the Merger Agreement, Mr. Dell’s unvested performance-based Company RSU Awards will be canceled and converted into a right to receive a cash amount as described above; however such cash amount will vest and pay out upon the Company RSU Awards’ original vesting and payout dates.
Except as otherwise agreed to in writing prior to the effective time of the merger by Parent and a holder of any restricted shares of Common Stock (each a “Company Restricted Share”) with respect to any of such holder’s Company Restricted Shares, each Company Restricted Share that is outstanding immediately prior to the effective time of the Merger, will be canceled and converted into the right to receive an amount in cash equal to $13.65 less such amounts as are required to be withheld or deducted under applicable tax provisions. In addition, each holder of Company Restricted Shares will remain entitled to receive any additional amounts related to dividends payable on such Company Restricted Shares prior to the effective time but which remain subject to the vesting of the Company Restricted Shares. Payment in respect of Company Restricted Shares (including associated amounts related to dividends) will be made on such date(s) as the Company Restricted Shares would have otherwise vested, but only if the holder of such Company Restricted Shares remains continuously employed with the surviving corporation through such vesting dates.
As of May 22, 2013, Mr. Dell and certain of his related family trusts beneficially owned, in the aggregate, 274,434,319 shares of Common Stock (including (i) 1,101,948 shares subject to Company stock options exercisable within 60 days and (ii) 33,186 shares held in Mr. Dell’s 401(k) plan), or approximately 15.6% of the total number of outstanding shares of Common Stock, and have agreed with Parent to contribute to Parent, immediately prior to the consummation of the merger, 273,299,383 shares in exchange for common stock of Parent.
2 The cross-references below are being supplied pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained in the Proxy Statement, including all annexes thereto, is incorporated by reference herein in its entirety, and the responses to each item in this Transaction Statement are qualified in their entirety by the information contained in the Proxy Statement and the annexes thereto. As of the date hereof, the Proxy Statement is in preliminary form and is subject to completion or amendment. Capitalized terms used but not defined in this Transaction Statement shall have the meanings given to them in the Proxy Statement.
While each of the Filing Persons acknowledges that the Merger is a going private transaction for purposes of Rule 13E-3 under the Exchange Act, the filing of this Transaction Statement shall not be construed as an admission by any Filing Person, or by any affiliate of a Filing Person, that the Company is “controlled” by any other Filing Person.
All information contained in, or incorporated by reference into, this Transaction Statement concerning each Filing Person has been supplied by such Filing Person.
Item 1. Summary Term Sheet The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER”
Item 2. Subject Company Information (a) Name and Address. The Company’s name, and the address and telephone number of its principal executive offices are as follows:
DELL INC. One Dell Way Round Rock, Texas 78682 (512) 338-4400
(b) Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “THE SPECIAL MEETING—Record Date and Quorum” “IMPORTANT INFORMATION REGARDING DELL—Security Ownership of Certain Beneficial Owners and Management”
(c) Trading Market and Price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“IMPORTANT INFORMATION REGARDING DELL—Market Price of the Company’s Common Stock and Dividend Information”
(d) Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“THE MERGER AGREEMENT—Conduct of the Business Pending the Merger”
3 “IMPORTANT INFORMATION REGARDING DELL—Market Price of the Company’s Common Stock and Dividend Information”
(e) Prior Public Offerings. Not Applicable.
(f) Prior Stock Purchases. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“IMPORTANT INFORMATION REGARDING DELL—Transactions in Common Stock”
Item 3. Identity and Background of Filing Person (a) Name and Address. Dell Inc. is the subject company. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“THE PARTIES TO THE MERGER” “IMPORTANT INFORMATION REGARDING DELL” “IMPORTANT INFORMATION REGARDING THE PARENT PARTIES, THE SLP FILING PERSONS, THE MD FILING PERSONS AND THE MSDC FILING PERSONS”
(b) Business and Background of Entities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “THE PARTIES TO THE MERGER” “IMPORTANT INFORMATION REGARDING DELL—Company Background” “IMPORTANT INFORMATION REGARDING THE PARENT PARTIES, THE SLP FILING PERSONS, THE MD FILING PERSONS AND THE MSDC FILING PERSONS”
(c) Business and Background of Natural Persons . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“IMPORTANT INFORMATION REGARDING THE PARENT PARTIES, THE SLP FILING PERSONS, THE MD FILING PERSONS AND THE MSDC FILING PERSONS”
Item 4. Terms of the Transaction (a) Material Terms.
(1) Tender Offers. Not applicable.
(2) Mergers or Similar Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger”
4 “SPECIAL FACTORS—Plans for the Company After the Merger” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Material U.S. Federal Income Tax Consequences of the Merger” “SPECIAL FACTORS—Anticipated Accounting Treatment of the Merger” “SPECIAL FACTORS—Payment of Merger Consideration and Surrender of Stock Certificates” “THE SPECIAL MEETING—Required Vote” “THE MERGER AGREEMENT—Effect of the Merger on the Common Stock” “THE MERGER AGREEMENT—Treatment of Company Stock Options, Company RSU Awards and Company Restricted Shares” “THE MERGER AGREEMENT—Payment for the Common Stock in the Merger” “THE MERGER AGREEMENT—Conditions to the Merger”
(c) Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Limited Guarantees” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Voting Agreement” “THE MERGER AGREEMENT—Effect of the Merger on the Common Stock”
(d) Appraisal Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “RIGHTS OF APPRAISAL” ANNEX D—SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(e) Provisions for Unaffiliated Security Holders. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“PROVISIONS FOR UNAFFILIATED STOCKHOLDERS”
(f) Eligibility for Listing or Trading. Not applicable.
Item 5. Past Contacts, Transactions, Negotiations and Agreements (a) Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Financing for the Merger” “SPECIAL FACTORS—Limited Guarantees” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Voting Agreement” “THE MERGER AGREEMENT” “IMPORTANT INFORMATION REGARDING DELL—Transactions between the SLP Filing Persons and Executive Officers of the Company” ANNEX A—AGREEMENT AND PLAN OF MERGER
5 (b)—(c) Significant Corporate Events; Negotiations or Contacts . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “THE MERGER AGREEMENT” ANNEX A—AGREEMENT AND PLAN OF MERGER
(e) Agreements Involving the Subject Company’s Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Financing for the Merger” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Voting Agreement” “THE SPECIAL MEETING—Required Vote” “THE MERGER AGREEMENT” ANNEX A—AGREEMENT AND PLAN OF MERGER
Item 6. Purposes of the Transaction, and Plans or Proposals (b) Use of Securities Acquired. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Payment of Merger Consideration and Surrender of Stock Certificates” “THE MERGER AGREEMENT—Effect of the Merger on the Common Stock” “THE MERGER AGREEMENT—Treatment of Company Stock Options, Company RSU Awards and Company restricted shares” ANNEX A—AGREEMENT AND PLAN OF MERGER
(c)(1)—(8) Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger”
6 “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filings Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Plans for the Company After the Merger” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Financing for the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “THE MERGER AGREEMENT—Structure of the Merger” “THE MERGER AGREEMENT—Effect of the Merger on the Common Stock” “THE MERGER AGREEMENT—Treatment of Company Stock Options, Company RSU Awards and Company Restricted Shares” ANNEX A—AGREEMENT AND PLAN OF MERGER
Item 7. Purposes, Alternatives, Reasons and Effects (a) Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Parties and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Plans for the Company After the Merger”
(b) Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Plans for the Company After the Merger”
(c) Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger”
7 “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Plans for the Company After the Merger” “SPECIAL FACTORS—Certain Effects of the Merger”
(d) Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Plans for the Company After the Merger” “SPECIAL FACTORS—Certain Effects of the Merger” “SPECIAL FACTORS—Financing for the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Material U.S. Federal Income Tax Consequences of the Merger” “SPECIAL FACTORS—Fees and Expenses” “THE MERGER AGREEMENT—Structure of the Merger” “THE MERGER AGREEMENT—Effect of the Merger on the Common Stock” “THE MERGER AGREEMENT—Treatment of Company Stock Options, Company RSU Awards and Company Restricted Shares” “APPRAISAL RIGHTS” ANNEX A—AGREEMENT AND PLAN OF MERGER ANNEX D—SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
Item 8. Fairness of the Transaction (a)—(b) Fairness; Factors Considered in Determining Fairness . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Opinion of J.P. Morgan Securities LLC” “SPECIAL FACTORS—Opinion of Evercore Group L.L.C.” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” ANNEX B—OPINION OF J.P. MORGAN SECURITIES LLC ANNEX C—OPINION OF EVERCORE GROUP L.L.C.
8 The presentations and discussion materials dated February 4, 2013, January 18, 2013, January 15, 2013, December 22, 2012, December 6, 2012, December 5, 2012, October 27, 2012, October 18, 2012, October 9, 2012, October 2, 2012, September 23, 2012, September 21, 2012 and September 14, 2012, each prepared by J.P. Morgan Securities LLC and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(5), (c)(8), (c)(11), (c)(14), (c)(16), (c)(18), (c)(20) through (c)(22) and (c)(25) through (c)(29) and are incorporated by reference herein. J.P. Morgan Securities LLC has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The presentations dated February 4, 2013, January 18, 2013 and January 15, 2013, each prepared by Evercore Group L.L.C. and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(4), (c)(7), (c)(10) and (c)(13) and are incorporated by reference herein. Evercore Group L.L.C. has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The discussion materials dated October 18, 2012 and October 10, 2012, each prepared by Goldman, Sachs & Co. and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(23) and (c)(24) and are incorporated by reference herein. Goldman, Sachs & Co. has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The presentations dated February 4, 2013, January 18, 2013, January 15, 2013, January 2, 2013, December 6, 2012 and December 5, 2012, each prepared by The Boston Consulting Group and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(3), (c)(6), (c)(9), (c)(12), (c)(15), (c)(17) and (c)(19) and are incorporated by reference herein. The Boston Consulting Group has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
(c) Approval of Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “THE SPECIAL MEETING—Record Date and Quorum” “THE SPECIAL MEETING—Required Vote” “THE MERGER AGREEMENT—Conditions to the Merger” ANNEX A—AGREEMENT AND PLAN OF MERGER
(d) Unaffiliated Representative. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “PROVISIONS FOR UNAFFILIATED STOCKHOLDERS”
(e) Approval of Directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger”
9 “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Interest of the Company’s Directors and Executive Officers in the Merger” “THE SPECIAL MEETING—Recommendation of our Board of Directors and Special Committee”
(f) Other Offers. Not applicable.
Item 9. Reports, Opinions, Appraisals and Negotiations (a)—(c) Report, Opinion or Appraisal; Preparer and Summary of the Report, Opinion or Appraisal; Availability of Documents . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Opinion of J.P. Morgan Securities LLC” “SPECIAL FACTORS—Opinion of Evercore Group L.L.C.” “WHERE YOU CAN FIND ADDITIONAL INFORMATION” ANNEX B—OPINION OF J.P. MORGAN SECURITIES LLC ANNEX C—OPINION OF EVERCORE GROUP L.L.C.
The presentations and discussion materials dated February 4, 2013, January 18, 2013, January 15, 2013, December 22, 2012, December 6, 2012, December 5, 2012, October 27, 2012, October 18, 2012, October 9, 2012, October 2, 2012, September 23, 2012, September 21, 2012 and September 14, 2012, each prepared by J.P. Morgan Securities LLC and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(5), (c)(8), (c)(11), (c)(14), (c)(16), (c)(18), (c)(20) through (c)(22) and (c)(25) through (c)(29) and are incorporated by reference herein. J.P. Morgan Securities LLC has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The presentations dated February 4, 2013, January 18, 2013 and January 15, 2013, each prepared by Evercore Group L.L.C. and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(4), (c)(7), (c)(10) and (c)(13) and are incorporated by reference herein. Evercore Group L.L.C. has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The discussion materials dated October 18, 2012 and October 10, 2012, each prepared by Goldman, Sachs & Co. and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(23) and (c)(24) and are incorporated by reference herein. Goldman, Sachs & Co. has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The presentations dated February 4, 2013, January 18, 2013, January 15, 2013, January 2, 2013, December 6, 2012 and December 5, 2012, each prepared by The Boston Consulting Group and reviewed by the Board of Directors or the Special Committee of the Company, as applicable, are attached hereto as Exhibits (c)(3), (c)(6), (c)(9), (c)(12), (c)(15), (c)(17) and (c)(19) and are incorporated by reference herein. The Boston Consulting Group has consented to the inclusion of its presentations to the Board of Directors and the Special Committee of the Company as exhibits hereto.
The reports, opinions or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of the Company during its regular business hours by any interested holder of Common Stock or any representative who has been so designated in writing.
10 Item 10. Source and Amounts of Funds or Other Consideration (a)—(b), (d) Source of Funds; Conditions; Borrowed Funds . The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Financing for the Merger” “SPECIAL FACTORS—Limited Guarantees” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger—Rollover Arrangements” “THE MERGER AGREEMENT—Other Covenants and Agreements—Financing”
(c) Expenses. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Fees and Expenses” “THE MERGER AGREEMENT—Termination Fees; Reimbursement of Expenses” “THE MERGER AGREEMENT—Expenses”
Item 11. Interest in Securities of the Subject Company (a) Securities Ownership. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“SUMMARY TERM SHEET” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “IMPORTANT INFORMATION REGARDING DELL—Security Ownership of Certain Beneficial Owners and Management”
(b) Securities Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“IMPORTANT INFORMATION REGARDING DELL—Transactions in Common Stock”
Item 12. The Solicitation or Recommendation (d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET” “QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger” “SPECIAL FACTORS—Voting Agreement” “THE SPECIAL MEETING—Required Vote”
11 (e) Recommendations of Others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Position of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Position of the MD Filing Persons as to Fairness of the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Company for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the Parent Parties, the SLP Filing Persons and the MSDC Filing Persons for the Merger” “SPECIAL FACTORS—Purposes and Reasons of the MD Filing Persons for the Merger”
Item 13. Financial Statements (a) Financial Information. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“IMPORTANT INFORMATION REGARDING DELL—Selected Summary Historical Consolidated Financial Data” “IMPORTANT INFORMATION REGARDING DELL—Ratio of Earnings to Fixed Charges” “IMPORTANT INFORMATION REGARDING DELL—Book Value Per Share” “WHERE YOU CAN FIND ADDITIONAL INFORMATION”
(b) Pro Forma Information. Not applicable.
Item 14. Persons/Assets, Retained, Employed, Compensated or Used (a)—(b) Solicitations or Recommendations; Employees and Corporate Assets . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Background of the Merger” “SPECIAL FACTORS—Reasons for the Merger; Recommendation of the Board of Directors; Fairness of the Merger” “SPECIAL FACTORS—Fees and Expenses” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “THE SPECIAL MEETING—Solicitation of Proxies” “THE SPECIAL MEETING—Additional Assistance”
Item 15. Additional Information (b) Golden Parachute Compensation. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER” “SPECIAL FACTORS—Interests of the Company’s Directors and Executive Officers in the Merger” “SPECIAL FACTORS—Advisory Vote on Specified Compensation” “THE MERGER AGREEMENT—Treatment of Company Stock Options, Company RSU Awards and Company restricted shares”
(c) Other Material Information. The entirety of the Proxy Statement, including all annexes thereto, is incorporated herein by reference.
12 Item 16. Exhibits
(a)(2)(i) Preliminary Proxy Statement of Dell Inc. (incorporated by reference to the Schedule 14A filed concurrently with this Transaction Statement with the Securities and Exchange Commission).
(a)(2)(ii) Form of Proxy Card (incorporated herein by reference to the Proxy Statement).
(a)(2)(iii) Letter to Stockholders (incorporated herein by reference to the Proxy Statement).
(a)(2)(iv) Notice of Special Meeting of Stockholders (incorporated herein by reference to the Proxy Statement). (a)(2)(v) Press Release issued by Dell Inc., dated February 5, 2013, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(vi) Key Messages, dated February 5, 2013, incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8- K filed with the SEC on February 5, 2013. (a)(2)(vii) E-mail from Michael Dell to Employees, transmitted on February 5, 2013, incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(viii) E-mail from Brian Gladden and Steve Price to Employees, transmitted on February 5, 2013, incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(ix) VPD Call Transcript, dated February 5, 2013, incorporated by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(x) Executive Leadership Team Call Script, dated February 5, 2013, incorporated by reference to Exhibit 99.6 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(xi) Team Member Frequently Asked Questions, dated February 5, 2013, incorporated by reference to Exhibit 99.7 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(xii) E-mail to Channel partner, transmitted on February 5, 2013, incorporated by reference to Exhibit 99.8 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(xiii) EMEA Works Council E-mail, transmitted on February 5, 2013, incorporated by reference to Exhibit 99.9 to the Company’s Current Report on Form 8-K filed with the SEC on February 5, 2013. (a)(2)(xiv) Account Executive Talking Points, delivered on February 6, 2013, incorporated by reference to the Schedule 14A filed with the SEC on February 6, 2013. (a)(2)(xv) E-mail to Employees, transmitted on February 7, 2013, incorporated by reference to the Schedule 14A filed with the SEC on February 7, 2013. (a)(2)(xvi) E-mail to Employees, transmitted on February 8, 2013, incorporated by reference to the Schedule 14A filed with the SEC on February 8, 2013. (a)(2)(xvii) Note, communicated on February 11, 2013, incorporated by reference to the Schedule 14A filed with the SEC on February 11, 2013. (a)(2)(xviii) Questions and Answers About the Dell Transaction, posted to the Dell Inc. web site on February 14, 2013, incorporated by reference to the Schedule 14A filed with the SEC on February 14, 2013. (a)(2)(xix) Communication to Employees, circulated on March 4, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 4, 2013.
(a)(2)(xx) Note, communicated on March 5, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 5, 2013.
13 (a)(2)(xxi) Statement from the Special Committee, issued on March 6, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 6, 2013. (a)(2)(xxii) Statement from the Special Committee, issued on March 7, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 7, 2013. (a)(2)(xxiii) Note, communicated to Dell employees on March 8, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 8, 2013. (a)(2)(xxiv) Interview given by Michael Dell on March 8, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 11, 2013.
(a)(2)(xxv) Letters sent on March 12, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 12, 2013.
(a)(2)(xxvi) Letter sent on March 15, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 15, 2013. (a)(2)(xxvii) Statement from the Special Committee, issued on March 25, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 25, 2013. (a)(2)(xxviii) Press release issued by the Special Committee on March 29, 2013, incorporated by reference to the Schedule 14A filed with the SEC on March 29, 2013. (a)(2)(xxix) Message to Employees, made available on April 1, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 1, 2013. (a)(2)(xxx) Press release issued by the Special Committee on April 5, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 5, 2013. (a)(2)(xxxi) Press release issued by the Special Committee on April 16, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 16, 2013. (a)(2)(xxxii) Note to Employees, sent on April 19, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 19, 2013. (a)(2)(xxxiii) Press release issued by the Special Committee on April 19, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 19, 2013. (a)(2)(xxxiv) Note to Employees, sent on April 23, 2013, incorporated by reference to the Schedule 14A filed with the SEC on April 23, 2013. (a)(2)(xxxv) Press release issued by the Special Committee on May 10, 2013, incorporated by reference to the Schedule 14A filed with the SEC on May 10, 2013. (a)(2)(xxxvi) Press release issued by the Special Committee on May 13, 2013, incorporated by reference to the Schedule 14A filed with the SEC on May 13, 2013. (a)(2)(xxxvii) Message to Employees, sent on May 13, 2013, incorporated by reference to the Schedule 14A filed with the SEC on May 13, 2013. (a)(2)(xxxviii) Press release issued by the Special Committee on May 20, 2013, incorporated by reference to the Schedule 14A filed with the SEC on May 20, 2013. (b)(1)†††† Second Amended and Restated Facilities Commitment Letter, dated May 3, 2013, among Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Credit Suisse AG, Credit Suisse Securities (USA) LLC, Royal Bank of Canada, RBC Capital Markets, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Morgan Stanley Senior Funding, Inc., UBS Loan Finance LLC, BNP Paribas and HSBC Bank USA, N.A. and Denali Intermediate Inc. (b)(2)† Amended and Restated Securities Purchase Agreement, dated as of March 22, 2013, by and between Denali Holding Inc. and Microsoft Corporation. (c)(1) Opinion of J.P. Morgan Securities LLC, dated February 4, 2013 (incorporated herein by reference to Annex B of the Proxy Statement).
14 (c)(2) Opinion of Evercore Group L.L.C., dated February 4, 2013 (incorporated herein by reference to Annex C of the Proxy Statement). (c)(3) Presentation of The Boston Consulting Group to the Board of Directors of the Company, dated February 4, 2013.
(c)(4)*††††† Presentation of Evercore Group L.L.C. to the Board of Directors of the Company, dated February 4, 2013.
(c)(5)*††††† Presentation of J.P. Morgan Securities LLC to the Board of Directors of the Company, dated February 4, 2013. (c)(6) Presentation of The Boston Consulting Group to the Special Committee of the Company, dated February 4, 2013.
(c)(7)*††††† Presentation of Evercore Group L.L.C. to the Special Committee of the Company, dated February 4, 2013.
(c)(8)*††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated February 4, 2013. (c)(9)* Presentation of The Boston Consulting Group to the Board of Directors of the Company, dated January 18, 2013.
(c)(10)*††††† Presentation of Evercore Group L.L.C. to the Board of Directors of the Company, dated January 18, 2013. (c)(11)*††††† Presentation of J.P. Morgan Securities LLC to the Board of Directors of the Company, dated January 18, 2013. (c)(12)* Presentation of The Boston Consulting Group to the Special Committee of the Company, dated January 15, 2013.
(c)(13)*††††† Presentation of Evercore Group L.L.C. to the Special Committee of the Company, dated January 15, 2013. (c)(14)*††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated January 15, 2013. (c)(15)* Presentation of The Boston Consulting Group to the Special Committee of the Company, dated January 2, 2013. (c)(16)††††† Discussion Materials of J.P. Morgan Securities LLC to the Special Committee of the Company, dated December 22, 2012. (c)(17) Presentation of The Boston Consulting Group to the Board of Directors of the Company, dated December 6, 2013. (c)(18)††††† Discussion Materials of J.P. Morgan Securities LLC to the Board of Directors of the Company, dated December 6, 2012. (c)(19) Presentation of The Boston Consulting Group to the Special Committee of the Company, dated December 5, 2013. (c)(20)††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated December 5, 2012. (c)(21)*††††† Discussion Materials of J.P. Morgan Securities LLC to the Special Committee of the Company, dated October 27, 2012. (c)(22)*††††† Discussion Materials of J.P. Morgan Securities LLC to the Special Committee of the Company, dated October 18, 2012.
15 (c)(23) Discussion Materials of Goldman, Sachs & Co. to the Board of Directors of the Company, dated October 18, 2012. (c)(24) Discussion Materials of Goldman, Sachs & Co. to the Special Committee of the Company, dated October 10, 2012.
(c)(25)*††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated October 9, 2012.
(c)(26)††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated October 1, 2012. (c)(27)*††††† Discussion Materials of J.P. Morgan Securities LLC to the Special Committee of the Company, dated September 23, 2012. (c)(28)††††† Perspectives on Denali of J.P. Morgan Securities LLC to the Special Committee of the Company, dated September 21, 2012. (c)(29)††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated September 14, 2012. (c)(30)††††† Presentation of J.P. Morgan Securities LLC to the Special Committee of the Company, dated November 16, 2012. (d)(1) Agreement and Plan of Merger, dated as of February 5, 2013, by and among Denali Holding Inc., Denali Intermediate Inc., Denali Acquiror Inc. and Dell Inc. (incorporated herein by reference to Annex A of the Proxy Statement). (d)(2) Voting and Support Agreement, dated as of February 5, 2013, by and among the stockholders listed on the signature pages thereto and Dell Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on February 15, 2013. (d)(3)† Rollover and Equity Financing Commitment Letter, dated February 5, 2013, among Michael S. Dell, Susan Lieberman Dell Separate Property Trust and Denali Holding Inc. (d)(4)† Equity Financing Commitment Letter, dated February 5, 2013, between MSDC Management, L.P. and Denali Holding Inc. (d)(5)† Equity Financing Commitment Letter, dated February 5, 2013, among Silver Lake Partners III, L.P., Silver Lake Partners IV, L.P. and Denali Holding Inc.
(d)(6)† Limited Guarantee, dated as of February 5, 2013, between Michael S. Dell and Dell Inc. in favor of Dell Inc. (d)(7)† Limited Guarantee, dated as of February 5, 2013, between Silver Lake Partners III, L.P. and Dell Inc. in favor of Dell Inc. (d)(8)† Limited Guarantee, dated as of February 5, 2013, between Silver Lake Partners IV, L.P. and Dell Inc. in favor of Dell Inc. (d)(9)† Interim Investors Agreement, dated as of February 5, 2013, by and among Denali Holding Inc., Michael S. Dell, Susan Lieberman Dell Separate Property Trust, MSDC Management, L.P., Silver Lake Partners III, L.P., Silver Lake Partners IV, L.P., Silver Lake Technology Investors III, L.P., and, for purposes of Sections 2.7.2, 2.12.2, 2.12.6, 2.20 and Article III only, Michael S. Dell 2009 Gift Trust and Susan L. Dell 2009 Gift Trust. (d)(10)† Form of Employment Agreement to be entered into by and among Dell, Inc., Denali Holding Inc. and Michael S. Dell. (f)(1) Section 262 of the Delaware General Corporation Law (incorporated herein by reference to Annex D of the Proxy Statement).
16 * Certain portions of this exhibit have been redacted and separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.
† Previously filed by this Transaction Statement on March 29, 2013.
†† Previously filed by Amendment No. 1 to this Transaction Statement on March 29, 2013.
††† Previously filed by Amendment No. 2 to this Transaction Statement on May 2, 2013.
†††† Previously filed by Amendment No. 3 to this Transaction Statement on May 10, 2013.
†††††Previouslyfiled by Amendment No. 5 to this Transaction Statement on May 20, 2013.
17 SIGNATURE
After due inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated as of May 30, 2013
DELL INC.
By: /s/ Brian T. Gladden Name: Brian T. Gladden Title: Senior Vice President, Chief Financial Officer
DENALI HOLDING INC.
By: /s/ Karen King Name: Karen King Title: Vice President
DENALI INTERMEDIATE INC.
By: /s/ Karen King Name: Karen King Title: Vice President
DENALI ACQUIROR INC.
By: /s/ Karen King Name: Karen King Title: Vice President
SILVER LAKE PARTNERS III, L.P.
By: Silver Lake Technology Associates III, L.P., its general partner
By: SLTA III (GP), L.L.C., its general partner
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
18 SILVER LAKE TECHNOLOGY ASSOCIATES III, L.P.
By: SLTA III (GP), L.L.C., its general partner
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
SLTA III (GP), L.L.C.
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
SILVER LAKE GROUP, L.L.C.
By: /s/ James Davidson Name: James Davidson Title: Managing Director
SILVER LAKE PARTNERS IV, L.P.
By: Silver Lake Technology Associates IV, L.P., its general partner
By: SLTA IV (GP), L.L.C., its general partner
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
SILVER LAKE TECHNOLOGY ASSOCIATES IV, L.P.
By: SLTA IV (GP), L.L.C., its general partner
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
19 SLTA IV (GP), L.L.C.
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
SILVER LAKE TECHNOLOGY INVESTORS III, L.P.
By: Silver Lake Technology Associates III, L.P., its general partner
By: SLTA III (GP), L.L.C., its general partner
By: Silver Lake Group, L.L.C., its managing member
By: /s/ James Davidson Name: James Davidson Title: Managing Director
MICHAEL S. DELL
By: /s/ Michael S. Dell Name: Michael S. Dell
SUSAN LIEBERMAN DELL SEPARATE PROPERTY TRUST
By: /s/ Susan L. Dell Name: Susan L. Dell Title: Trustee
MSDC MANAGEMENT, L.P.
By: /s/ Marc R. Lisker Name: Marc R. Lisker Title: Managing Director
MSDC MANAGEMENT (GP), LLC
By: /s/ Marc R. Lisker Name: Marc R. Lisker Title: Managing Director
20 Exhibit (c) (3)
FebruaryProject Denali 04, 2013
AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our 2These materials may not be copied or given to any person or entity (“Third-Parties”) other than the Client without BCG’s prior written consent.
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 3What is the impact of separating DFS (outside go private scenario)?
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 4What is the impact of separating DFS (outside go private scenario)?
ProposedFour primary split: impacts separate from Core splitting / New Denali EUC Peripherals StorageEUC Support NetworkingServices “New“Core Denali” SolutionsPC Company Company Strategic perspective on split Cost1 Cost impact synergies: on shared functions Sales force cross-selling 2Economies Strategy &of execution:scale and scope ImpactTactics onand management partnerships focusmade possible 3Potential Market execution valuation: risks “SumImpact of of parts” new portfolio value shift logic on trading multiple Impact4 Transaction on existing costs: initiatives 5Upfront costs
Initial review of must-believes to pursue split SeparationMust believe 21 createsSplit enables minimal improved dis-synergies strategies and execution for each BU 43 TransactionSplit will drive can marketbe executed revaluation quickly with little disruption or risk RationaleInitial assessment -Both Est. parts$770M of businesscost synergy currently from benefitprocurement, from combined overhead, scale marketing, etc Common- Est. $420M sales revenue team key synergy enabler from of strategysales pull-through (shift to higher in core margin and new enterprise products in mid-market); split expected to increase Opex, decrease cross-sell GainsBroad inconviction management among focus Denali could leaders be achieved that combination with new metrics, of Core incentives, and New BUDenali cost is allocations at heart of and business processes model – theyand docompetitive not require advantage split Separate Core / New stocks would appeal to new types of investors OnHowever, average, perceived firms see lack 3-4% of improvementtransparency intoin share BUs price is already from announcement1being addressed by changes in reporting (underway); unclear how much split would add -Core/New A split will are likely highly entail interlinked changes operationally to core processes and organizationallyand IT, and require separation of duplicate assets (brand, sales structure, back office, DFS) Empirically,Announced demergers demergers do are not can always take time reach to completioncomplete ( varies(e.g., HP) by size of demerger - can be ~6 months planning + 18 months execution) 1.While Analysis separation based ison in an progress, event study business of 28 will spin-offs/equity be disrupted carve-outs over 2005-09 6Source: BCG study on value creation from splits (Nov 2010); BCG research, Denali Dataroom
Difference from Project Clean estimate driven primarily by use of the “9/21 case” business forecast 30Denali post-split DCF value per share: Project Clean vs. current effort1 2025 1015 05 BCGProject Base Clean’s Case forecast Avg Value1 assumed Denali split and achieved mgmt plan; most of the value upside was driven by 9/21 forecast, not the split per se Prj.(w/o Clean: Split) =Original 10.1-14.5 Estimate ChangePrepared in by Mgmt Goldman Case in May 2011 Prj.Decline Clean: from Updated April 2011 Estimate forecast to Sept 2012 BasePrj. Clean Forecast methods Change applied (by BCG) to Sept. 2012 forecast LostBase Synergiescase forecast used instead of 9/21 plan Transaction$950 earnings costs impact vs $590M Multiple$480M one-time; Expansion not included in Project Clean Improved4.5x/7.5x usedExecution for Core/New Denali vs. 6.7x for each in Proj. Clean CurrentNo change Estimate (both methods assume zero) 71. Numbers shown for current effort are average of high (7.6x multiple) and low (4.5x multiple) cases for Base Case
One-TimeInitial estimates Costs of synergy/cost impact of potential split ItemOngoing ($M) Dis-Synergies ProcurementRevenue (GM) SalesMarketing OpEx OpEx G&AR&D (OtherOpEx OpEx) GeneralEarnings split Impact1 costs EarningsTransaction Impact1 fees estimateInitial (260)(420) (220)(140) (150)- (500)(950) (480)(100) Project (830)Clean (150)(100) +80- (590)+260 - - - ReducedDrivers revenue pull-through DecreasedDecline in purchasingsynergies, ongoingpower due branding to scale cost loss Decreased synergies in operations None Re-branding,Decreased synergies turnover, in backdelay office, in transformation, mgmt, advisors, new property systems, etc. MethodologyBank and advisor fees for analysis and deal financing Cost1% reduction increase infor Core processor GM base and ofhard ~$5.1B; drive spend:5% reduction 5% for in New New (base GM ofbase ~$3.8B), of ~$7.2B; 1% for percentages Core (base are of half ~$5.8B)2 of Project Clean’s 6%12% increase increase on on base base of of ~$4B4 ~$1.2B3; ; equivalent does not to include estimating initial that re-branding 10% of sales (which ops ispositions in “one-time are duplicated costs”) Clean’sAssumed rationale no existing for projecting synergies costor dis-synergies; reduction is unclearProject 1/38% ofincrease HP’s $1.5B on base estimate of ~$2.3B5, (designed plus to$20M be conservative for duplication – Denali of core is 1/2public HP’s company size) costs (board, compliance, etc.); Project Clean’s rationale for projecting cost reduction is unclear 1.Industry-standard Numbers do not 0.5% sum of due transaction to tax impact size ($20B) 3.2. BasedPer rough on 90% management scale factor estimates 5.4. Based on 95% scale factor 8Note: “Ongoing” figures show FY14-FY17 average; all projections are incremental to current forecast; numbers rounded to nearest $10M.
Open questions regarding split SynergiesIssue / dis-synergies SalesExecution Force Risk Organization OutstandingImpact on New questions Denali transformation ToWhat what dis-synergies extent will wouldsplit enable be caused long-term by splitting gains through companies? better management? How long will split take to execute? HowWhat willis downside sales force risk be if divided? split is poorly managed or lasts longer than expected? (Increased turnover, poor sales, etc.) ToHow what will extent split affect will transformationexisting client relationships stall due to andlack current of mgmt cross-selling focus? contracts? How will Newcurrent Denali executive fund growthteam be without divided cash between generation new companies? from Core? LaunchPotential cross-functional next steps effort to detail synergies bottom-up by division BuildAnalyze detailed competitive roadmap opportunities for logistics for of businesses split as separate companies ModelKey milestones, range of execution deadlines, scenarios and owners Engage advisors to plan legal and financial structure of split (e.g., spin-off, split-off, etc.) InterviewPlan detailed customers allocation to developof new sales deeper organization understanding (including of expected structure, reaction wiring, processes, etc) CreateRefine successionstrategic plans plan for and two launch separate search companies for new executive committee 9Assess capital structure and plan for likely capital needs of both companies
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 10What is the impact of separating DFS (outside go private scenario)?
Four criteria to assess DFS separation (outside ‘go private’) IllustrativeDFS functions DFS separation Possible split of functions SellingBranding Servicing CreditPricing assessment InvoicingFunding DisposalCollection DenaliRemarketing PartnerDenali and Partner 1Assessment criteria How important is financing/leasing as part of customer offer? 32 How do benefits of an integrated (captive) finance unit compare to separated (third party) finance entity? 4Would a DFS separation (outside a ‘go private’ scenario) create strategic value? 11Can DFS be separated quickly with little disruption?
Observations on separation of DFS (outside ‘go private’) 1Observations 2Financing/Leasing Integrated (captive) - important financing part units of enablethe customer coordinated offer marketing & life cycle asset management Value3 from DFS separation is less obvious at this point Separation4 will take time and may cause disruption ADescription well-integrated sales and financing interface is valued by customers - FasterDFS has approval 23% pen. times rate with in SMBs,fewer handoffs manages important ~$3B in commercialto customers receivables (BCG case experience) -Mid Most market competitors and Enterprise have retained customers captive interested finance inarms financing (e.g. HP, – especially Cisco, IBM) leasing -Parent’s 47% of knowledge DFS originations of products in FY’12 enables were life leases; cycle managementlargely to SMB of leasedand PLE assets segments ConsolidatedCaptive has customer co. can integrate relationships financing and parent with pricing/promotions has access to product to increase pipeline probability information of – sale this facilitates migrating customers from Gen 1.0 to Gen 2.0 products as technology evolves For a transaction to offer compelling value, the offer should offset revenue dis-synergies from: - Inclusion of the third-party financing entity into commercial sales cycle -Denali’s reduced flexibility to integrate pricing/promotions with financing to sell DFSDenali not currently configured has forstrong separation credit rating, at present; with thereforesmall disadvantage separating (ifwill any) take on time funding costs - DFS is not a separate legal entity - DFSTreasury, CSMB Legal, organization HR, and isother integrated support with functions its counterpart handled Denalithrough division shared services at Denali -Denali Base caseis in and the costmiddle take-out of executing requires aexecution transformation bandwidth and DFSwith highseparation value creationmay impact potential mgmt focus 12Source: Denali data, Management interviews, Advisor interviews, BCG experts, BCG research
DFS separation tradeoffs different in a ‘go private’ scenario 21 OverallFinancial strategic reasons and to retaincommercial DFS become logic for less effects attractive, of captive since integration parent will do have not changea much more levered balance sheet (with credit rating below investment grade) Higher vulnerabilitycost of funds in and scenario lower ROEwhere external liquidity becomes difficult and/or very expensive to access DFS3 Opportunity separation to lowers separate leverage DFS becomes and/or reduces more attractive need for sponsor equity 13Sale proceeds can be used to return cash to investors
DFS offers differentiated value FYDFS ‘12 supports important customers for Denali especially SMBs OriginationsPen rateManaged % ($B) SMBassets ($B) 1.223 PLE0.8 1.58 Consumer2.1 1.040 Total2.0 3.615 47%4.9 of total originations are leasing (mgmtSMBs (esp.presentation) mid market) is a growth priority for DFS Source:~60% consumers Denali management receivables information, are sub-prime BCG research LeasingCaptive financeis a differentiator units can offer differentiated value to SMBs “OEM“Ability financing to provide would purchasing be easier and because leasing there is advantageous, is no debate on – themoving residual the valueoutflow of thefrom asset Capex during to Opex the life is ofattractive the financing.” for us.” –– CIOCIO regional of a small bank bank Faster“Asymmetric turnaround product times information are valued gives OEMs a distinct advantage over third parties – “ BCG expert “Typical“ Captive corporate financing contract is almost takes always 1-3 monthsequal or to faster negotiate than ;external.” having a single– CIO contract manufacturing can speed SMB the transaction by over 1 month” - IT manager small co. “IfIntegrated you can sales get theand buyer financing into thepreferred mind-frame that they are getting great technology at a fair value price along with a variety of payment mechanism, then you are creating an easier decision process for them.” – CIO 14manufacturing
Most tech co’s have captive finance units and IG rating Technology (OEMs) Retailers MicrosoftCompany CISCOIBM hpORACLE Symantecxerox BESTLenovo BUY Captivehhgregg ProviderOutsourced IBMGo-to-market Global Finance is via Microsoft Partners OracleCisco Capital Financing HP Financial Services GEXerox Capital Finance CITApple Financial Services GEMasterCard, Capital Capital One AAARating A+AA- BBB+A+ BBB- BBB- - BB- - 15Source: BCG research, S&P ratings as at 30 Jan 2012
From Jan 18, 2013 FinancialBoard presentation forecasts lead to range of implied Denali DCF values LowDCF case3$ / share calculations High case4 Base case Base case forecast 9.7Present value of business CFs Cash13.4 (after tax)1,2 4.3 – 4.9 (5.2)Debt1 Long-term(5.2) investments1 1.3- 1.4 10.1Base case– 10.8 total Management13.8– 14.5 initiatives Productivity1 cost takeout: Realize 25-75% of $3.3B cost out 3.2–2.2– 10.06.8 Maintain2 / grow Core : Get 0-50% of 0~11% – 0.6 share (vs. 6%) in EM in FY17 30 – 0.8 0Sales – 1.5 force effectiveness: Realize 0-50% of 5% p.a. productivity gain in each0 – 2.1 of 3 years Market sensitivities PC4a market upside 3.01.5 PC4b market downside (2.0)(1.4) New5a Denali upside: Revenue CAGR 6.5% (base – 4.5%) till FY’17 vs. FY’28 1.20.8 – 2.6 New5b Denali downside: Revenue CAGR 2.5% (base - 4.5%) till FY’17 vs. FY28 (1.2)–(0.8) (2.3) Discount6 rate: Range from 7.5-9.5% (base case – 8.5%) (0.5)(0.3) –– 0.30.5 multiple1. Denali (which balance is sheet 4.5x asEBITA) of November 3. TV based 2, 2012 on 2.revaluation Assumes upward90% cash to andreflect investments the NPV ofare the offshore TV over and FY’17-28 subject to (which 25%-35% calculates US taxes out onto 7.5xrepatriation. EBITA) 3.Note: TV based1742M on diluted no revaluation shares outstanding vs. the unaffected as at Nov late 02, 2012 2012. trading BCGNumbers does may not providenot foot fairnessdue to rounding. opinions orDiscount valuations rate of of market 8.5% usedtransactions. to calculate Third-Parties present values. may not rely on these materials for any purpose whatsoever. Source: BCG analysis, Denali Data Room, Industry Publications, 16Denali 10Q and 10K Exhibit (c)(6)
FebruaryProject Denali 04, 2013
Preface AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our 2These materials may not be copied or given to any person or entity (“Third-Parties”) other than the Client without BCG’s prior written consent.
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 3What is the impact of separating DFS (outside go private scenario)?
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 4What is the impact of separating DFS (outside go private scenario)?
ProposedFour primary split: impacts separate from Core splitting / New Denali EUC Peripherals StorageEUC Support NetworkingServices “New“Core Denali” SolutionsPC Company Company Strategic perspective on split Cost1 Cost impact synergies: on shared functions Sales force cross-selling 2Economies Strategy &of execution:scale and scope ImpactTactics onand management partnerships focusmade possible 3Potential Market execution valuation: risks “SumImpact of of parts” new portfolio value shift logic on trading multiple Impact4 Transaction on existing costs: initiatives 5Upfront costs
Initial review of must-believes to pursue split SeparationMust believe 21 createsSplit enables minimal improved dis-synergies strategies and execution for each BU 43 TransactionSplit will drive can marketbe executed revaluation quickly with little disruption or risk RationaleInitial assessment -Both Est. parts$770M of businesscost synergy currently from benefitprocurement, from combined overhead, scale marketing, etc Common- Est. $420M sales revenue team key synergy enabler from of strategysales pull-through (shift to higher in core margin and new enterprise products in mid-market); split expected to increase Opex, decrease cross-sell GainsBroad inconviction management among focus Denali could leaders be achieved that combination with new metrics, of Core incentives, and New BUDenali cost is allocations at heart of and business processes model – theyand docompetitive not require advantage split Separate Core / New stocks would appeal to new types of investors OnHowever, average, perceived firms see lack 3-4% of improvementtransparency intoin share BUs price is already from announcement1being addressed by changes in reporting (underway); unclear how much split would add -Core/New A split will are likely highly entail interlinked changes operationally to core processes and organizationallyand IT, and require separation of duplicate assets (brand, sales structure, back office, DFS) Empirically,Announced demergers demergers do are not can always take time reach to completioncomplete ( varies(e.g., HP) by size of demerger - can be ~6 months planning + 18 months execution) 1.While Analysis separation based ison in an progress, event study business of 28 will spin-offs/equity be disrupted carve-outs over 2005-09 6Source: BCG study on value creation from splits (Nov 2010); BCG research, Denali Dataroom
Difference from Project Clean estimate driven primarily by use of the “9/21 case” business forecast 30Denali post-split DCF value per share: Project Clean vs. current effort1 2025 1015 05 BCGProject Base Clean’s Case forecast Avg Value1 assumed Denali split and achieved mgmt plan; most of the value upside was driven by 9/21 forecast, not the split per se Prj.(w/o Clean: Split) =Original 10.1-14.5 Estimate ChangePrepared in by Mgmt Goldman Case in May 2011 Prj.Decline Clean: from Updated April 2011 Estimate forecast to Sept 2012 BasePrj. Clean Forecast methods Change applied (by BCG) to Sept. 2012 forecast LostBase Synergiescase forecast used instead of 9/21 plan Transaction$950 earnings costs impact vs $590M Multiple$480M one-time; Expansion not included in Project Clean Improved4.5x/7.5x usedExecution for Core/New Denali vs. 6.7x for each in Proj. Clean CurrentNo change Estimate (both methods assume zero) 71. Numbers shown for current effort are average of high (7.6x multiple) and low (4.5x multiple) cases for Base Case
One-TimeInitial estimates Costs of synergy/cost impact of potential split ItemOngoing ($M) Dis-Synergies ProcurementRevenue (GM) SalesMarketing OpEx OpEx G&AR&D (OtherOpEx OpEx) GeneralEarnings split Impact1 costs EarningsTransaction Impact1 fees estimateInitial (260)(420) (220)(140) (150)- (500)(950) (480)(100) Project (830)Clean (150)(100) +80- (590)+260 - - - ReducedDrivers revenue pull-through DecreasedDecline in purchasingsynergies, ongoingpower due branding to scale cost loss Decreased synergies in operations None Re-branding,Decreased synergies turnover, in backdelay office, in transformation, mgmt, advisors, new property systems, etc. MethodologyBank and advisor fees for analysis and deal financing Cost1% reduction increase infor Core processor GM base and ofhard ~$5.1B; drive spend:5% reduction 5% for in New New (base GM ofbase ~$3.8B), of ~$7.2B; 1% for percentages Core (base are of half ~$5.8B)2 of Project Clean’s 6%12% increase increase on on base base of of ~$4B4 ~$1.2B3; ; equivalent does not to include estimating initial that re-branding 10% of sales (which ops ispositions in “one-time are duplicated costs”) Clean’sAssumed rationale no existing for projecting synergies costor dis-synergies; reduction is unclearProject 1/38% ofincrease HP’s $1.5B on base estimate of ~$2.3B5, (designed plus to$20M be conservative for duplication – Denali of core is 1/2public HP’s company size) costs (board, compliance, etc.); Project Clean’s rationale for projecting cost reduction is unclear 1.Industry-standard Numbers do not 0.5% sum of due transaction to tax impact size ($20B) 3.2. BasedPer rough on 90% management scale factor estimates 5.4. Based on 95% scale factor 8Note: “Ongoing” figures show FY14-FY17 average; all projections are incremental to current forecast; numbers rounded to nearest $10M.
Open questions regarding split SynergiesIssue / dis-synergies SalesExecution Force Risk Organization OutstandingImpact on New questions Denali transformation ToWhat what dis-synergies extent will wouldsplit enable be caused long-term by splitting gains through companies? better management? How long will split take to execute? HowWhat willis downside sales force risk be if divided? split is poorly managed or lasts longer than expected? (Increased turnover, poor sales, etc.) ToHow what will extent split affect will transformationexisting client relationships stall due to andlack current of mgmt cross-selling focus? contracts? How will Newcurrent Denali executive fund growthteam be without divided cash between generation new companies? from Core? LaunchPotential cross-functional next steps effort to detail synergies bottom-up by division BuildAnalyze detailed competitive roadmap opportunities for logistics for of businesses split as separate companies ModelKey milestones, range of execution deadlines, scenarios and owners Engage advisors to plan legal and financial structure of split (e.g., spin-off, split-off, etc.) InterviewPlan detailed customers allocation to developof new sales deeper organization understanding (including of expected structure, reaction wiring, processes, etc) CreateRefine successionstrategic plans plan for and two launch separate search companies for new executive committee 9Assess capital structure and plan for likely capital needs of both companies
1Follow up questions from discussion on Jan 15 2What is the impact of splitting Denali into Core and New? 10What is the impact of separating DFS (outside go private scenario)?
Four criteria to assess DFS separation (outside ‘go private’) IllustrativeDFS functions DFS separation Possible split of functions SellingBranding Servicing CreditPricing assessment InvoicingFunding DisposalCollection DenaliRemarketing PartnerDenali and Partner 1Assessment criteria How important is financing/leasing as part of customer offer? 32 How do benefits of an integrated (captive) finance unit compare to separated (third party) finance entity? 4Would a DFS separation (outside a ‘go private’ scenario) create strategic value? 11Can DFS be separated quickly with little disruption?
Observations on separation of DFS (outside ‘go private’) 1Observations 2Financing/Leasing Integrated (captive) - important financing part units of enablethe customer coordinated offer marketing & life cycle asset management Value3 from DFS separation is less obvious at this point Separation4 will take time and may cause disruption ADescription well-integrated sales and financing interface is valued by customers - FasterDFS has approval 23% pen. times rate with in SMBs,fewer handoffs manages important ~$3B in commercialto customers receivables (BCG case experience) -Mid Most market competitors and Enterprise have retained customers captive interested finance inarms financing (e.g. HP, – especially Cisco, IBM) leasing -Parent’s 47% of knowledge DFS originations of products in FY’12 enables were life leases; cycle managementlargely to SMB of leasedand PLE assets segments ConsolidatedCaptive has customer co. can integrate relationships financing and parent with pricing/promotions has access to product to increase pipeline probability information of – sale this facilitates migrating customers from Gen 1.0 to Gen 2.0 products as technology evolves For a transaction to offer compelling value, the offer should offset revenue dis-synergies from: - Inclusion of the third-party financing entity into commercial sales cycle -Denali’s reduced flexibility to integrate pricing/promotions with financing to sell DFSDenali not currently configured has forstrong separation credit rating, at present; with thereforesmall disadvantage separating (ifwill any) take on time funding costs - DFS is not a separate legal entity - DFSTreasury, CSMB Legal, organization HR, and isother integrated support with functions its counterpart handled Denalithrough division shared services at Denali -Denali Base caseis in and the costmiddle take-out of executing requires aexecution transformation bandwidth and DFSwith highseparation value creationmay impact potential mgmt focus 12Source: Denali data, Management interviews, Advisor interviews, BCG experts, BCG research
DFS separation tradeoffs different in a ‘go private’ scenario 21 OverallFinancial strategic reasons and to retaincommercial DFS become logic for less effects attractive, of captive since integration parent will do have not changea much more levered balance sheet (with credit rating below investment grade) Higher vulnerabilitycost of funds in and scenario lower ROEwhere external liquidity becomes difficult and/or very expensive to access DFS3 Opportunity separation to lowers separate leverage DFS becomes and/or reduces more attractive need for sponsor equity 13Sale proceeds can be used to return cash to investors
DFS offers differentiated value FYDFS ‘12 supports important customers for Denali especially SMBs OriginationsPen rateManaged % ($B) SMBassets ($B) 1.223 PLE0.8 1.58 Consumer2.1 1.040 Total2.0 3.615 47%4.9 of total originations are leasing (mgmtSMBs (esp.presentation) mid market) is a growth priority for DFS Source:~60% consumers Denali management receivables information, are sub-prime BCG research LeasingCaptive financeis a differentiator units can offer differentiated value to SMBs “OEM“Ability financing to provide would purchasing be easier and because leasing there is advantageous, is no debate on – themoving residual the valueoutflow of thefrom asset Capex during to Opex the life is ofattractive the financing.” for us.” –– CIOCIO regional of a small bank bank Faster“Asymmetric turnaround product times information are valued gives OEMs a distinct advantage over third parties – “ BCG expert “Typical“ Captive corporate financing contract is almost takes always 1-3 monthsequal or to faster negotiate than ;external.” having a single– CIO contract manufacturing can speed SMB the transaction by over 1 month” - IT manager small co. “IfIntegrated you can sales get theand buyer financing into thepreferred mind-frame that they are getting great technology at a fair value price along with a variety of payment mechanism, then you are creating an easier decision process for them.” – CIO 14manufacturing
Most tech co’s have captive finance units and IG rating Technology (OEMs) Retailers MicrosoftCompany CISCOIBM hpORACLE Symantecxerox BESTLenovo BUY Captivehhgregg ProviderOutsourced IBMGo-to-market Global Finance is via Microsoft Partners OracleCisco Capital Financing HP Financial Services GEXerox Capital Finance CITApple Financial Services GEMasterCard, Capital Capital One AAARating A+AA- BBB+A+ BBB- BBB- - BB- - 15Source: BCG research, S&P ratings as at 30 Jan 2012
From Jan 18, 2013 FinancialBoard presentation forecasts lead to range of implied Denali DCF values LowDCF case3$ / share calculations High case4 Base case Base case forecast 9.7Present value of business CFs Cash13.4 (after tax)1,2 4.3 – 4.9 (5.2)Debt1 Long-term(5.2) investments1 1.3- 1.4 10.1Base case– 10.8 total Management13.8– 14.5 initiatives Productivity1 cost takeout: Realize 25-75% of $3.3B cost out 3.2–2.2– 10.06.8 Maintain2 / grow Core : Get 0-50% of 0~11% – 0.6 share (vs. 6%) in EM in FY17 30 – 0.8 0Sales – 1.5 force effectiveness: Realize 0-50% of 5% p.a. productivity gain in each0 – 2.1 of 3 years Market sensitivities PC4a market upside 3.01.5 PC4b market downside (2.0)(1.4) New5a Denali upside: Revenue CAGR 6.5% (base – 4.5%) till FY’17 vs. FY’28 1.20.8 – 2.6 New5b Denali downside: Revenue CAGR 2.5% (base - 4.5%) till FY’17 vs. FY28 (1.2)–(0.8) (2.3) Discount6 rate: Range from 7.5-9.5% (base case – 8.5%) (0.5)(0.3) –– 0.30.5 multiple1. Denali (which balance is sheet 4.5x asEBITA) of November 3. TV based 2, 2012 on 2.revaluation Assumes upward90% cash to andreflect investments the NPV ofare the offshore TV over and FY’17-28 subject to (which 25%-35% calculates US taxes out onto 7.5xrepatriation. EBITA) 3.Note: TV based1742M on diluted no revaluation shares outstanding vs. the unaffected as at Nov late 02, 2012 2012. trading BCGNumbers does may not providenot foot fairnessdue to rounding. opinions orDiscount valuations rate of of market 8.5% usedtransactions. to calculate Third-Parties present values. may not rely on these materials for any purpose whatsoever. Source: BCG analysis, Denali Data Room, Industry Publications, 16Denali 10Q and 10K Exhibit (c)(9)
Exhibit (c)(9) JanuaryProject Denali 18, 2013 Board of Directors Discussion been[***] filed indicates separately information with the that Securities has been and omitted Exchange on the Commission basis of a confidential (the “SEC”). treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information has
AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our ClientThese materialswithout BCG’s may not prior be copiedwritten orconsent. given to any person or entity (“Third-Parties”) other than the
DecemberObjectives 6for today AssessLay out strategy market of context each Denali for Denali business Market attractiveness Denali position & trajectory DefineFuture strategicoutlook options that emerge JanuaryHelp frame 18 the Board’s decisions •Discuss Based baseon key case assumptions outlook for and Denali supporting rationale •Discuss Management DCF value initiatives for Denali base case and key incremental overlays to be considered • Market sensitivities 2For discussion today
Reminder: We have framed the Denali forecast using three groups of inputs – base case, initiatives, and sensitivities BaseDenali case outlook forecast based • Intent on underlyingto create mid-point market forecast fundamentals (not optimistic or pessimistic) market• Built upgrowth using rates, underlying Denali Denali share businessand Denali positions margins and their Significant• Organic view initiatives (no M&A identified economics by management mixed in) as part of initiativesManagement • e.g. future Productivity strategic direction cost takeout; for Denali Grow in emerging markets (EM) TestInitiatives variables are incrementalthat materially to base impact case the forecast forecast sensitivitiesMarket • e.g. Each PC variablemarket outlookwas given a corridor of outcomes, enabling 3sensitivities relative to the base case forecast
FinancialJan18, 2013 forecasts lead to range of implied Denali DCF values LowDCF case3$ / share High calculations case4 Base case •case Cash • Present (after tax)1,2value of 4.3 business – 4.9 4.3CFs – 9.7 4.9 13.4 Baseforecast • Long-term • Debt1 (5.2) investments1 (5.2) 1.3- 1.4 1.3- 1.4 1Base Productivity case total cost 10.1 takeout: – 10.8 13.8– Realize 14.5 25-75% of $3.3B cost out 2.2– 6.8 3.2– 10.0 Management ini 3 tiatives Sales force 2 Maintain effectiveness: / grow CoreRealize : Get 0-50% 0-50% of 5%of ~11% p.a. productivity share (vs. 6%) gain in in EM 0 – in1.5 FY17 0 – 2.1 0– 0.6 0 – 0.8 4aeach PC of market3 years upside 1.5 3.0 sensitivities 5a4b NewPC market Denali downside upside: Revenue (1.4) (2.0) CAGR 6.5% (base – 4.5%) till FY’17 vs. FY’28 0.8 1.2 – 2.6 Market5b New 6 Denali Discount downside: rate: Range Revenue from CAGR 7.5-9.5% 2.5% (base (base—4.5%) case – 8.5%) till (0.3) FY’17 – 0.3 vs. (0.5) FY28 – (0.8)0.5 (1.2)– (2.3) multiple1. Denali (which balance is sheet 4.5x asEBITA) of November 3. TV based 2, 2012 on 2.revaluation Assumes upward90% cash to andreflect investments the NPV ofare the offshore TV over and FY’17-28 subject to (which 25%-35% calculates US taxes out onto 7.5xrepatriation. EBITA) 3.Note: TV based1742M on diluted no revaluation shares outstanding vs. the unaffected as at Nov late 02, 2012 2012. trading BCGNumbers does may not providenot foot fairnessdue to rounding. opinions orDiscount valuations rate of of market 8.5% usedtransactions. to calculate Third-Parties present values. may not rely on these materials for any purpose whatsoever. Source: BCG analysis, Denali Data Room, Industry Publications, 4Denali 10Q and 10K
Recent developments in the PC market 14.4Denali 13.2 Share 12.0 Price 10.8 ($) 9.6 8.4 7.2 6.0 DateAug Sep Oct Nov Dec Jan •IDC Global & Gartner PC units report down slow by 8%,PC marketanticipating Windows 8 • GlobalRevenue PC from revenue value down & standard by 10% segment of BIC market up by 11% Lenovo• US PC captures revenues share down by 15% (down by 7% in value, down by 11% in premium) • RevenueAchieved up leading by 11%1 market position (15.7% market share) •ASUS Maintained grows positionin BIC marketas 5th largest in market (7.3% market share) Denali• Revenue revenue up by lower 19%1 than expected • TotalNotebook rev. downrev. down by 11%1 by 26%1 • GMDesktop down rev. by down17%1 by 8%1 HP• New loses Denali share drove R&D opex up by 23%1 • LostHP notebook top position & desktop in PC market rev. down to Lenovo, by 15%1 now 15.5% market share •W8 PC did sales not down stimulate 21% duringPC market first as4 weeks hoped of Win82 Strong• Win 8 tablet captured sales just reinforce 58% of concerns Win computing for value unitPC marketsales in first 4 weeks after launch, vs. 89% for Win 7 Lenovo• Tablet reorganizesunits up by to54%1 separate premium PC business • Plans“Think” to developbrand will products open Apple-like separately stores 51. % change from 3Q2011 to 3Q2012, 2. Compared to same time period of previous year Source: IDC, Jeffries, Gartner, Denali 10-Q, HP 10-Q, Lenovo 10-Q, ASUS 10-Q, NPD group
Comparison of base case forecast (with/without cost take-out) to 9/21 management plan and analyst reports 5,500Op Inc 5,000 ($M) 4,500 4,000 3,500 3,000 2,500 FY 1312 declineFY 13 FYdriven 14 FYby falling 15 EUC revenues and margins AnalystManagement estimates plan consistentlyprojects significant ist tly mo decline ore re in pessimistic EUC / ESG than opex 9/21 levels mgmt and plan 6% revenue growth Base9/21 Managementcase + 75% productivity plan cost takeout Base case + 25% productivity cost takeout MorganCowen Stanley Analyst consensus Goldman Sachs BarclaysBase case forecast 6Note: Analyst consensus current as of Jan 11, 2013
7Appendix
PCCore market Denali seeing a mix shift to lower price points $Estimated / unit PC impactprofit pool: on PC Tablet profit profit pool 1,2001,400 $38 B pool: $8 B 1,000280 75800 175600 200400 25 25 0 100 200 300 400 500 600 700 800 ($800+)Premium (<$500) Value OtherTablets Total units market (M) Denali:Standard ($500-799) iPad RevenueUnits (M) ($B)16 13 17 1411 –6 – – $GM / unit ($B) PC profit[***] pool: [***] Tablet [***] profit [***] [***] 1,2001,400 $26 B pool: $30 B 1,000270 600800 70 25400 50 140 0200 Premium0 100 200 Value300 400 Ipad 500 Other 600 700tablets 800 Standard($800+) (<$500) UnitsDenali: (M) ($500-799) 10 7 18 – 3 GMRevenue ($B) ($B) [***] 10 4 [***]7 – 1 [***] [***] [***] Note:1. Profit Denali pool units,projection revenue based and on margin BCG analysisrepresent of fiscal historical years and Margin current $ will trends decline for segments even if Source: of PC marketBCG analysis, IDC, Gartner, Morgan Stanley, Denali Data room share remains nearly flat [***]8 indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
Base case forecast KeyBase drivers case forecast: Base case Key forecast drivers assumptions and assumptions •Mix Unit shift shift in fromPC market premium Shift to to lower value margin segment value drives segments decrease in PC profit pool profit• Despite pool modest from $36B PC unit to $28Bgrowth, in FY12-17leads to estimated decrease in marketDenali share• Assume in PC (5%) Moderate share Denali loss from share FY13-FY17 loss in PC markets in PCs drivenin line withby history Coreshare Denaliloss in S&PEM & and std/value Support segments & Deployment ((5%)1 declinesfrom FY09-13) moderately due to Denaliattachment position PC mix in Denali shift to captures lower-value share unitsin rapidly growing tablet market tablet marketmarket •by Capture FY17 share of 9% in developed markets, 4.5% in EM of Win growthNew Denali underlying revenue segment Expect growthrevenue rates of New Denali businesses to grow at 1.• No Share additional loss of acquisitionsvalue and standard included price tiers declined from 14% in FY09 to 9% in FY13 Note: Impact of management initiatives not included in base case 9Source: Denali data room, Management presentations, management interviews, IDC data, Gartner, BCG analysis
Base case forecast WithoutCore Denali: management Base case initiative GM forecast overlays FY12Base case FY13 forecast FY14 FY15 FY16 FY17 CAGR (13-17) DenaliMarket Share Units (%) (M) 16% 82.7 15% 75.1 15% 71.4 15% 67.8 15% 64.4 16%61.2 (5%) PremiumDenali Units Denali (M) Price 13.3 ($/unit)11.6 11.0 1,217 10.5 1,214 10.0 1,1879.5 (5%) 1,158 1,131 1,104 (2%) GMRevenue % [***]% ($B) 16.25 [***]% 14.04 19% 13.06 19% 12.14 18% 11.29 18% 10.50 (7%) MarketGM ($B) Units [***] (M) [***] 117.9 2.51118.7 2.29 111.6 2.09 104.9 1.90 98.7 ([***]%) 92.9 (6%) Denali ShareUnits (M)(%) 17.014% 14.112% 11.911% 9.99% 8.1 8% 6.6 7% (17%) RevenuePCs Standard ($B) Denali 11.10 9.29Price 7.80 ($/unit) 6.47 651 5.28 659 4.23 655 (18%) 652 648 645 (1%) GM %($B) [***]% [***] [***]% [***] 0.95 12% 0.76 12% 0.59 11% 0.45 11% ([***])% DenaliMarket ShareUnits (%)(M) 8%163.3 8% 164.8 8% 8% 178.4 8% 194.38% 212.8 234.5 9% ValueDenali Denali Units (M)Price 13.5 ($/unit) 12.9 443 13.9 394 15.0 388 16.3 382 17.7 376 8%369 (2%) GMRevenue % [***]% ($B) 5.98 [***]% 5.08 3%5.38 3% 5.73 2% 6.11 2% 6.54 7% MarketGM ($B) Units [***] (M) [***] 70.0 101.60.18 0.17143.4 0.15 194.8 0.13 254.4 ([***]%) 319.0 33% TabletsDenali Share Denali (%) Units 0% 1%(M) 1% 0.4 1% 1.2 1% 2.1 2.9 3.5 77% TabletsDenali Price Revenue ($/unit) ($B) 395 0.14 388 0.48 382 0.79 375 1.07 368 1.29(2%) 74% GM ($B)% [***]% [***] 8%0.04 8% 0.06 8% 0.09 8% 0.10 [***]% Total TotalGM ($B) Revenue [***] ($B) [***] 33.33 3.68 28.55 3.27 26.73 2.91 2.5925.12 ([***]%) 23.75 22.55 (6%) [***]10 indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
Base case forecast WithoutTotal Denali: management Base case initiative GM forecast overlays—Core Denali decline partially offset by New Denali FY12Base case FY13 forecast FY14 FY15 FY16 FY17 CAGR (13-17) EUCRevenue GM ($ % B) [***]% 33.2 28.6 [***]% 26.7 14% 25.1 13%23.8 12%22.5 11%(6%) RevenueGM ($ B) ($ [***] B) 7.9 [***] 6.7 6.2 3.7 5.8 3.3 5.4 2.9 5.0 2.6 (7%) ([***]%) CoreAttached S&P GM % [***]% [***]% 19% 19% 19% 19% RevenueGM ($ B) ($ [***] B) 25. [***] 20. 19. 1.2 18. 1.1 17. 1.0 17. 1.0 (3%) ([***]%) ServicesAttached GM % [***]% [***]% 65% 65% 65% 65% RevenueGM ($ B) ($ [***] B) 18.5 [***] 19.6 1.2 21.6 1.2 22.8 1.1 24.21.1 ([***]%) 25.0 6.3 %2 New DenaliGM % [***]% [***]% 31% 31% 31% 30% RevenueGM ($ B) ($ [***] B) 62.1 [***] 56.8 6.8 56.4 7.1 55.5 7.4 55.17.6 [***]% 54.3 (1%) GMTotal ($ GM B) %14.2 23% 12.8 22% 12.9 23% 12.6 23% 12.5 23% 12.3 23% (1%) 111. Includes all non-iPad tablets 2.FY13 to FY14 growth due to integration of Quest acquisition. Organic growth rate without acquisitions beyond FY14 is 4.5%
WithoutTotal Denali: management base case initiative forecast overlaysthrough FY17 ItemBase case($M) forecast FY12 FY13 FY14 FY15 FY16 FY17 CAGR (13-17) CostSales of 62,071 Sales (47,906)56,845 56,448 (44,074) 55,511 (43,554) 55,050 (42,869) 54,339 (42,521) (1%) (42,034) (1%) Gross Margin 14,165(%) 23% 12,772 22% 23%12,894 23% 12,643 23% 12,53023% 12,305 (2%) SalesMarketing Opex Opex ([***]) ([***]) ([***]) ([***]) (4,191) (1,289) (4,218) (1,254) (4,277) (1,239) (4,300) (1,218) [***]% ([***]%) OtherR&D Opex Opex (849) ([***]) (913) ([***]) (1,140) (2,554) (1,050) (2,476) (1,022) (2,456) (1,020) (2,422)(4%) ([***]%) Total Opex (%)(9,030) 15% (8,558) 15% 16% (9,174) 16% (8,998) 16% 16% (8,994) (8,960) (1%) EBITAEBITA1 (%) 5135 8% 3,851 7% 7% 3,358 7% 6%3,282 6% 3,174 2,983 (3%) CapExEBITDA (675) 5,680 (600) 4,780 (600) 4,343 (600) 4,267 (600) 4,159 (600) 3,968 0% (3%) TaxesWorking 3 (992) Capital (843) Chg2 (744) (222) (729) (1,398) (707) (669)(247) (3%)(398) (217) (462) 1.FCF Takes 3,791 $362 1,577 M of2,390 stock 2,178 based 2,273 compensation 1,875 (7%) out as an expense. 2. Working capital accounts for DSO, DPO and DIO in EUC , ESG, Services, Software, SnP as per management plan and Note:is adjusted Excludes for changes M&A activity in business (thus mix flat over capex) forecast FY12 period. OpEx sourced3. Taxes from taken management as 21% of EBITA files in per data management room to get granular view 12[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
Management initiativesinitiatives: Three primary strategic initiatives identified by management 1Description envelopes• Established based top on down benchmarks “affordability” costProductivity takeout opportunities• Building pipeline across of all cost BUs savings and functions •2 Identified steps to drive Core share Maintain– Focus on / – high Develop growth targeted, EMs local products sharegrow –Core Develop – Build local local indirect product channels planning 3• Various levels of implementation • In process of identifying opportunities to Salesimprove force SFE • Potential levers include: –effectiveness Streamline –processes Optimize coverage ratios FY17– Refine EBIT generalist Target / specialist mix resulting• Top-down in $3.3Btarget ofFY17 $3.3B EBIT cost out •impact Actions required to reduce costs are still being developed (vs.• Gain base share case in of EM 7%) from resulting 9% to in 11% FY17target of $0.5B in EBIT impact by 3• Improveyears driving SFE $1.1Bby 5% in per EBIT year over 13impact by FY17
Exhibit (c) (12)
Project Denali [***]January indicates 15, 2013 information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange “SEC”).Act of 1934, as amended (the “Exchange Act”). This information has been filed separately with the Securities and Exchange Commission (the
Preface AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our 1These materials may not be copied or given to any person or entity (“Third-Parties”) other than the Client without BCG’s prior written consent.
We have framed the Denali forecast using three groups of inputs – base case, initiatives, and sensitivities ManagementBase case forecast initiatives DenaliMarket sensitivitiesoutlook based on underlying market fundamentals • IntentBuilt upto createusing underlyingmid-point forecast Denali (notbusiness optimistic positions or pessimistic) and their market growth rates, Denali share and Denali margins Significant• Organic view initiatives (no M&A identified economics by management mixed in) as part of future strategic direction for Denali Initiatives• e.g. Productivity are incremental cost takeout; to base Growcase forecast in emerging markets (EM) •Test e.g. variables PC market that outlook materially impact the forecast 3Each variable was given a corridor of outcomes, enabling sensitivities relative to the base case forecast
Multiple refinements made to value stack since Jan 2 1Base Base case case units1 for FY13 restated based on updated PC shipment data from IDC and mgmt 32 TechnicalOperating adjustmentsincome restated on methodology from EBIT to to EBITA take EBITA per management to FCF per conventioncollaboration with other advisors 4Market PC market sensitivities downside scenario adjusted to reflect fixed Opex with declining sales 65 NewTablet Denali margins downside increased scenario in PC adjustedmarket upside to reflect scenario continued to reflect low growthcost reductions post FY17 over (similar time adjustment to upside scenario) 41. Primarily value tier units
FinancialJan14, 2013 forecasts lead to range of implied Denali DCF values LowDCF case3$ / share calculations High case4 Base case Base case forecast 9.7• Present value of business CFs •13.4 Cash (after tax)1,2 4.3 – 4.9 (5.2)• Debt1 •(5.2) Long-term investments1 1.3- 1.4 10.1Base case– 10.8 total 113.8– Productivity 14.5 cost takeout: Realize 25-75% of $3.3B cost out 3.2–2.2– 10.06.8 02 Maintain– 0.6 / grow Core : Get 0-50% of ~11% share (vs. 6%) in EM in FY17 Management0 – 0.8 initiatives 3 Sales force effectiveness: Realize 0-50% of 5% p.a. productivity gain in each of 3 years 0 – 2.11.5 4aMarket PC marketsensitivities upside 3.01.5 (1.4)4b PC market downside 5a(2.0) New Denali upside: Revenue CAGR 6.5% (base – 4.5%) till FY’17 vs. FY’28 1.20.8 – 2.6 (0.8)5b New Denali downside: Revenue CAGR 2.5% (base - 4.5%) till FY’17 vs. FY28 6(1.2)–(2.3) Discount rate: Range from 7.5-9.5% (base case – 8.5%) (0.5)(0.3) –– 0.30.5 multiple1. Denali (which balance is sheet 4.5x EBITA)as of November 3. TV based 2, 2012 on revaluation2. Assumes upward 90% cash to reflectand investments the NPV of are the offshore TV over and FY’17-28 subject to(which 25%-35% calculates US taxes out to on 7.5x repatriation. EBITA) 3. TV based on no revaluation vs. the unaffected late 2012 trading BCGNote: does1742M not dilutedprovide shares fairness outstanding opinions or as valuations at Nov 02, of 2012. market Numbers transactions. may notThird-Parties foot due to may rounding. not rely Discount on these ratematerials of 8.5% for used any purposeto calculate whatsoever. present values.Source: BCG analysis, Denali Data Room, Industry Publications, 5Denali 10Q and 10K sinceRefinements our last and meeting changes on toJanuary implied 2nd Denali DCF values CurrentPrevious (Jan (Jan 15) 2) DCFDetailed $ / share adjustments calculations eLow Market case shareHigh incase ‘value’ notebooks restated to reflect FY13 actual ofcas business t Present 9.7 value 13.4 11.8 CCC 15.6 days Working aligned capital with managementcash outflows forecast refined onby 1/13BU over forecast period1 SBCBase takenforecas as cash an expense flows Operating income restated from EBIT to EBITA cost1 Productivity takeout 2.2 2.6 – – 6.8 6.9 3.2 3.7 – – 10.0 10.0 Minor adjustments to timing of labor and shipping savings Management2 Maintain 1.0 initiatives 1.4 Base growcase restatement core 0.6 0.8 (see above) reduced impact of initiative PC4a 1.0 upside 2.0 Tablet 1.5 3.0 gross Increased margins from revised [***]% to [***]% for the upside (0.8)vities (1.0)4b Higher premium PC market unit decline rate with fixed Opex sensitiPC downside (1.4) (2.0) Non-sales Decline Opex rates considered reflect last fixed 4Q trend in the in short mature term and BRIC markets arket5a New upside Denali 0.8 0.8 1.2 1.2 – 2.6DCF Revenues value for growthhigh case at refined6.5% CAGR to consider over postFY18-27 FY’17 (vs. growth base at 4.5%) NewM 5b Denali (0.8) (1.2) DCF value for high case refined to consider post FY’17 decline 1.downside Working (0.8) capital (1.2) accounts – (2.3) forRevenues DSO, DPO decline and atDIO 2.5% in EUCCAGR , ESG, over Services,FY18-27 Software,(vs. base atSnP 4.5%) as per management plan and is adjusted for changes in business mix over forecast period. [***]Source: indicates BCG analysis, information Denali that Data has beenRoom, omitted Industry on Publications,the basis of a Denaliconfidential 10Q andtreatment 10K request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC. 6
Recent developments in the PC market 14.4Denali Share Price ($) 12.013.2 9.610.8 7.28.4 IDC6.0 & Gartner report slow PC market • Global PC revenueunits down down by by8%, 10% anticipating Windows 8 11%• Revenue from value & standard segment of BIC market up by Lenovo• US PC captures revenues share down by 15% (down by 7% in value, down by 11% in premium) • RevenueAchieved up leading by 11%1 market position (15.7% market share) •ASUS Maintained grows positionin BIC marketas 5th largest in market (7.3% market share) Denali• Revenue revenue up by lower 19%1 than expected • TotalNotebook rev. downrev. down by 11%1 by 26%1 • GMDesktop down rev. by down17%1 by 8%1 HP• New loses Denali share drove R&D opex up by 23%1 • LostHP notebook top position & desktop in PC market rev. down to Lenovo, by 15%1 now 15.5% market share •W8 PC did sales not down stimulate 21% duringPC market first as4 weeks hoped of Win82 Strong• Win 8 tablet captured sales just reinforce 58% of concerns Win computing for value unitPC marketsales in first 4 weeks after launch, vs. 89% for Win 7 Lenovo• Tablet reorganizesunits up by to54%1 separate premium PC business • Plans“Think” to developbrand will products open Apple-like separately stores SepAug NovOct Dec DateJan 71. % change from 3Q2011 to 3Q2012, 2. Compared to same time period of previous year Source: IDC, Jeffries, Gartner, Denali 10-Q, HP 10-Q, Lenovo 10-Q, ASUS 10-Q, NPD group
ComparisonBase case forecast of base case forecast (with/without cost take-out) to 9/21 management plan and analyst reports 5,500Op Inc ($M) 4,5005,000 3,5004,000 2,5003,000 ManagementFY 13 decline plan driven projects by falling significant EUC declinerevenues in andEUC margins / ESG opex levels and 6% revenue growth 9/21Analyst Management estimates consistently plan more pessimistic than 9/21 mgmt plan productivityBase case + 75%cost takeout productivityBase case + 25%cost takeout MorganCowen Stanley GoldmanAnalyst consensus Sachs BarclaysBase case forecast FY 1312 FY 1415 8Note: Analyst consensus current as of Jan 11, 2013
Exhibit (c)(15) JanuaryProject Denali 02, 2013 been[***] filed indicates separately information with the that Securities has been and omitted Exchange on the Commission basis of a confidential (the “SEC”). treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information has
Preface AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our 1These materials may not be copied or given to any person or entity (“Third-Parties”) other than the Client without BCG’s prior written consent.
DecemberObjective for6 today - share preliminary materials for January Board meeting AssessLay out strategy market of context each Denali for Denali business Market attractiveness Denali position & trajectory DefineFuture strategicoutlook options that emerge JanuaryHelp frame (date the TBD) Board’s decisions BasedDevelop on base key caseassumptions outlook for and Denali supporting rationale HighlightDetermine potential DCF value variations for Denali of Denali base casebase outlookcase outlook Management initiatives Market sensitivities 3Share preliminary materials today
NoOur work since Dec. 6 has focused on creating a grounded view of the forecast for Denali as a stand-alone entity ProceedRemain withpublic PE process and (at end)accept bid? Yes KeyTake questions Private StatusWhich quostrategic vs. new direction? strategy CurrentWhich leadership vs. new management team? Stand-aloneWhich go-forward vs. split structure? 4What is Denali worth as public company?
We have framed the Denali forecast using three groups of inputs – base case, initiatives, and sensitivities DenaliBase case outlook forecast based on underlying market fundamentals BuiltIntent upto createusing underlyingmid-point forecast Denali (notbusiness optimistic positions or pessimistic) and their market growth rates, Denali share and Denali margins ManagementOrganic view initiatives (no M&A economics mixed in) e.g.Significant Productivity initiatives cost identifiedtakeout; Grow by management in emerging as markets part of future(EM) strategicInitiatives direction are incremental for Denali to base case forecast Market sensitivities e.g.Test PCvariables market that outlook materially impact the forecast 5Each variable was given a corridor of outcomes, enabling sensitivities relative to the base case forecast
Financial forecasts lead to range of implied Denali DCF values LowDCF case3$ / share High calculations case4 Base case forecast PresentBase case value of business CFs 11.8 15.6 Debt1Cash (after (5.2) tax)1,2 (5.2) 4.3 - 4.9 4.3 - 4.9 BaseLong-term case total investments1 12.2 - 12.9 1.3 16.0 - 1.4 - 16.71.3 - 1.4 1Management Productivity initiatives cost takeout: Realize 25-75% of $3.3B cost out 2.6 - 6.9 3.7 - 10.0 32 SalesMaintain force / groweffectiveness: Core share: Realize Realize 0-50% 0-50% of 5% of per~11% year share productivity (vs. 6%) gain in EM in eachin FY17 of 3 0years - 1.0 0 0 - -1.5 1.4 0 - 2.1 4aMarket PC marketsensitivities upside 1.0 2.0 5a4b NewPC market Denali downside upside: Range (0.8) (1.0)from 6.5% (base case – 4.5%) 0.8 1.2 65b Discount New Denali rate: downside: Range from Range 7.5-9.5% from (base 2.5% case (base – case8.5%) – (0.3)4.5%) - (0.8)0.3 (0.5) (1.2) - 0.4 of1. Based4.5x 4. on TV Denali based balance on long-term sheet asshape of November of New Denali 2, 2012 cash 2. flowsAssumes and 90% assumes cash successfuland investments transformation are offshore to New and Denali(7.5x)subject to 25%-35% Note: 1742M US taxes diluted on repatriation. shares outstanding 3. TV based as at Novon Denali 02, 2012. Nov Numbers2012 EV may/ EBIT not multiple foot due BCGto rounding. does not Discount provide ratefairness of 8.5% opinions used orto valuationscalculate present of market values. transactions. Third-Parties may not rely on these materials for any purpose whatsoever. Source: BCG analysis, Denali Data Room, Industry Publications, 6Denali 10Q and 10K
Financial forecasts lead to range of implied Denali DCF values LowDCF case3$ / share High calculations case4 Base case forecast Base case CashPresent (after value tax)1,2 of business CFs Long-termDebt1 investments1 Base case total $3.5BTV based of corporate on Denali bonds Nov 2012and gov’t EV /debt EBIT multiple of 4.5x 4.311.8 - 4.9 1.3-(5.2) 1.4 TV12.2 based - 12.9 on long-term shape of New Denali cash flows (7.5x) 4.315.6 - 4.9 1.3-(5.2) 1.4 Management16.0 – 16.7 initiatives 21 ProductivityMaintain / grow cost Core takeout: share: Realize Realize 25-75% 0-50% of of $3.3B ~11% cost share out (vs. 6%) in EM in FY17 2.63 Sales - 6.9 force effectiveness: Realize 0-50% of 5% per year productivity gain in each of 3 years 00- - 1.0 1.5 3.7Based - 10.0 on mgmt ability to implement productivity initiative -2.1-1.4 4aMarket PC marketsensitivities upside 5a4b NewPC market Denali downside upside: Range from 6.5% (base case - 4.5%) 65b Discount New Denali rate: downside: Range from Range 7.5-9.5% from (base2.5% case(base - case8.5%) - 4.5%) 1.0Decline in premium PCs 0.8(0.8) (0.3)(0.8) - 0.3 2.0Growth in Premium PCs and strong Denali share and margins in tablets 1.2(1.0) (0.5)(1.2) - 0.4 of1. Based4.5x 4. on TV Denali based balanceon long-term sheet asshape of November of New Denali 2, 2012 cash 2. flows Assumes and assumes90% cash successful and investments transformation are offshore to New and Denali(7.5x) subject to 25%-35% US taxes on repatriation. 3. TV based on Denali Nov 2012 EV / EBIT multiple BCGNote: does1742M not dilutedprovide shares fairness outstanding opinions or as valuations at Nov 02, of 2012. market Numbers transactions. may notThird-Parties foot due to may rounding. not rely Discount on these materialsrate of 8.5% for anyused purpose to calculate whatsoever. present values. 7Source: BCG analysis, Denali Data Room, Industry Publications, Denali 10Q and 10K
Base casecase forecast forecast: Key drivers and assumptions BaseKey driverscase forecast assumptions ShiftMix shiftto value in PC segment market drives decrease in PC profit pool DespiteUnit shift modest from premiumPC unit growth, to lower leads margin to estimated value segments decrease in profit pool from $36B to $28B in FY12-17 ModerateDenali share Denali in PC share market loss in PC markets in line with history CoreAssume Denali -3 pts attachment of share loss from FY13 to FY17 in PCs driven by share loss in EM and value segments DenaliS&P and position Support in &tablet Deployment market declines moderately due to PC mix shift to lower-value units CaptureDenali captures share of share 9% in in developed rapidly growing markets, tablet 4.5% market in EM of Win tablet market by FY17 ExpectNew Denali revenue revenue of New growth Denali businesses to grow at underlying segment growth rates Note:No additional Impact of acquisitions management included initiatives not included in base case 8Source: Denali data room, Management presentations, management interviews, IDC data, Gartner, BCG analysis
Base case forecast FY12:Backup Global – Mix profit shift inpools PC shrinking,market: Shift shifting to value to FY17: segment Global drives PC decrease profit pools in PC decline profit with pool... value, where Denali lacks a winning strategy value shift, tablet profit pool expands 1,200$ / unit 1,200 PC profit 280 270pool: 1,000 Tablet 1,000 profit $ / unit PC profit pool: Tablet profit 1,400 $38 B pool: $8 B 1,400 $26 B pool: $30 B 600800 600800 7075 175 25400 50 25 200 400 200 140 25 0 0100 200 300 400 500 600 700 800 0 100 200 300 400 500 600 700 800 Premium Value Other Total market Premium Value Ipad Other tablets Units($800+) (M) (<$500) 13 17 Tablets14 – – 9units 9 13 (M) –Units ($800+) (M) (<$500) Revenue Standard ($B)16 iPad 11 6 Standard – – Revenue Denali: ($B) ($500-799) 10 6 5 –GM Denali: ($B) ($500-799) [***] [***] [***] [***] [***] GM ($B) [***] [***] [***] [***] Note:1. Profit Denali pool units,projection revenue based and on margin BCG analysisrepresent of fiscal historical years and Margin current $ will trends decline for segments even if Source: of PC marketBCG analysis, IDC, Gartner, Morgan Stanley, Denali Data room share remains nearly flat 9[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
...leadingBase case forecastto significant declines in GM dollars for Core Base case forecast MarketFY12 FY13 Units FY14 (M) 82.7FY15 75.1 FY16 71.4 FY17 67.8 CAGR 64.4 61.2 (13-17) (5.0%) Denali UnitsShare (M)(%) 13.316% 11.115% 10.5 15% 10.0 15% 9.6 15% 9.1 15% (4.7%) RevenuePremium ($B)Denali 16.25 Price 13.43 ($/unit) 12.50 1,217 11.63 1,214 10.82 1,187 10.07 1,159 (7.0%) 1,132 1,105 (2.3%) GM %($B) [***]% [***] [***]% [***] 2.4219% 2.2119% 2.0119% 1.8318% ([***]%) DenaliMarket Share Units (%) (M) 14% 117.9 15% 118.7 13% 111.6 12% 104.911% 10% 98.7 92.9 (5.9%) PCsDenali Standard Units (M) Denali 17.0 Price 17.3 ($/unit) 15.0 12.8 651 10.9 662 9.2658 (14.6%) 654 649 645 (0.6%) GMRevenue % [***]% ($B) 11.10 [***]% 11.46 12% 9.84 11% 8.39 11% 7.09 10% 5.93 (15.2%) MarketGM ($B) Units [***] (M) [***] 163.3 1.13 164.8 0.93 178.4 0.75 194.3 0.61 212.8([***]%) 234.5 9.2% Denali ShareUnits (%)(M) 8%13.5 6% 10.2 6% 10.7 6% 11.36% 5% 11.9 12.6 5.4% RevenueValue Denali ($B) Price 5.98 ($/unit) 3.98 4.12 443 4.27391 3854.44 379 4.61 373 3.8% 367 (1.6%) GM %($B) [***]% [***] [***]%[***] 0.17 4% 0.143% 3% 0.12 2% 0.10 ([***]%) DenaliMarket Share Units (%) (M) 0% 70.0 1% 101.6 1% 1% 143.4 1% 194.8 254.4 319.0 33.1% DenaliTablets Price Denali ($/unit) Units 395(M) 388 0.4 3821.2 2.1375 2.9 368 3.5 (1.7%) 76.9% GMTablets % [***]%Revenue 8% ($B) 8% 0.14 8% 0.48 8% 0.79 1.07 1.29 73.9% TotalGM ($B) Total [***] Revenue 0.04 ($B)0.06 33.30.09 29.0 0.10 26.9 [***]% 25.1 23.4 21.9 (6.8%) separatelyTotal GM with($B) the [***] [***] 3.8 3.3 3.0 2.6 ([***][***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed %)SEC. 9 SEC.[***] indicates9 information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the
Base case forecast Total Denali GM forecast to decline slightly – Core Denali declines partially offset by New Denali growth Base case forecast RevenueFY12 FY13 ($B) FY14 33.2 FY15 29.0 FY1626.9 25.1 FY17 23.4 CAGR 21.9 (13-17)(7%) GMEUC ($B) GM [***]% [***]% [***] [***]% 3.8 3.3 14% 3.0 13%2.6 ([***]%) 13% 12% AttachedRevenue ($B) 7.9 6.8 6.3 5.8 5.3 4.9 (8%) GMCore ($B)S&P [***]GM % [***] [***]% 1.2 [***]% 1.1 1.0 19%0.9 ([***]%) 19% 19% 19% AttachedRevenue ($B)GM 2.5% [***]% 2.0 1.8 [***]%1.7 1.6 1.6 65% (5%) 65% 65% 65% GMServices ($B) [***] [***] 1.2 1.1 1.1 1.0 ([***]%) wRevenue New ($B) 18.5 19.6 21.6 22.8 24.2 25.0 4.5 %2 GMNe Denali ($B) [***]GM % [***] [***]% 6.8 [***]% 7.1 7.4 31% 7.6 31%[***]% 31% 30% TotalRevenue GM ($B) % 23% 62.1 22% 57.4 23% 56.7 23% 55.4 23% 54.5 23% 53.4 (2%) 1.GM Includes ($B) 14.2 all non-iPad 12.8 13.0 tablets 12.7 2.12.5 Organic 12.2 (1%)growth rate without acquisitions 11[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
Base case forecastforecast projects steady declines in EBIT & FCF for Denali through FY17 ItemBase case($M) forecast FY12 FY13 FY14 FY15 FY16 FY17 CAGR (13-17) Sales 62,066 57,408 56,684 55,390 54,535 53,388 (2%) Cost of Sales (47,840) (44,560) (43,725) (42,723) (42,026) (41,153) Gross Margin (%)14,226 23% 12,848 22% 23%12,959 23% 12,667 23% 12,51023% 12,235 (1%) OpexMarketing ([***]) Opex ([***]) ([***]) (2,563) ([***]) (2,471) (1,296) (2,434) (1,251) (2,382) (1,227) ([***]%) (1,195) Total ([***]%) Opex Sales (8,737) Opex (8,623) ([***]) (9,198) ([***]) (8,978) (4,198) (8,925) (4,207) (8,838) (4,246) 1% (4,247) Total Opex [***] (%) % R&D14% 15%Opex 16% (778) 16% (917) 16% (1,141) 17% (1,050) (1,019) (1,015) 3% Other EBITDAEBIT 5,128 6,071 3,864 5,062 3,399 4,534 3,327 4,378 3,222 4,205 3,035 3,977 (6%) (6%) EBIT CapEx (%) 8%(675) 7% (427) 6% 6% (616) 6% (598) 6% (589) (576) 8% 87Working (300) (101)Capital (77) (58) (65) (32%) TaxesChange (992) (845) (752) (738) (717) (679) (5%) Stock Comp 362 362 362 362 362 362 0% Note:FCF 4,853 FY12 3,852 OpEx 3,427 sourced 3,328 from 3,204 management 3,019 (6%) files in data room to get granular view 11[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
Base case forecastforecast more pessimistic than 9/21 mgmt plan, but in-line with recent analyst reports 5,500EBIT ($M)5,000 4,500 4,000 3,500 3,000 2,500 FYManagement 13 decline plan driven projects by falling significant EUC declinerevenues in andEUC margins / ESG opex levels and 6% revenue growth Analyst9/21 Management estimates consistently plan more pessimistic than 9/21 mgmt plan MorganCowen Stanley AnalystGoldman consensus Sachs BarclaysBase case forecast 13FY 12 FY 13 FY 14 FY 15
Management initiativesinitiatives: Three primary strategic initiatives identified by management EstablishedDescription FY17top down EBIT “affordability” Target envelopes based on benchmarks Top-downBuilding pipeline target of $3.3Bcost savings cost out opportunities resulting in across $3.3B all FY17 BUs EBIT and functions impact 2Actions Maintain required / grow to Core reduce share costs are still being developed -Identified Focus on steps high togrowth drive CoreEMs share - DevelopBuild local targeted, product local planning products - Develop local indirect channels GainVarious share levels in EM of implementation from 9% to 11% (vs. base case of 7%) resulting in target of $0.5B in EBIT impact by FY17 In3 Sales process force of effectiveness identifying opportunities to improve SFE -Potential Optimize levers coverage include: ratios - Streamline processes - Refine generalist / specialist mix 14Improve SFE by 5% per year over 3 years driving $1.1B in EBIT impact by FY17
[***]%)Normal;H1;H2;H3;H4;H5;H6;Blockquote;Preformatted;z-Bottom Premium PC units decrease (9.1 M ^ 7.0M) Tablet units go of to Form;z-Top 0 (3.5 M ^ 0of M) Form;Premium Tablet GM declines PC units ([***]% increase ^ [***]%)(9.1 M ^ Premium 11.1M) Tablet PCs maintain units increase current (3.5 volumes M ^ 10.7 Tablets M) Tabletgrow rapidly, GM increases but limited ([***]% ^ lowcannibalization HW margins of WACClaptops Androidtriangulated tablets using (with CAPM higher and margins) MCPM gain methods acceptance Discount for workrate increase Premium (8.5% PCs units ^9.5%) fall Discount precipitously rate decreaseNon-Windows (8.5% Tablets ^7.5%) grow PC market rapidly outlook: and cannibalize Upside PClaptops market at work/home outlook: Downside Tablets have New assumptionsDenali revenue against CAGR alternative increases scenarios (4.5% ^ 6.5%)Description Cloud 4a computing 4b 5a 6 Impact accelerates, to Denali1 requiring [***] ESG indicates as a bundle information OR New that Denali has been upside omitted Discount on the rate basis Market of a confidentialsensitivities: treatment We also testedrequest key pursuant PC, New to RuleDenali, 24b-2 & discount of the rate decreasesExchange (4.5%Act and ^ 2.5%)has been IT filedspend separately decelerates with due the to SEC.SaaS, 1. Cloud, Unit and creates margin central impacts scale refer New to Denali FY2017 downside units and 5b margins. 15 Growth impacts refer to FY13-FY17 growth Market sensitivities New Denali revenue CAGR
15Appendix
Normal;H1;H2;H3;H4;H5;H6;Blockquote;Preformatted;z-Bottom of Form;z-Top of Form;Perspective on key questions underlying the model (I) Key Question How does the market grow? How does Denali share sectorevolve? forecasts, Why do brokenEUC gross out bymargins price bandchange (+9% over for time? value, What -5% else for drives premium) FCF? New: What Overall is impact constant of tablets? share, Perspective but share gain New: in 3-4% servers, revenue network, CAGR, and basedshare losson sector in storage forecasts Core: Core: Decline 1-2% from overall 11% revenue (FY13) CAGR to 9% (FY17),based on D&A,based onand price Stock-Based tier mix shiftCompensation Mix shift Workingdrives declining capital calculatedprofit pool separately ($10B decline for each globally business from unit; FY13 changes to FY17) as a percentBased on of [***]%total revenue GM in as value, relative [***] size %of GMunits in shifts premium over forecastAssume periodrates consistent Assume no with further history acquisitions for CapEx, informationHigh unit growth that has at lowbeen EBIT omitted $/unit on theresults basis in of limited a confidential FCF impact treatment Base requestForecast pursuant 1 2 3 4 5to Sources: Rule 24b-2 BCG of researchthe Exchange and analysis, Act and hasDenali been management filed separately interviews, with the Denali SEC. 17data room, Industry publications [***] indicates
KeyPerspective Question on key questions underlying the model (II) MgmtPerspective Initiatives Management6 How was impact sized oftop-down management targets initiatives based on evaluated? benchmarking Together,We evaluated total probable impact could success range in future from years,25%-75% based depending on management on progress interviews to goal and experience with similar initiatives at other firms Market Sensitivities Primary7 What drives sensitivities upside are and premium downside PC assumptions sales, tablet forsales PC and market? tablet margins TabletPremium sales PC a saleslarge the driver primary of volume, driver butof profit only relevant to FCF at higher profit margins Base8 What estimate drives (4.5%)high and based low revenueon IDC/Gartner growth ratessector for forecasts New Denali? DownsideUpside case case (6.5%) (2.5%) based based on aggressiveon price erosion sector and growth decline due in to customer expansion spend in cloud due computing,to shared services, with Denali SaaS, holding and central share scale created by cloud 18Sources: BCG research and analysis, Denali management interviews, Denali data room, Industry publications
Perspective on key questions underlying the model (III) Other Key Question Perspective Ongoing9 What are earnings dis-synergies impact fromof negative potential $950M split? due to revenue and cost dis-synergies (vs. $600M for Project Clean) TeamAdditional accepted one-time Project impact Clean of estimates $480M due for tosome split items, costs (vs.and $0modeled for Project others Clean) independently; all figures are incremental to base case Projections based on mgmt interviews, research on analogous splits, BCG experience, and scale curves 19Sources: BCG research and analysis, Denali management interviews, Denali data room, Industry publications
DCFAdditional Value DCFMethodology valuation methodology 10Key What Question drives Perspective discount rate assumption? 11Calculated How were WACC low and (weighted high TV cost multiples of capital) chosen? at 8.5% triangulated using CAPM and MCPM methods HighLow (4.5x)(7.5x) is based on presentrecent trading value of EV/EBIT extended (November-December DCF forecast to 2027, 2012)assuming that market trends continue and New Denali grows successfully $19-$26/share12 What DCF value- using does 9/21 methodology forecast of revenue, ascribe EBIT,to the 9/21GM, managementetc. run through case? the DCF model 20Sources: BCG research and analysis, Denali management interviews, Denali data room, Industry publications
1 Backup: Long-term PC revenue growth constant despite form factor shifts - current assumptions falls within band HistoricalTotal PC rev PC ($revenue B) (Laptop growth + Desktop +Tablet) 400All cases300 200 assume 100 018% tablet revenue CAGR Market1999-2012 forecast Rev for CAGR PC upside = 4% caseR2 =Market 0.934 forecast for base case Market forecast for PC downside case Up+/-10% (+4%) of LTand revenue downside trend case (-9%) for premium desktop Year0 2000 2002 2004 2006 2008 2010 2012 2014 2016 211. Base case = Value: +10%, Standard: -6%, Premium: - 5% Sources: IDC, Gartner, CIA GDP statistics, BCG analysis
Assumption:1 Assumption PC - Evolution units by price of PC tier market: grow accordingForecast PC to growthunits to trajectoryremain flat post through iPad launchFY17, but with shifts between price tiers 30Desktop Units (M) 1020 Value,Standard, +1% -8% 10 2Premium, 3 4 5 6 7 -4% 8 9 10 UpsideLT premium +4% drivendesktop by CAGR SmartTV’s 0% fueled by Win 8 QuartersDownside since -9% iPadevidenced launch by recent declines in Europe Standard:Value: +10% -6% TotalPremium: PC: 2% - 5% 25Laptop Units (M) Standard,20 Value, +17%-5% 015 Premium, -6% LT1 2 value3 4 5 6laptop 7 8 9 CAGR10 17% DownsideUpside remains 10% drivenat 17% by slowdown in China QuartersLimited impactsince iPad on profitslaunch 22Source: IDC, Gartner, CIA GDP statistics, BCG analysis
1 1999Backup: 2000 Computing 2001 2002 devices 2003 2004market 2005 historical 2006 2007 data 2008 2009 2010 2011 DesktopCAGR ‘06-‘11 (%) ASPQty (M) ($) 1,22495 105 1,183 114 1181,034 126 1,035 136 973148 878152 751 163 647 157 613 146 600 157 546 155 549 0 564 (3) LaptopRev ($B) 117 124 118 122 122 120 111 98 100 94 80 86 87 (2) ASPQty (M) ($) 2,46220 26 2,33727 30 1,93638 47 1,82564 80 1,678107 142 1,564 169 1,339 201 209 1,181 21% 1,109 982 797 738 721 (9) ReviPad ($B) 48 60 52 55 64 74 85 95 119 140 135 148 151 10 Qty (M) ------17 41 ASP ($) ------600 580 OtherRev ($B) Tablets ------10 26 Qty (M) ------2 30 ASP ($) ------418 400 TotalRev ($B) Mkt. ------1 10 RevQty (M)(B) 165115 184131 171142 177148 187164 193183 196212 193 232 219 271 234 300 214 315 246 377 273 434 7 13 23Source: BCG analysis, IDC, Gartner, Morgan Stanley
1 New Denali growth rate in base case varies by industry segment, overall in line with external analysts RevenueForecasts CAGRin line with % analyst projections1 8(FY 6 4 14 2 0– FY 17) Enterprise3.2 3.6 6.2 solutions 6.0 6.0 Services6.0 Software Analyst consensus Base case EnterpriseKey assumptions solutions Networking,Servers expected storage to grow expected slightly to growfaster with than market market due to historical share gains Services SoftwareInfrastructure, security expected to grow at market rates, S&D expected to grow at the rate of servers (4.2%) 1.Expected IDC, Gartner, to growth Forrester, at the rate Morgan of server Stanley middle-ware, enterprise management software 24Note: Growth rates beyond FY 14 chosen to allow for integration of recent acquisitions
Denali2 Denali share share trends has beenover thestable last in 8Q… premium, declining in standard and value 20Units 18 (M) 16 14 12 10 8 6 4 2 0 2010Premium 2010 Standard 2011 2011 Value 2011 2011 2012 2012 2012 ...andQ3 Q4 current Q1 Q2 GTM Q3 Q4 and Q1 product Q2 Q3 positions used to model future share trend StrongMaintaining commercial share in relationships, premium protects premium disproportionately ModerateStrong product share portfolioloss in standard from Apple has caused short-term fluctuations in share due RecentStandard quarters volume signaling growth share in emerging loss markets and decline in mature markets causes moderate share loss Significant share loss in value Long-termWeak GTM trend position of declining in emerging share markets (e.g. 1/5 distribution footprint of Lenovo in China), where value segment growing fastest 25Source: Denali data room, IDC, BCG Analysis but3 Assumption 9/21 plan forecasts – Denali salesoperating efficiency expense gains evolution: Comments Management plan shows declining opex as % of revenue 1,000Avg salesperson revenue productivity1 ($k / rep) 600800 400[***] 0200 11Q1 11Q2 11 Q3 11 Q4 12 Q1 12 Q2 12 Q312 Q4 14Sales opex % 1012 8[***] Ent. solutions 6[***] [***] Services Total Denali [***]4 EUC Q22 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 11FY 11 FY 12 FY 12 FY13 13FY 14 FY 14 FY 15 FY15 FY FY R&DSales, OpexOther asOpex a % as of % revenue of revenue modeled held constantafter 9/21 at planFY12 levels due to historical trend 1.Total 12/10 % OpexDenali for management software held plan constant at FY14 to account for Quest integration 25[***] indicates information that has been omitted on the basis of a confidential treatment request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC.
5 Tablet market estimated to provide limited profit opportunity for Denali with current cost structure UnitsDenali (M) forecasted to capture share of tablet market in Windows market... Denali400 300 plays 200 100in Windows 0 OS 4.5%9%1 shareshare inin matureemerging 2%102 52% 42% 4% 2012 1%143 48% 40% 10% 2013 2%195 46% 39% 14% 2014 319254 47%45% 34%37% 17%16% 1% 2% 2016 2015 Calendar year ...butiOS Android estimate Windows will earn limitedOther EBIT on tablet given current cost structure (16G)iPad 3 Tablet Windows Fire Kindle(8G) (16B) Nexus 7 Nexus 7 COGSPrice ($/unit) ($/unit) 499 316 469 431 199 174 199 160 249 166 OpexGross (%)profit 9% (%) 11%2 37% 13%2 8% 13% 11%2 20% 11%2 33% 1.EBIT Current (%) laptop28% -3% marketshare 0% 9% 22% 2. Denali Opex % for Notebooks only. Corporate overall opex is 17%; driven by higher opex in New Denali 27Note: Mature market includes United States and Western Europe, emerging market includes Asia pacific and ROW, Morgan Stanley forecast for forecasted tablet units Source: Morgan Stanley, BCG analysis
5 ForecastBackup: CorePC units Denali to remain PC assumptions flat through FY15 800Units 600 (M) 400 200 0 Gartner,PCs +4.5% BaseIDC, case,+4.1% +0-1% Barclays,JPM, -1.0% -4.1% FY10MS, -4.7% FY11 FY12 FY13 FY14 FY15 FY16 JPM,800 600 +84% 400 200 0 MS,Tablets +69% Barclays,Base Case, +58% +62% IDC,Gartner, +50% +57% ExpectFY10 FY11 continued FY12 shift FY13 in PCFY14 units FY15 towards FY16 value segment Units (M) Premium700 600 500 Standard 400 300 Value 200 100 iPad 0 Other tablets 33%24% 31%22% 26%17% 23%15% 20%13% 18%11% 16%9% 4%44% 9% 43% 11% 41% 13% 41% 16% 39% 18% 37% 34% FY107% 10% FY11 15% FY12 19% FY13 22% FY14 FY15 FY16 28Source: JPM Presentation to the Denali Special Committee, (December 5, 2012), Morgan Stanley, IDC, BCG analysis
6A Denali initiative – Productivity cost takeout: Management estimates $3.3B in EBIT by FY16 if fully implemented LowManagement case: Oversea estimates shipping, $3.3B laborin EBIT arbitrage by FY16 estimate if fully to implemented1 drive [***]% COGS savings by [***]. Delayering estimated to drive an additional [***]% in total cost savings. KeyHigh assumptions case: % cost takeout on [***] total base equivalent to % of $[***] EUC client reinvention in [***] Ramp rate is [***]% in ‘14, [***]% in ‘15, [***]% in ‘16 ConvertKey levers to beingBTS vs. pulled CTO RangeSimplification of probability of SKUs determined and global by product outside portfolio benchmarks Sourcing Low in case China/labor 25% - Delayering arbitrage andCost China takeout labor of logistics arbitrage Sales well and understood G&A cost and process have beenreconfiguration achieved in benchmarked companies 1.High 11/14 case Denali [***]% management - based on productivitydriving $[***] transformation out of cost base presentation through “client reinvention” in 2009 Note: Proposed savings likely to overlap with New Denali sales force effectiveness initiative [***]Sources: indicates Denali information data room, Managementthat has been omittedinterviews, on theBCG basis analysis of a confidential and research treatment 28 request pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC. ~$[***]6B Denali M initiative EBIT by – MaintainFY17 based / grow on Coremanagement share: Estimate agenda managementAssumption: Estimateagenda of impact based on Revenue$M FY12 00 FY13 521 FY141134 1865FY15 2743 FY16 FY17 GMCOGS 00 0 [***] 0 ([***]) [***] ([***]) [***] ([***]) [***] ([***]) EBITOpex 0000 ([***])[***] [***] ([***]) [***] ([***]) [***] ([***]) DenaliManagement invests succeeds in distribution at stated in goalAsia to (stores, “Grow indirect emerging channels), market PCdriving business WW with value targeted PC share localized to past products” high of [***]% by [***] (vs. [***]% in base case) KeyDenali assumptions develops low-cost PCs to target sub-$[***] value segment, which increases average GM for value PCs to [***]% (vs. [***]% in base case)2 FocusKey levers of investment being pulled on China, especially 2nd tier cities with localized products HighRange case of probability 50% - based determined on having by reached outside [***]% benchmarks market Low share case two 0% years - Lenovo’s ago and distribution reinvigorated continues focus but to outpacecontinued Denali, pressure especially from aggressive in China competitors [***]1. 12/11 indicates mgmt presentationinformation that2. Margin has been increase omitted occurs on the in basis part dueof a toconfidential NCBM improvements treatment request Sources: pursuant Denali to dataRule room, 24b-2 BCG of the analysis Exchange and Act research and has been filed separately with the SEC. 29
Assumption:6C Denali initiative Sales force – New effectiveness Denali sales initiative force effectiveness: has potential Management to deliver $[***] identified of EBIT opportunity in FY171 to increase SFE [***]$M FY12 [***] FY13 [***] FY14 [***] FY15 FY16 FY17 Revenue 0 0 289 1,524 3,227 3,336 COGS 0 0 ([***]) ([***]) ([***]) ([***]) GM 0 0 [***] [***] [***] [***] Opex 0 0 [***] [***] [***] [***] EBIT 0 0 NewMgmt Denali presentation based on identified BCG SFE improving experience SFE in as tech strategic sector2 priority, Program but assumed have not to developed require [***] specific to implement goals / targets fully; Estimate will scale maximum to full effect potential by [***] impact New at Denali ~[***]% margins sales remainproductivity constant improvement over [***] years for Key leversassumptions being pulled RangeImproved of probabilitysales force structuredetermined tactics: by outside – cross-selling, benchmarks solution Low selling case 0% – increased - Initiative specialization not pursued and training – new incentive structures 1.High Estimated case 50% based - Median on typical outcome TMT based SFE resultson SFE 2. experience Assumed 15% revenue increase, less decline due to small drop in sales FTEs as a result of productivity initiative Note: Proposed savings likely to overlap with [***]productivity indicates initiative information Sources: that Denali has been data omitted room, Managementon the basis of interviews, a confidential BCG treatment analysis andrequest research pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC. 30
12 9/21 plan differs from the base case in FY2017 due to differences in revenue outlook, GM and Opex % 9/21BCG plan Contribution base case %to ofEBIT ?? contribution GM%Revenues [***]% 42,242 [***]% 28,006 702([***]) 32% ([***]%) OpOpex Inc %4.9% [***]% 4.8% 739[***]% 34% [***] [***]% GrossRevenues [***]% 25,777 [***]% 25,047 99 [***] 5% [***]% Opexmargins [***]% [***]% [***] [***]% Opcosts Inc 13.6% 8.2% 1,449 66% CoreTotal Denali?Op Inc: 2,364 100% New Denali
9.5Normal;H1;H2;H3;H4;H5;H6;Blockquote;Preformatted;z-Bottom M) Denali Tablet Units (Base case – 3.5 M) Denali Tablet GM% of(Base Form;z-Top case – [***]%) of Form;Backup: Downside Market Detailed trends description Denali position of PC market Result upsideMarket & trends downside Denali sensitivity position Result Upside Limited Denali laptop Premium cannibalization Units (Base by case tablets – popularHybrid devicesand gain gain broad wide share adoption, Denali especially succeeds at sellinghigh- end both Premium Windows desktops 8 and Android grow at 4%tablets (LT Denali television achieves growth share rate) (equivalent Premium laptopsto PC share) decline of attotal -3% market (lowest ex-iPad decline Tablet rate in prices last 5 do years) not fall 11.5M meaningfully Windows Manufacturing8 devices are cannibalizationcost continues to by fall smart Android TVs OS& tablets remains Premium free to manufacturersdesktops shrink Denali at -12% develops 1 Premium tablets laptops with similar shrink costat -10% structure Trend to from Nexus last 7 12Cloud quarters computing Windows lowers 8 devices business struggle, demand and Major adoption laptop is cannibalization slow Denali tablets by tablets fail to Desktop gain a [***]%foothold 7.3M Tablet 0M sales [***]% abandoned 1. Alternate after 2 yearstriangulation Tablet prices assumes fall worstdue to decline competition, rates byAdditional region: premiummargin earned desktops by most shrink market at -9% players (-22% through mature content mkts, +1%sales, BRIC), not hardware and premium Denali margins laptops remainshrink atconstant -12%(-25% 10.7M mature requestmkts, - 8%pursuant BRIC) to – Rule Sources: 24b-2 Denali of the dataExchange room, ActManagement and has been Interviews, filed separately BCG analysis with the and SEC. research, Industry publications 7 [***] indicates information that has been omitted on the basis of a confidential treatment
8 Backup: Detailed description of New Denali market upside & downside sensitivity RevenueNew Denali ($M) segment growth rate estimates suggest ~$1.5B revenue delta in FY17 High30,000 case 20,000 (6.5%) 10,000 0 LowBase case (4.5%)(2.5%) KeyFY12 assumptions FY13 FY14 FY15 FY16 FY17 HighGrowth and rates low diverge case growth in FY14 rates to are allow constant, for integration in line with of FY13 benchmarks acquisitions RangeBase case of segmentgrowth rates growth fluctuate rates determinedslightly based by on outside individual benchmarks segment forecasts 2.5%Low case ND segment growth 50%IT spend of opex decelerates cost base due assumed to SaaS, to Cloud, be fixed creates in short-term central scale 6.5%High caseND segment growth 50%Cloud of computing opex cost baseaccelerates, assumed requiring to be fixed ESG in as short-term a bundle and increasing pull-through rates 33Sources: BCG research and analysis, Denali data room, Industry publications
Four9 primary impacts from splitting Denali EUCProposed split: separate Core / New PCEUC Company Peripherals “Core Denali” StorageEUC Support Services“New Denali” Solutions NetworkingCompany Potential impacts of a split Cost1 Cost impact synergies: on shared functions Sales force cross-selling 2Economies Transaction of scalecosts: and scope AdvisorImpact of fees existing and expense initiatives required Impact3 Market of valuation:new portfolio logic on trading multiple 4“Sum Strategy of parts” & execution: value shift TacticsImpact onand management partnerships focusmade possible 34Potential execution risks
Open9 questions regarding split OutstandingIssue questions Potential next steps LaunchWhat dis-synergies cross-functional would effort be causedto detail by Synergies / synergiessplitting companies? bottom-up by division Todis-synergies what extent will split enable long-term Analyze competitive opportunities for businessesgains through as separate better management? companies How long will split take to execute? KeyBuild milestones, detailed roadmap deadlines, for andlogistics owners of split WhatExecution is downside risk if split is poorly Model range of execution scenarios managedRisk or lasts longer than expected? Engage(Increased advisors turnover, to plan poor legal sales, and etc.) financial Howstructure will of sales split force (e.g., be spin-off, divided? split-off, etc.) Plan detailed allocation of new sales Salesorganization Force (including structure, wiring, How will split affect existing client processes, etc) relationshipsOrganization and current cross-selling Interviewcontracts? customers to develop deeper Tounderstanding what extent of will expected transformation reaction stall Refine strategic plans for two separate companiesdue to lack of mgmt focus? NewImpact Denali on CreateHow will succession current executive plan and launchteam be search fordivided new betweenexecutive new committee companies? Howtransformation will New Denali fund growth without cashAssess generation capital structure from Core? and plan for likely 35capital needs of both companies
9/21Preliminary management Analysis plan – Forby solutionsDiscussion group Purposes Only Strictly Private and Confidential TotalRevised Denali 9/21 ESG management S&P plan (9.9%)FY13 FY14 2.0% FY15 3.0% FY163.0% FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Revenue 57.5 59.9 63.2 66.6 10.6 11.4 12.3 13.3 9.2 9.4 9.7 10.0 Y-o-Y growth (7.4%) 4.2% 5.5% 5.3% 2.8% 7.9% 8.0% 8.0% TotalGross OpexMargin 8.8 12.8 9.5 13.79.7 10.1 14.6 [***] 15.3 [***] [***] [***] [***] [***] [***] [***] [***]% of Rev% of 15.2% Rev 22.2% 15.8% 22.8% 15.4% 23.0% 15.1% 23.0% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% EUCOpInc Services 4.0 4.2 Software 4.9 5.3 0.3 0.6 0.7 0.8 0.8 0.8 0.8 0.8 % of Rev 7.0% 7.0% 7.7% 7.9% 3.1% 4.8% 5.6% 6.4% 8.2% 8.4% 8.1% 7.5% 146.3%FY13 FY14 31.9% FY15 9.4% FY16 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Revenue 28.7 28.9 30.1 31.3 8.5 8.9 9.4 10.0 0.6 1.4 1.8 2.0 Y-o-Y growth (13.8%) 0.9% 4.1% 4.0% 2.3% 4.1% 5.6% 7.4% N/A [***]%Gross Margin [***]% [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] % of Rev [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]%Total Opex [***]% [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] % of Rev [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% [***]% KeyOpInc commentary 0.9 0.7 0.7 0.7 2.4 2.5 2.7 3.0 (0.0) (0.0) 0.3 0.3 % of Rev 3.2% 2.5% 2.5% 2.3% 28.4% 28.5% 29.2% 29.9% (9.0%) (1.7%) 16.0% 17.7% ?Reflects?Preliminary management tops-down plan allocation to reduce of operatingexpenses overexpenses the projected across solutions period withgroups savings assumed to be reinvested in core growth areas Source:?DFS is Denali’sdistributed updated across FY13-16 the solutions projections groups as of September 21, 2012 [***]Note: indicatesAbove reflects information estimated that opex has beenby segment omitted based on the on basis FY13 of internal a confidential operating treatment plan cost request allocation pursuant to Rule 24b-2 of the Exchange Act and has been filed separately with the SEC. APDEN P EA ND L I I48 X
Top 25 global information technology companies AppleTech company Inc 550 Market cap ($B) IntlMicrosoft Business Corp Machines 223 Corp 221 GoogleSamsung Inc Electronics 180 Co Ltd 184 QualcommOracle Corp Inc 158 109 IntelCisco Corp Systems 98 Inc 100 TaiwanSAP AG Semiconductor 93 MFG Co 88 TencenteBay Inc Holdings 68 Ltd 60 TATAEMC Corp/MA Consultancy 51 Svcs Ltd. 47 Accenture Plc 43 HonCanon Hai Inc Precision 42 Ind Co Ltd 38 EricssonTexas Instrument 30 Inc 34 HitachiAutomatic Ltd Data 27 Procession 27 InfosysHewlett-Packard Ltd 26 Co 26 Salesforce.comYahoo Inc 22 Inc 22 37Source: Compustat Exhibit (c) (17)
DecemberProject Denali 6, 2012
ThisPreface volume contains copies of slides that will be presented by members of The Boston Consulting Group, Inc. (“BCG”), to members of the Board of Directors of “Denali”, and are designed for the use of the Board. TheAt the financial presentation, evaluations the slides contained will serve in this as thepresentation focus for discussion.are based upon They standard are incomplete methodologies without usingthe accompanying public and/or oral confidential commentary. data and assumptions derived from the industry insight gained during the strategic options Changeswork for thein the Board underlying of Directors data orof operating“Denali”. assumptions will clearly impact the analyses and conclusions. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our Thesefinancial materials evaluations may providenot be copied a framework or given for to assessing any person the or relative entity attractiveness(“Third-Parties”) of different other than strategic the options. 2Client without BCG’s prior written consent.
DecemberObjectives 6for today’s meeting AssessLay out strategy market of context each Denali for Denali business Market attractiveness FutureDenali positionoutlook & trajectory HelpDefine frame strategic the Board’soptions thatdecisions emerge JanuaryToday’s discussionmeeting (date TBD) RequiredEvaluate attractiveness actions of key strategic options ValueCompetitive creation logic Feasibility to achieve 3Highlight key tradeoffs between strategic options for Board
ValueMarket of context: $100 invested After very at IPO strong historical value creation, Denali has significantly underperformed 40.00060,000 020,000 Enters$340M ConvergeNet acquisition FirstChina drop in PC rev EntersConvergeNet mp3 players, write-down PDAs, TVs BecomesMSD steps down as CEO First#1 PC PC manuf. share loss AcquiresExits mp3 Compellent players, PDAs, TVs MSD($0.9B) returns as CEO ($1.2B)Acquires SonicWall ($2.4B)Acquires Quest 89Acquires 90 91 92Perot 93 Systems94 95 96 ($3.9B) 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Denali24 yr TSR 21% EarlyS&P 500 years 9% Nasdaq 9% growthDramatic & Bubblecrash growth Return Transition to Rise of to competitors; “New Denali” RevPoints Growth of TSR 55 44 26 16 2 EV/EBITEBIT Margin Multiple Chg (7) Chg 17 (18) (11) 80 7 (3)13 (10) (20) TSRCF Yield (Annual (4) (8) Avg%) (1) 3 266 133 27 16 (15) ~75%~95x value value growth decline since since IPO 2005 4Source: Company reports, Denali Data room, BCG analysis
Denali’s low valuation does not match apparent company strengths and reflects investor concerns GloballyDespite significant respected strengths... brand and international market access Strong (A-) credit, with significant free cash flow generation ProfitableWell positioned $39B Coreto serve Denali the business,commercial with mid-market scale Profitable $19B New Denali business, with growth potential ...Founder Investors / CEO are skepticalwith strong reputation and network ...At withconsensus zero terminalprofitability, value Denali implied will generate its own market cap in free cash flow in 3.2 years1 CashTwo potentialflows are investor likely to concerns decline rapidlycould explain this low valuation: WeCash would flows like will to be understand spent in value-destroying the relative importance ways of each concern HowAre these might justified private byownership fundamentals? change outlook? 51. Based on Dec 3 2012 value of $10 and forecast for FCF of $3.21B/year (avg 2013-2016); counts $4.12/share of company’s existing cash ($6.33/share less 35% repatriation cost)
Strategic assessment: Denali strategy integrates two distinct business models under common management KeyOverview questions FacingA leader significant in a mature, category commoditizing threats & uncertainty category CoreAggressive Denali low-cost competitors gaining share SignificantWhat actions FCF will - even at low OI margins, with minimal investmentcreate long-term Denalicompetitive losing share with strategy focused on margin% Aadvantage? collection of acquired discrete positions -What High-IP actions HW drive & SW; labor-intensive services attractive FavorableNew Denali LT outlook for growth with healthy margins Profitable,shareholder but value low returns vs. acquisition capital creation? LeadershipDenali struggling belief inwith “end go-to-market to end” solutions model IsSignificant Denali one commonality in procurement, infrastructure, business,and IT systems or a conglomerateLinkages of twoBut differentdistinct parts? business models With sales force capabilities a critical issue supporting 6transition from Core to New
GrowthCore Denali in legacy under PC’s pressure (desktop/laptop) as PC market has commoditizes stalled, and future and uncertainmix shifts downward Form-factorSeveral headwinds displacement creating a uncertaintyslow process; in theanalogs demand typically forecast take 5+ years to achieve 20% market penetration AsTablet market substitution mix shifts, in certain $ profit segments per unit andis more use casesat risk only than - Legacyunit volume PCs likely to decline, but unlikely to disappear in next 3-5 years ProductsPC market not profit designed pools specifically shifting towards for lower value end segment, of Value where segment Denali (<$500 lacks ASP) a winning product strategy and operating model AlignedSelling higher with Wintel cost products model, atcurrently low end, a low-shareat a loss technology in tablets MarketIn process is rewarding of moving innovation from higher (Apple), cost CTO and to increasing more efficient scale BTS(Lenovo) supply chain 7Two paths for Core Denali: run the business for margin dollars, or for margin percentage
PC market growth has stalled...the future is hotly debated 400Revenue ($B)1 0200 Other’99 ’00 tablets ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12E ’13E ’14E ’15E NotebooksiPad TabletsDesktops will be highly cannibalistic to core PC market in all segments The- Goldman decline Sachsof the PC business has accelerated. This ship is sinking faster than anyone expected ‘Death- Indigo of Equity the PC’ Research is like death of the mainframe - forecasted for ages but extremely slow to occur Windows- Professor1, 8 means Wharton a potential return to positive growth for the PC market 1.- Research From 12Q3 Dir., till IDC ‘15 BCG projections assume that the total revenue from computing devices (desktops, notebooks and tablets) follows a long term 10year trend. 8Source: IDC, Gartner, BCG analysis
TechnologyA retrospective: adoptions Analogous do not technologies happen overnight... take years to reach full penetration, with form-factor displacement often limited 50U.S. 40 household 30 20 10 0penetration (%) InternetSmartphone VCRAudio CD OtheriPad tablets 0Home 1 2 3 PC 4 5 6 7 8 9 10 ...andYears olderfrom form-factorsintroduction may persist and grow with newer ones 400PC shipments by form factor 1999-2012E 300 100200 1150 142131 164148 212183 271232 315300 364358 Notebooks366 ’99Desktops ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 12E 9Source: eMarketer; William Blair; Nielsen; Forrester; EIA; US Census; USGS; AWAA; press and web research; IDC, Gartner, BCG analysis
2011Profit Global pools in PC PC profit market pools are shifting to sub-$500 (“Value”) segment, where Denali lacks a winning product strategy 1,400$ / unit 1,200 1,000 800 600 400 200 0 280-3% 757% 2522% 25240 (‘06-‘11)1Profit CAGR Total0 50 100 market 150 units200 250(M) 300 350 400 450 ($800+)Premium ($500-799) Standard Value(<$500) iPad Tablets Other unitsDenali’s 2 (M) 12 15 13 - - Keyrevenue2 observations ($B) 15 10 5 - - ProfitHalf the pool PC in profit Premium today segment is in Premium shrinking segment - and growing in Value segment and tablets Build-to-stockDenali lacks a winningis lower costproduct - Denali strategy mostly in Value configured segment to order OverLacks half products of Denali designed Value specifically segment revenues2 for Value deliver segment negative gross margins WinDenali 8 tabletscurrently just not being big inintroduced Tablets 1.Denali Profit not pool participating projection inbased ARM/Android on BCG analysis of historical and current trends for segments of PC market 2. Denali units and revenue represent Q4FY2012 to Q3FY2013 (LTM of available data) Source: BCG analysis, 10IDC, Gartner, Morgan Stanley, Denali Data room
Market rewarding two business models - leadership in innovation (Apple) and increasing scale (Lenovo) $Highly EBIT competitive Growth (2006-11 PC market CAGR with %) top players separating from others in share 4060 020 -220-200 Market cap declinegrowth OthersBubble size = 2011 PC revenue LenovoDenali HPApple PC Mac averageAsus Acer Change-15 -12 -3 in 0 market 3 6 share Two(2006-11) value creating models have emerged DrivenApple winning, by innovation with a and focus design on the premium segment Difficult to replicate LenovoDrives high also GMwinning, of ~25% but by (only having Apple) a low vs. cost a market position GM and range driving of 8-15%scale aggressively across all price tiers Note:Denali Apple caught and in theHP middlemargins - losingestimated share from at Premium published end segment to Apple, operating and facing margins aggressive for Apple low-cost Mac competitionand HP PC divisions,from Lenovo Denali represents EUC business only. Source: IDC, Gartner, Analyst report, Denali data room, 11company annual reports, BCG analysis
Two paths for Core Denali: run the business for margin dollars, or for margin percentage OptimizePath A: around margin % CompetePath B: aggressively for margin $ CurtailCede volume/share investments andin low-margin redeploy cash product from segments Core to New Denali CompeteLargely current aggressively approach in variety of segments AggressivelyDesign for and push selectively in emerging enter lowermarkets price bands, even if margins are lower DriveOperate scale as commodityadvantage business Aggressively reduce costs MarginMust believes floors are best way to extract value CanDifficult maintain to generate attractive profit cash in lowerflows priceas volume bands and scale loss occurs Scale not necessary to compete in high-end PublicLow end market players investors won’t besensitive able to to move margin% up CompetitiveDollar profit objectiveposition will is best erode way dangerously to extract value without (business scale fromhas low low capital end intensity) 12Denali can lower costs, get a small but positive margin at low end and create attractive return on capital
New Denali competes in healthy markets, but growing slower than expectations However,New Denali transformation competes in ais set slower of markets than desired with healthy growth exposure and profit margins Revenue trajectory of acquisitions below expectations SolutionNew Denali sales has complex not grown - Denali in targeted sales force mid-market primarily segment selling point solutions to date Servers...while Newhealthy, Denali but servicesorganic revenueand storage growth behind has lagged rest of the market New Denali faces three key challenges DisciplinedImprove sales execution, force capability to ensure and sales effectiveness force focuses in solution on and selling grows Mid market 13Develop compelling, differentiated solutions that combine Denali technology components
TotalNew Denali Enterprise competes solutions in a setmarket of markets revenue featuring and EBIT healthy by product growth type exposure and profits 2502011 200 $B 150globally 100 50 0 51.2200.1 12.3 24.0 21.023.7 2.35.5 18.419.4 4.65.4 ServicesEBIT $ Servers Storage Services Software Networking 12-16(non-attached) CAGR% (attached) 4.4 3.1 11.2 3.0 7.7 2.9 Note:7 - 12 Non-attachedCAGR% 7.3 services2.7 6.6 -0.8includes 6.6 6.0server maintenance, excludes EUC support. Attached services includes PC repair and tech support Source: Gartner 2012, IDC 2012, IBISWorld 2012, Credit Suisse 2011 SteadyKey observations growth consensus outlook for enterprise Growth projected to accelerate for most categories Hardware/softwareEnterprise EBIT margins ~25% are healthy AnalystsServices ~12%aligned on healthy growth outlook 14IDC, Gartner, IBISWorld project modest growth (mid-single digits) through 2016
AcquisitionsEnterprise transformation have not grown has to not expectations yet produced expected results for Denali... 100% revenue 90 80 70earned 60 50 to plan (08-11) Gap95 91 to 89 plan 83 60 0Acquisition 2,000 4,000 price 6,000 ($M) 8,000 StrategyPerot Secureworks is mid-market Compellant focused, Force but mid-marketOthers has not driven growth 5% 4 revenue 3 2 1 0 -1CAGR (08-12) Public3.0 -0.2 Consumer -0.5 -1.0 Large SMB %Limited of LE effectiveness Generalist sales of cross-selling (2012) efforts Primarily100 80 60 S&P40 20 attachment 0 ...While Denali organic revenue growth mixed picture across Enterprise product lines %Services: revenue Growth CAGR below (08-11) industry average 23.525 20 19.3 15 10 18.3 5 0 8.2 -5 Industry average 4.4 3.5 1.4 6.9 Storage:Infosys Tata Business Wipro is Accenturedeclining IBM Denali CSC 25% revenue20 15 10 CAGR 5 0 -5 (08-11) -2.022.9 -2.110.0 4.1 Industry average 4.6 ServersNetApp andEMC network: IBM Denali HP %In-line revenue with CAGR industry (08-11) 6.625 20 5.5 15 4.7 10 Industry 5 0 -5 average 5.2 -0.5 Note:Fujitsu All Denali firms HP portrayed IBM as ex-major related acquisitions 16Source: BCG Valuescience, IDC 2012, Dell’Oro 2012, Gartner 2011 New Denali faces three key challenges Key challenges for New Denali DisciplinedImprove sales execution force capability to ensure and sales effectiveness force focuses in solution on and sellinggrows Mid market 17Develop compelling, differentiated solutions that combine Denali technology components FirmHow Yeardifficult Challenges is “Transformation”, Tactics Used and what signals success? Success Share‘97 loss, driven by poor product StreamlineInstall new leadershipproduct line team and major investment in R&D ‘93Build integrated ecosystem: device, software, content DecliningShare loss marketin PC business AggressivelyExit PC business enter high-margin software and services ‘90Transform legacy culture MarginLow-growth erosion market driven by competition ControlFocus on costs growing, and globalize high-margin organization BUs; shed remainder of historical core businesses ‘06Still in Transition MarginShare loss erosion LeverageGrow through PC unit large, for expensivecash, attempt add-on few (failed)acquisitions innovations ‘07Change leadership when strategy didn’t deliver results ExpandDeclining from printing printing market to broaderShare loss “document due to new management” competition GraduallyShift into new wind business down printing processes business and IT withoutoutsourcing major shifts ‘08Failure MarginShare loss erosion (high (low end) end) driven by poor product AttemptedRemained focused in-house on OS, legacy then feature exited phones& partnered despite w/ evidence MSFT of shift to smart phone trend Declining‘97 film market AttemptedBusiness model to preserve (Gillette-style) analog photography becoming obsolete profits through major cost cuts 18Gradually pushed into digital, but without clear vision Empirical lessons from successful “transformations” SometimesConsistently present present Not present Match scale of challenge - make moves equal to scope of challenge faced ShelterDefine clearnew strategicbusiness vision- protect - ensure new business continuous models iteration from against legacy vision problems Shed legacy core - willingness to exit segments in secular decline AlignInnovate management business model with strategy - shift multiple - match leadershipparts of biz skills model, with not strategic just product path AcquireExclusive way focus to healthon costs - large, - cost lumpy reductions acquisitions necessary lacking but not investment sufficient, thesis need long-term growth agenda in addition 19Unrealistic time horizon - prematurely change strategic path OrganizationObservations on Denali org, leadership, and culture CultureLeadership HighTeam centralization aligned on broad - senior strategic talent priorities primarily in Austin Slow2013 orgdecision shift viewedmaking as - drivennecessary, by matrixbut key organization elements unresolved structure FounderSerial reorganizations, / CEO has deep legacy knowledge sales force of business, struggling strong to sell presence solutions MixedDe facto results “Office with of lateralCOO” managers(the Business - retention Operation challenged Team) SharedFact-based, history analytical of a long-tenured culture core group HistoryAcquisitions of optimism, bring different weak forecasting business models and planning and beliefs 20Limited pay-for-performance - discretionary bonus mechanism Public:Strategic Maintain options: structurefive options emerge for Denali to pursue TakePublic: private Transform structure Strategic option Current1 strategy High2 contrast strategy Split3 company Pursue4 strategic buyer Take5 private PlayDescription in higher-end EUC market, cede share and maintain margins CoreGrow Denali New Denali - commit at current to win pace, with continued acquisitions GrowDesign volume products in to value compete / emerging in all segments mkts while maintaining margins NewOperate Denali as commodity - drive organic business growth with focus on cost takeout Improve sales force capability in solution selling DevelopDisciplined compelling, execution differentiated and focus on solutions the mid-market SeekSplit intobuyer two for pure-play all or portion companies of Denali (Core businesses and New Denali) with distinct strategic agendas and valuation profiles Accept offer for company to be taken private 21Leverage private structure to enable distinct strategic actions Our sense of the take-private agenda Potential value levers “CommitA to win” in Core Denali DriveB organic growth in New Denali ImplementC aggressive cost takeout AlignD org and talent TightlyE align management incentives EnsureF discipline of capital allocation EnhanceG capital strategy MaximizeDescription life cycle cash flow $, not margin percent MoveDrive sharedecision to preserve making centerscale (e.g. of organization $450 product, to AsiaTier 4-6 China, etc) IncreaseIntegrate focusproducts on toadvantaged create differentiated mid-market solution segment for clients AggressivelySegment and implementupgrade selling simplification organization, and cost build take-out solutions (NDBM) approach DelayerProgram-manage the organization large-scale cost reduction programs AlignCreate external COO, recruit reporting / change with seniorinternal talent roles, to resourcing, align with strategyand metrics Drive strong execution discipline, with focus on the “6-8 key priorities” RequireRemove mgtquarterly purchase EPS of constraint, equity (money drive towardsat risk, not 3-6 options) yr exit profile Revisit M&A activity - ensure clear investment thesis for acquisition IncreaseDrive integration debt leverage of existing to boost acquisitions equity returns Access OUS cash tax-efficiently 22Arbitrage valuation multiple (buy low, sell high) Believe many of the “take-private” value levers could (in principle) be applicable to Denali as public company Potential value levers Description AApplicable “Commit to to public? win” in Core Denali CB DriveImplement organic aggressive growth in cost New takeout Denali ED TightlyAlign org align and management talent incentives GF EnsureEnhance discipline capital strategy of capital allocation Maximize life cycle cash flow $, not margin percent MoveDrive sharedecision to preserve making centerscale (e.g. of organization $450 product, to Asia?Tier 4-6 China, etc) IncreaseIntegrate focusproducts on toadvantaged create differentiated mid-market solution segment for clients AggressivelySegment and implementupgrade selling simplification organization, and cost build take-out solutions (NDBM) approach DelayerProgram-manage the organization large-scale cost reduction programs AlignCreate external COO, recruit reporting / change with seniorinternal talent roles, to resourcing,align with strategy and metrics ? Drive strong execution discipline, with focus on the “6-8 key priorities” RequireRemove mgtquarterly purchase EPS of constraint, equity (money drive towardsat risk, not 3-6 options)? yr exit profile? Revisit M&A activity - ensure clear investment thesis for acquisition IncreaseDrive integration debt leverage of existing to boost acquisitions equity returns? Access OUS cash tax-efficiently 23Arbitrage valuation multiple (buy low, sell high) Frame path forward: Critical questions facing the Board NoProceed with PE process and (at end) accept bid? RemainYes public KeyTake questions Private Which strategic direction? WhichStatus quoleadership vs. new team? strategy WhichCurrent go-forward vs. new management structure? WhatStand-alone is Denali vs. worthsplit as public company? 24What is Denali worth as private company? What to expect when we meet in January BoardPath to answer critical questions facing Denali AssessKey deliverables driver-based view of evolution of profit pools in PC / Tablet market RangeEvaluate of valuepotential creation outcomes of priority strategic options Timing- Based toon achieve internal (feasibility to achieve) and external (market forces, competitors) risk ArticulateRisk, difficulty, critical and must uncertainties believes Highlight key tradeoffs across options 25Drivers of difference in value creation Exhibit (c)(19) Exhibit (c) (19) DecemberProject Denali 5, 2012 AtThis the volume presentation, contains the copies slides of will slides serve that as willthe focusbe presented for discussion. by members They ofare The incomplete Boston Consultingwithout the Group,accompanying Inc. (“BCG”), oral commentary. to members of the Board of Directors of “Denali”, and are designed for the use of the Board. workThe financial for the Board evaluations of Directors contained of “Denali”. in this presentation are based upon standard methodologies using public and/or confidential data and assumptions derived from the industry insight gained during the strategic options financialChanges evaluationsin the underlying provide data a framework or operating for assumptions assessing the will relative clearly attractiveness impact the ofanalyses different and strategic conclusions. options. The Boston Consulting Group does not provide fairness opinions or valuations of market transactions. Our ClientThese materialswithout BCG’s may not prior be copiedwritten orconsent. given to any person or entity (“Third-Parties”) other than the DecemberObjectives 6for today's meeting AssessLay out strategy market of context each Denali for Denali business • Market attractiveness • DenaliFuture positionoutlook & trajectory HelpDefine frame strategic the Board'soptions decisionsthat emerge JanuaryToday's meetingdiscussion (date TBD) •Evaluate Required attractiveness actions of key strategic options • CompetitiveValue creation logic • Feasibility to achieve 2Highlight key tradeoffs between strategic options for Board Market context: After very strong historical value creation, Denali has significantly underperformed 60,000Value of 40.000 $100 invested20,000 0 at IPO Enters$340M ChinaConvergeNet acquisition ConvergeNetFirst drop in PC rev Enterswrite-down mp3 PDAs,players, TVs BecomesMSD steps #1 down PC manuf. as CEO shareFirst PC MSDloss returns as CEO players,Exits mp3 AcquiresPDAs, TVs ($0.9B)Compellent Acquires Perot AcquiresSystems ($3.9B) ($1.2B)SonicWall QuestAcquires 24($2.4B) yr TSR NasdaqDenali 21% 9% EarlyS&P 500 years 9% BubbleDramatic & growthcrash RiseReturn of tocompetitors; growth Transition to "New Denali" 9189 90 9392 9794 95 96 9998 0100 0402 03 0605 07 0908 12Points10 11 of TSR • RevEBIT Growth Margin Chg • EV/EBITCF Yield Multiple Chg • TSR55 (Annual Avg%) •(18)•(7) ••(4) 26 • 1744 •(8)• 80 • 13326 ••(11) 13 ••(1) 27 • 167 ••(10) 3 • 162 •(20)•(3) •(15)• 6 • ~75%~95x value value growth decline since since IPO 2005 3• Source: Company reports, Denali Data room, BCG analysis GloballyDenali's low respected valuation brand does and not international match apparent market company access strengths and reflects investor concernsDespite significant strengths. Strong (A-) credit, with significant free cash flow generation ProfitableWell positioned $39B Coreto serve Denali the business,commercial with mid-market scale Profitable $19B New Denali business, with growth potential .Founder Investors / CEOare skeptical with strong reputation and network •At . withconsensus zero terminalprofitability, value Denali implied will generate its own market cap in free cash flow in 3.2 years1 •Two Cash potential flows are investor likely concernsto decline could rapidly explain this low valuation: We• Cash would flows like will to beunderstand spent in value-destroyingthe relative importance ways of each concern • HowAre these might justified private byownership fundamentals? change outlook? 4• 1. Based on Dec 3 2012 value of $10 and forecast for FCF of $3.21B/year (avg 2013-2016); counts $4.12/share of company's existing cash ($6.33/share less 35% repatriation cost) CoreStrategic Denali assessment: Denali strategy integrates two distinct business models under common managementOverview • FacingA leader significant in a mature, category commoditizing threats & uncertainty category • AggressiveSignificant low-costFCF – even competitors at low OI gaining margins, share with minimal investment • NewDenali Denali losing share with strategy focused on margin % • A collection of acquired discrete positions • High-IPFavorable HW LT & outlook SW; labor-intensive for growth with services healthy margins • Profitable,Denali struggling but low with returns go-to-market vs. acquisition model capital • LeadershipLinkages belief in "end to end" solutions • SignificantBut different commonality business models. in procurement, infrastructure, and IT systems • .WithKey questions sales force capabilities a critical issue supporting transition from Core to New • What actions willdrive create attractive long-term shareholder competitive value advantage?creation? 5• Is Denali one business, or a conglomerate of two distinct parts? Core Denali under pressure as PC market commoditizes and mix shifts downwardGrowth in legacy PC's (desktop/laptop) has stalled, and future uncertain • SeveralForm-factor headwinds displacement creating a uncertaintyslow process; in theanalogs demand typically forecast take 5+ years to achieve 20% market penetration • TabletAs market substitution mix shifts, in certain $ profit segments per unit andis more use casesat risk only than – unitLegacy volume PCs likely to decline, but unlikely to disappear in next 3-5 years •PC Products market notprofit designed pools shiftingspecifically towards for lower value end segment, of Value where segment Denali (<$500 lacks ASP)a winning product strategy and operating model • AlignedSelling higher with Wintel cost products model, atcurrently low end, a low-shareat a loss technology in tablets Market• In process is rewarding of moving innovation from higher (Apple), cost CTO and increasingto more efficient scale (Lenovo) BTS supply chain 6Two paths for Core Denali: run the business for margin dollars, or for margin percentage PC market growth has stalled.the future is hotly debated Revenue ($B)1 200400 0 Other’99 ’00 tablets ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12E ’13E ’14E ’15E NotebooksiPad TabletsDesktops will be highly cannibalistic to core PC market in all segments The- Goldman decline Sachsof the PC business has accelerated. This ship is sinking faster than anyone expected 'Death- Indigo of Equity the PC' Research is like death of the mainframe –forecasted for ages but extremely slow to occur - Professor1 , Wharton -Windows Research 8 Dir., means IDC a potential return to positive growth for the PC market 1. From 12Q3 till '15 BCG projections assume that the total revenue from computing devices (desktops, notebooks and tablets) follows a long term 10year trend. Source: IDC, Gartner, BCG analysis 7 A retrospective: Analogous technologies take years to reach full penetration, with form-factor displacement often limited U.S.Technology household adoptions penetration do not (%) happen overnight 4050 030 20 10 iPad0 1 2 Other 3 4 5 tablets6 7 8 9 10 InternetSmartphone VCRAudio CD YearsHome fromPC introduction PC.and shipments older form-factors by form factormay persist 1999-2012E and grow with newer ones ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 12E 400 300 200 100 0 DesktopsNotebooks 164142 183148 148115 131 300232 271212 358315 364 366 8 Source: eMarketer; William Blair; Nielsen; Forrester; EIA; US Census; USGS; AWAA; press and web research; IDC, Gartner, BCG analysis 2011Profit Global pools in PC PC profit market pools are shifting to sub-$500 ("Value") segment, where Denali lacks a winning product strategy 1,400$ / unit 1,0001,200 800 600 400 200 500 0 100 150 200 250 300 350 400 450 -3%Total 7% market 22% units (M) Profit CAGR ('06-'11)1 HalfKey observationsthe PC profit today is in Premium segment DenaliProfit pool lacks in a Premiumwinning productsegment strategy shrinking in Value– and segmentgrowing in Value segment and tablets • Build-to-stockLacks products is designed lower cost specifically – Denali mostlyfor Value configured segment to order Denali• Over halfcurrently of Denali not big Value in Tablets segment revenues2 deliver negative gross margins • DenaliWin 8 tabletsnot participating just being inintroduced ARM/Android ($800+)Premium ($500-799) Standard Value(<$500) iPad Tablets Other Denali's 2 12 15 13 – –units (M) revenue2 ($B) 15 10 5 IDC,1. Profit Gartner, pool projection Morgan Stanley, based on Denali BCG Dataanalysis room of historical and current trends for segments of PC market 2. Denali units and revenue represent Q4FY2012 to Q3FY2013 (LTM of available data) Source: BCG analysis, 9 HighlyMarket competitiverewarding two PC businessmarket with models top –players leadership separating in innovation from others (Apple) in share and increasing scale (Lenovo) 60$ EBIT Growth (2006-11 CAGR %) -15 40 20 0 200 220 -12 -3 0 3 6 Market cap decline Market cap growth Bubble size = 2011 PC revenue Others Denali LenovoHP PC Apple Mac averageAsus TwoAcer value creating models have emerged •Apple Driven winning, by innovation with a focus and design on the premium segment • DifficultDrives high to replicate GM of ~25% (only Apple) vs. a market GM range of 8-15% DenaliLenovo caught also winning, in the middle but by –having losing a share low cost at Premium position endand todriving Apple, scale and aggressively facing aggressive across low-cost all price competitiontiers from Lenovo (2006-11)Change in market share Note: Apple and HP margins estimated from published segment operating margins for Apple Mac and HP PC divisions, Denali represents EUC business only. Source: IDC, Gartner, Analyst report, Denali data room, 10company annual reports, BCG analysis Two paths for Core Denali: run the business for margin dollars, or for margin percentage Strategic actions OptimizePath A: around margin % CurtailCede volume/share investments andin low-margin redeploy cash product from segments Core to New Denali PathLargely B: current approach Compete aggressively infor variety margin of $ segments • DesignAggressively for and push selectively in emerging enter lowermarkets price bands, even if margins are lower •Operate Drive scale as commodity advantage business • Aggressively reduce costs MarginMust believes floors are best way to extract value CanDifficult maintain to generate attractive profit cash in lowerflows priceas volume bands and scale loss occurs • Scale not necessary to compete in high-end Public• Low endmarket players investors won't sensitive be able toto movemargin up % CompetitiveDollar profit objectiveposition will is best erode way dangerously to extract value without (business scale fromhas low low capital end intensity) 11Denali can lower costs, get a small but positive margin at low end and create attractive return on capital New Denali competes in healthya set of markets,markets withbut growing healthy growthslower thanexposure expectations and profit margins •However, Revenue transformationtrajectory of acquisitions is slower belowthan desired. expectations • SolutionNew Denali sales has complex not grown – Denali in targeted sales force mid-market primarily segment selling point solutions to date •.while Servers New healthy, Denali but organic services revenue and storage growth behind has lagged rest of the market New Denali faces three key challenges • ImproveDisciplined sales execution, force capability to ensure and sales effectiveness force focuses in solution on and selling grows Mid market 12• Develop compelling, differentiated solutions that combine Denali technology components New Denali competes in a set of markets featuring healthy growth exposure and profits 2011Total $BEnterprise globally solutions market revenue and EBIT by product type 250 200 150 100 50 0 200.1Services 24.0 Servers Storage Services Software Networking (non-attached) (attached) 23.751.2 12.35.5 19.421.0 5.42.3 12-1618.4 4.6 CAGR% 4.4 3.1 11.2 3.0 7.7 2.9 —127 CAGR% 7.3 2.7 6.6 -0.8 6.6 6.0 Note: Non-attached services includes server maintenance, excludes EUC support. Attached services includes PC repair and tech support Source: Gartner 2012, IDC 2012, IBISWorld 2012, Credit Suisse 2011 SteadyKey observations growth consensus outlook for enterprise • Growth projected to accelerate for most categories •Enterprise Hardware/software EBIT margins ~25% are healthy Analysts• Services aligned ~12% on healthy growth outlook 13• IDC, Gartner, IBISWorld project modest growth (mid-single digits) through 2016 Enterprise transformation has not yet produced expected results for Denali Acquisitions have not grown to expectations 100% revenue 90 80 70earned 60 50 to plan (08-11) 0 Perot 2,000 Secureworks 4,000 Compellant Force Others 6,000 8,000 95Gap to plan 6091 89 83 Acquisition price ($M) % revenue CAGR (08-12) Strategy is mid-market focused, but mid-market has not driven growth 5 4 3 2 1 0 -1 Public Large SMB Consumer -0.23.0 -1.0-0.5 %Limited of LE effectiveness Generalist sales of cross-selling (2012) efforts < 10k 10k—100k 100k—1M 100 80 60 40 20 0 10M+1M—10M size $ ( Other) Account 3rd product 1st2nd product product #Primarily accounts S&P 482 attachment853 2,039 981 31 14 Note: Revenue to plan in GAAP revenue, performance to plan excludes Denali financial services, Equallogic; performance TBD for 2012 acquisitions Source: Denali internal files .While Denali organic revenue growth mixed picture across Enterprise product lines %Services: revenue Growth CAGR below (08-11) industry average Infosys 25 20 15 10 5 0 -5 WiproTata IBMAccenture CSCDenali 19.323.5 18.3 8.2 Industry average 4.4 3.5 1.4 %Storage: revenue Business CAGR is (08-11) declining NetApp 25 20 15 10 5 0 -5 IBMEMC 22.9Denali 2.0 -HP 2.1 - 4.110.0 4.6 Industry average %Servers revenue and CAGR network: (08-11) In-line with industry 25Fujitsu 20 15 Denali 10 5 0 HP -5 -0.5IBM 5.2 6.6 5.5 Industry 4.7 average Note: All firms portrayed as ex-major related acquisitions 15 Source: BCG Valuescience, IDC 2012, Dell'Oro 2012, Gartner 2011 New Denali faces three key challenges Key challenges for New Denali DisciplinedImprove sales execution force capability to ensure and sales effectiveness force focuses in solution on and sellinggrows Mid market 16Develop compelling, differentiated solutions that combine Denali technology components FirmHow Yeardifficult Challenges is "Transformation", Tactics Used and what signals success? '97• Share • Streamline loss, driven product by • Installline and new major leadership investment team in R&D •poor Share product loss in • BuildPC • Exitintegrated PC business ecosystem: device, software, content •Success Declining '93 businessmarket • •Transform Aggressively legacy enter culture high-margin software and services '90• Low-growth • Margin erosion market driven • Focus historical on growing, core businesses high-margin BUs; shed remainder of •by Share competition loss • Grow • Control through costs large, and expensive globalize organizationadd-on acquisitions •'06 Margin • Leverage erosion PC unit for cash, attempt few (failed) innovations TransitionStill in • Change • Declining leadership printing when market strategy • didn'tExpand deliver from results printing to broader "document management" competition'07 • Share loss • Gradually due to new wind • Shift down into printing new business business processes without and major IT outsourcingshifts '08• Share driven loss by (high poor end) product • Remained evidence focused of shift on to legacysmart phonefeature trend phones despite Failure• Margin erosion (low end) • Attempted in-house OS, then exited & partnered w/ MSFT '97• Declining • Business film model market (Gillette- • Attempted major tocost preserve cuts analog photography profits through 17style) becoming obsolete • Gradually pushed into digital, but without clear vision MatchEmpirical scale lessons of challenge from successful– make moves "transformations" equal to scope of challenge faced Consistently Define clear strategic vision – ensure continuous iteration against vision Shelterpresent new business – protect new business models from legacy problems SometimesShed legacy Innovatecore – willingness business tomodel exit segmentsshift multiple in secular parts declineof biz model, not just product Alignpresent management with strategy – match leadership skills with strategic path needExclusive long-term focus growthon costs agenda – cost reductionsin addition necessary but not sufficient, presentNot Acquire way to health – large, lumpy acquisitions lacking investment thesis 18Unrealistic time horizon – prematurely change strategic path •Observations Team aligned on on Denali broad org, strategic leadership, priorities and culture Organization• High centralization • 2013 org– senior shift viewedtalent primarily as necessary, in Austin but key elements unresolved • SerialSlow decisionreorganizations, making legacy – driven sales by force matrix struggling organization to sell structuresolutions • MixedFounder results / CEO with has lateraldeep knowledge managers retentionof business, challenged strong presence Leadership • De facto "Office of COO" (the Business Operation Team) • SharedFact-based, history analytical of a long-tenured culture core group •Culture History • ofAcquisitions optimism, bringweak differentforecasting business and planning models and beliefs 19• Limited pay-for-performance – discretionary bonus mechanism Strategic options: five options emerge for Denali to pursue 1Strategic •option Play inDescription higher-end EUC market, cede share and maintain margins 2Current strategyCore Denali • Grow – commit New Denali to win at current pace, with continued acquisitions MaintainPublic: • Design • Grow products volume toin competevalue / emerging in all segments mkts while maintaining margins strategystructure New High Denali contrast – drive • Operate organic as commoditygrowth business with focus on cost takeout • ImproveDisciplined sales execution force capability and focus in solutionon the mid-market selling 3• Develop • Splitcompelling, into two differentiated pure-play companies solutions (Core and New Denali) with Public:Split company distinct strategic agendas and valuation profiles structureTransform 4 Pursue 5strategic buyer • Seek buyer for all or portion of Denali businesses Take •private Accept offer for company to be taken private 20private • Leverage private structure to enable distinct strategic actions Our sense of the take-private agenda APotential "Commit value to leverswin" in Description • Maximize life cycle cash flow $, not margin percent Core• Drive Denali share • to Move preserve decision scale making (e.g. $450 center product, of organization Tier 4-6 China, to Asia etc) •B Increase Drive organic focus growthon advantaged • Integrate mid-market products to segment create differentiated solution for clients Cin ImplementNew Denali aggressive • Segment • Aggressivelyand upgrade selling implement organization, simplification build andsolutions cost take-out approach (NDBM) cost• Program-manage takeout • Delayer large-scale the organization cost reduction programs AlignD • Create org and COO, talent recruit • Align / change external senior reporting talent to with align internal with strategy roles, resourcing, and metrics E• Drive Tightly strong align execution • Remove discipline, quarterly withEPS focusconstraint, on the drive "6-8 towardskey priorities" 3-6 yr exit profile Fmanagement Ensure discipline incentives of • Revisit• Require M&A mgt activity purchase – ensure of equity clear (money investment at risk, thesis not options)for acquisition Gcapital • Increase allocation debt •leverage Drive integration to boost equity of existing returns acquisitions Enhance capital strategy • Access OUS cash tax-efficiently 21• Arbitrage valuation multiple (buy low, sell high) ApplicableBelieve many of the "take-private" value levers could (in principle) be applicable to Denali as public company APotential "Commit value to leverswin" in Description • Maximize to lifepublic? cycle cash flow $, not margin percent Core• Drive Denali share • toMove preserve decision scale making (e.g. $450 center product, of organization Tier 4-6 China, to Asia etc) ? •B Increase Drive organic focus growthon advantaged • Integrate mid-market products to segment create differentiated solution for clients Cin ImplementNew Denali aggressive • Segment • Aggressivelyand upgrade selling implement organization, simplification build andsolutions cost take-out approach (NDBM) cost• Program-manage takeout • Delayer large-scale the organization cost reduction programs AlignD • Create org and COO, talent recruit • Align / change external senior reporting talent to with align internal with strategy roles, resourcing, ? and metrics E• Drive Tightly strong align execution • Remove discipline, quarterly withEPS focusconstraint, on the drive "6-8 towardskey priorities" 3-6 yr exit profile ? Fmanagement Ensure discipline incentives of • Revisit• Require M&A mgt activity purchase – ensureof equity clear (money investment at risk, thesis not options)for acquisition ? Gcapital • Increase allocation debt •leverage Drive integration to boost equity of existing returns acquisitions ? Enhance capital strategy • Access OUS cash tax-efficiently 22• Arbitrage valuation multiple (buy low, sell high) Frame path forward: Critical questions facing the Board NoProceed with PE process and (at end) accept bid? RemainYes public KeyTake questions Private Which strategic direction? Which• Status leadership quo vs. new team? strategy Which• Current go-forward vs. new managementstructure? What• Stand-alone is Denali vs. worth split as public company? 23What is Denali worth as private company? What to expect when we meet in January Path to answer critical questions facing Denali Board AssessKey deliverables driver-based view of evolution of profit pools in PC / Tablet market •Evaluate Range of value potential creation outcomes of priority strategic options •– TimingBased on to internalachieve (feasibility to achieve) and external (market forces, competitors) risk Articulate• Risk, difficulty, critical andmust uncertainties believes Highlight key tradeoffs across options 24• Drivers of difference in value creation Exhibit (c) (23) PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW PreliminaryINVESTMENT Summary BANKING Discussion DIVISION Materials Prepared for Goldman,The Denali SachsBoard &of DirectorsCo. GoldmanOctober 18, Sachs 2012 does not provide accounting, tax, or legal advice. 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Theand ConfidentialGS assumes noInformation responsibility is necessarily for updating based or onrevising economic, the Confidential monetary, market Information. and other conditions as in effect on, and the 2Work Area Guide: Uncheck option in GSOffice tab to hide PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENTThe Goldman Sachs BANKING Team DIVISION DenaliTechnology Coverage Investment Banking George Lee GuyPawan Nachtomi Tewari PeterRay Kwong Brundage ManagingGlobal Co-Head Director of TMT Managing Director Vice President CorporateManaging DirectorFinance Solutions BenjaminSrinidhi Raghavan Mensah Michael Tepatti Daniel Shefter Associate Analyst FinanceHead of SolutionsCorporate CreditLeveraged Risk Finance Mgmt & Advisory HeadMatt DeFuscoof TMT AnneLeveraged Russ Finance ViceEric PresidentLindberg 3Vice President PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENTIntroduction BANKING DIVISION 1Goldman What is Sachsthe public would market’s like to perceptionthank the Board of Denali of Directors and why fordoes the Denali opportunity trade the to wayshare that our it preliminary does? observations on several key questions regarding Denali today: market’s— Denali’s weak share outlook price performancefor the PC sector, and public recent trading company multiples underperformance, have lagged those Denali’s of its significant peers, likely cash due balances to a range and of a factors,broad disconnect including lowerfrom valuationexpectations fundamentals of growth, EUC’sas a result significant of industry contribution disruption to Denali and the —2 How Wall do Street management’s research analyst financial estimates projections suggest compare a fundamentally in the context lower of publicoutlook market for growth perceptions? compared to management’s financial projections —3 What Illustrative are the standalone standalone valuation value implications analyses result of management’s in Denali value financial outcomes projections? that are significantly higher than the current share price —4 What There are are some a range of the of potentialalternatives alternatives that Denali that could are available potentially to Denaliconsider, today including, and what but are not the limited key financial, to, pursuing strategic, the current operational strategy, and a transactional take-private issuesLBO, someto consider? form of a company separation via spin-off / spin-merger or return of capital initiatives forma— While trading illustrative multiples, financial there analysesare significant of these issues alternatives to consider may around result inthe value execution, outcomes complexity, significantly costs higher and timing than the of pursuingcurrent share these price alternatives as a result of assumptions such as purchase price, pro forma financials and pro 2012In reaching Board our Strategy preliminary Plan financial observations, projections we have and relied other upon documents management’s provided 9/21 by Casemanagement financial in projections the data room (“management’s Additional diligencefinancial projections”and management or the discussions “9/21 Case andfinancial input projections”)would be required and have in order reviewed to further the July 4develop and refine our preliminary observations and analyses PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT1 Public Market Perspectives BANKING on DIVISION Denali TimeDenali’s Period share Denali price hasHP WholeCounderperformed EUC Enterprise relative to Softwarethose of its Services peer groups… S&P Last 10 Years Last(65)% 5 19%Years 1141% 109% 220% 276% 335% 37% Last(67)% 3 Years(72)% 45% (28)% (7)% 46% 58% (10)% Last(41)% 1 (70)%Year 49% 10% 1% 4% 48% (8)% …with(42)% (45)%slower 12% revenue 7% growth…1% 7% 24% (13)% LastRevenue 10 Years CAGR1 Denali HP WholeCo EUC Enterprise Software Services S&P Last5% 7% 5 Years 10% 14% 15% 10% 8% 4% Last(1)% 3 2% Years 9% (0)% 9% 6% 5% 2% Last3% 1% 1 Year 13% (7)% 9% 9% 11% 1% …and(7)% (5)% current 9% public 7% 7% trading 3% 7% multiples 1% lagging those of its peers 0.2CY2013E / 0.3 x Multiple 0.4 x 2.1 Denali x 0.1 HP x 1.2WholeCo x 2.6 xEUC 1.1 Enterprisex 0.1 x Software Services S&P Enterprise Value / Sales2 2.5Enterprise / 3.4 x Value 3.4 x /6.7 EBITDA2 x 5.2 x 5.1 x 7.1 x 8.0 x 3.2 x P / E 5.2 4.0 11.9 12.0 12.4 11.4 11.7 7.2 Source:Operating Bloomberg, P / E3 1.3 company 2.7 8.9 6.8reports, 7.5 8.7 public 10.8 filings, 4.9 Capital IQ and IBES Brocade,Note: WholeCo Cisco, peerEMC, composite HP, IBM, consists Juniper of and Accenture, NetApp. Apple, Services Cisco, peer EMC,composite HP, IBM,consists Microsoft, of Accenture, NetApp, CGI Oracle and CSC. and SAP. Software EUC peer peer composite composite consistsconsists ofof BMCAcer, Software,AsusTek and CA, Lenovo. Compuware, Enterprise Informatica, peer composite Microsoft, consists Oracle, of 1SAP, Based Symantec on the median and Tibco. revenue S&P compound peer composite annual consists growth ofrate Ingram of each Micro of the and peer TechData. groups, calculated for the historical period through to calendar year 2012 using calendar year 2012 IBES estimates. In addition figure 2does First not figure adjust represents for acquisitions Denali’s over EV time. / Sales and EV / EBITDA multiple. Second figure assumes the public market adjusts Denali’s cash balance for the tax associated with repatriating Denali’s offshore cash balances, 3assuming Operating 100% P / Eof calculated the cash is by offshore. removing cash per share from each company’s share price. 5Preliminary Summary Observations PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT1 Public Market Perspectives BANKING on DIVISION Denali Denali’sCont’d current valuation is likely attributable to a range of potential factors, including, but not limited to: — EUCExpectations segment of financials lower Denali overwhelming growth – theboth financial revenue contribution and EPS of other segments (EUC represents ~50% of revenues) — OverhangMarket outlook from recentfor the stock PC industry and operating underperformance —Another Cash reasonis primarily for Denali’s offshore current and, absent valuation changes could in be tax because regulations, investors would are notrequire be attributing tax payment full onvalue repatriation to its significant cash balances Companies— Some investors at the center may have of industries the view undergoingthat the cash major will bestructural used for changes acquisitions often that suffer have from limited depressed near-term valuations P&L benefit that seem “disconnected” from fundamentals — ManyInvestors investors are often believe reluctant that theto fightshift strongto mobile “secular computing headwinds” represents even a whensignificant values disruption become attractive to the traditional in absolute desktop and relativeand “notebook” terms; as ecosystem a result, valuations can remain depressed for protracted periods 6Preliminary Summary Observations PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT2 Management Financial BANKING Projections DIVISION The(US$ 9/21 in millions, Case financial except projections per share amounts) reflect top-line reductions across the entire business relative to the July 2012 Board Strategy Plan, with operating income and margins for EUC, Enterprise and S&P impacted most significantly % Difference of Revenue Dollars % Difference of Operating Margins1 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 (12)%EUC (1)%(4)% (2)% (30)%(2)% (55)%(53)% (75)%(58)% Enterprise(75)% (1)%(13)% (0)%(1)% (1)% (51)%(56)% (44)%(46)% (35)% (2)%Services (2)% (1)% 5%(1)% — % (7)%(0)% Software(8)% (118)%NM (6)%0% 1%0% NM 2%34% (20)%(12)% (8)%S&P (2)%(3)% 3%(2)% (17)%3% (29)%(25)% (49)%(35)% WholeCo(55)% (1)%(9)% (1)%0% (2)% (18)%(15)% (16)%(13)% (36)%(35)% Wall Street research analysts have lower estimates than the 9/21 Case financial projections, including little to no revenue growth and correspondingly lower EPS estimates Denali9/21 Case IBES Estimates FY2013IBES less 9/21 Case FY2015FY2014 FY2015FY2014 FY2014FY2013 FY2013FY2015 FY2015FY2014 $57,490Revenue $63,232$59,933 $58,099$57,468 $(22)$57,392 $(5,841)$(1,834) (7.4)%Revenue Growth 5.5%4.2% 1.1%(7.4)% (0.0)%(1.2)% (6.7)%(3.1)% $3,999Operating Income $4,851$4,188 $4,099$4,029 $30$4,001 $(850)$(88) 7.0%% Margins 7.7%7.0% 7.1%7.0% 0.1%7.0% (0.7)%0.1% $1.70EPS $2.20$1.84 $1.80$1.74 $0.04$1.79 $(0.41)$(0.04) 2.4%% Difference (18.6)%(2.2)% 1Source: Highlighted Management figures represent and IBES operating margin declines of 25% or greater. 7Preliminary Summary Observations PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT3 Illustrative Status BANKING Quo Financial DIVISION Analysis High(In US$) unlevered free cash flows implied by management’s financial projections result in illustrative DCF share price values that are significantly higher than Denali’s current share price Implied ShareTerminal Price Year EBITDA Multiple PerpetuityIllustrative Growth Discount Rate Rate —Perpetuity % Growth Rate 3.01.5 % 1.5— % % 8.0%3.0 % $39.45$33.94 8.9$48.27 x 14.711.1 x 25.4511.0% 31.3727.94 7.66.5 14.0%9.2 21.9620.61 5.123.69 6.75.8 inDenali’s Annual current EBIT share price implies lower growth and margins than in management’s financial projections and potentially flat to negative perpetuity growth1 Implied ShareFY2018 Price EBITDA inMargin Annual vs. Rev. Growth Rate vs. 9/21 Case 9/21in Annual Case Rev. Growth Rate vs. 9/21 Case (2.5)%(5.0)% (5.0)%— % —(2.5)% % $9.86(5.0)% $11.62$10.70 $2,389$2,179 (2.5)%$2,621 18.0616.49 3,53819.78 4,3603,929 23.13— % 27.9425.43 5,4684,897 An6,099 illustrative present value of future share price analysis results in share prices similar to the current share price assuming Denali trades at a consistent multiple to today. However, peer PEG multiples would suggest that FY2013Denali should trade at higher multiples (thus implying higher prices) given the EPS growth profile of management’s financial projections FY2015FY2014 FY2017FY2016 DilutedFY2018 EPS (Non-GAAP) $1.84$1.70 $2.45$2.20 $2.64$2.56 8.2%% Annual Growth 11.4%19.6% 3.1%4.5% 8.2%% CAGR from FY2013 EPS 8.2%% CAGR from FY2013 EPS 12.9%13.7% 9.2%10.8% @Illustrative a 5.0x Forward PV of Future P/E Multiple Share Price and Illustrative 10.0% Discount Rate $9.99$9.19 $9.61$10.11 @$9.03 a 9.0x Forward P/E Multiple and Illustrative 10.0% Discount Rate $17.98$16.53 $17.29$18.19 Source:$16.26 Management and IBES 1Note: The Pleaseillustrative refer sensitivity to Appendix analysis A pages below 14 andassumes 15 for an additional illustrative assumptions 11.0% discount and detailrate and perpetuity growth rate of 1.5%. 8Preliminary Summary Observations Goldman Sachs 4PRELIMINARY Summary Overview CONFIDENTIAL of Selected Potential DRAFT Alternatives – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW DenaliINVESTMENT BANKING DIVISION StatusA B C QuoD SeparationTake-Private via Leveraged Spin-Off Buyout Separation via Client Spin- Merger 100%Return Spin-Off of Capital with to ShareholdersNo Cash Dividend Sponsored100% Spin-Off Spin-Off with Cash Dividend Note:Share DottedRepurchase blue lines(New denote Debt oralternatives Existing Cash) that Denali Cash Dividendcould pursue (New on Debta standalone or Existing basis Cash) 9Preliminary Summary Observations Goldman Sachs APRELIMINARY Illustrative Leveraged CONFIDENTIAL Buyout Analysis DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$INVESTMENT in millions, BANKINGexcept per share DIVISION amounts) toThe fund potential a transaction, returns toDenali’s a sponsor go-forward will be dependent effective tax on rate,a wide the range transaction of variables, structure including, and the butexit notopportunities limited to, availablethe purchase price, the sources and quantum of funding, the ability and cost of utilizing offshore cash balances Illustrative Sources and Uses (Assumes a $15.00 Purchase Price)1 %Amount of Total CashPF % Own. 31%$13,538 7,423Rollover Debt New17% Debt 28%12,500 3,674MD Rollover 35%8% 1,989SE Rollover 19%5% 4,918New Sponsor Equity 46%11% Total 100%$44,042 Illustrative100% Uses %Amount of Total $26,080Equity Purchase Price Assumed59% Debt 17%7,423 1,018Refinanced Debt Total2% Purchase Price (excl. Cash) 78%$34,521 6,500Minimum Cash Tax15% on Cash Repatriation 6%2,463 558Fees and OID Total1% 100%$44,042 PurchaseIllustrative Price Returns per Share Analysis to New Sponsor3 $ 14.0013.00 $ 16.0015.00 $ 17.0018.00 39Implied % Premium 6050 % 8271 %% Implied93 % LTM EBITDA Entry Multiple 4.23.8 x 4.94.6 x 5.75.3 x 28.1%Illustrative Returns Assuming Same Exit Multiple 22.4%24.8% 19.0%20.5% Source:17.8% Management and company reports 1Note: Illustrative Please referpro forma to Appendix capital structureA page 16 results for additional in pro forma assumptions gross leverage and detail. of 4.3x, Please compared refer to to Appendix 1.8x currently, A pages as 22of 2013and 23 fiscal for DFSyear andend. tax-related considerations 1Note: Illustrative Please referpro forma to Appendix capital structureA page 16 results for additional in pro forma assumptions gross leverage and detail. of 4.3x, Please compared refer to to Appendix 1.8x currently, A pages as 22of 2013and 23 fiscal for DFSyear andend. tax-related considerations 3The2 Assumed illustrative minimum returns cash analysis balanced to new based sponsor on management assumes a non-GAAP estimates andtax rateincludes of 21.0% approximately per management $1.3 billion estimates. of restricted cash in Asia. 10Preliminary Summary Observations GoldmanPRELIMINARY Sachs B CONFIDENTIALIllustrative Spin-Off DRAFT Analysis – INVESTMENT SUBJECT TO BANKINGCHANGE AFTERDIVISION FURTHER DILIGENCE AND REVIEW In(US$ order in millions,to evaluate except the merits per share of a potentialamounts) separation, a wide range of factors should be taken into consideration Company,— Potential enhanced benefits strategic,may include, financial but are and not operational limited to, flexibility; “unlocking” additionally, embedded shareholderseparated companies value through could potential become M&Amultiple candidates re-rating of the costs,— Potential etc.), potential issues for customer, consideration supplier include, and employee but are not reaction, limited andto, the the nature, timing magnitudeand complexity and impact of execution of potential of such operating a separation dissynergies (e.g. cross-selling, sales organization leverage, materials sourcing, share corporate —For Client illustrative (FY2014 purposes, revenues we /consider, EBITDA: based $36.7 on billion management / $1.8 billion): guidance, Consists a separation of EUC, into the a consumer“Client” business business and of Services’an “Enterprise” Support business & —Deployment Enterprise (~10% (FY2014 of Servicesrevenues revenue) / EBITDA: and $23.3 the consumer-related billion / $2.2 billion): portion Consists of S&P of (~75% Enterprise of S&P Solutions, revenue) Software, the corporate business of Services (~90% of Services revenue) and the corporate-related portion of S&P Illustrative(~25 of S&P 100% revenue) Enterprise Spin-Off (Value per Denali Share) 2.0Client x 4.0 EV x/ FY2014E6.0 x EBITDA EVEnterprise / FY14 5.0 7.0 x x $10.05 12.58 14.67$12.13 16.75 $14.22 IllustrativeEBITDA 9.0Value x 15.12 of Dissynergies 17.20 19.28 (Value per Denali Share)1 $580Illustrative Million Dissynergy of Annual Per Enterprise Share Sourcing Dissynergies @ 7.0x $2.34 $100 Million of Annual EnterpriseClient Corporate Corporate & Public & Public Company Company Costs Costs @ 4.0x @ 7.0x 0.23 0.40 One-TimeTax on Repatriation Transaction of OffshoreCosts 0.45 Cash 0.85 Source:Illustrative Management, Total $4.27 company reports and IBES 1Note: Estimated Please Enterpriserefer to Appendix sourcing A and pages corporate 17– 19 andfor additionalpublic company assumptions cost dissynergies and detail. Pleaseare capitalized refer to Appendix at an assumed pages 7.0x 22 and EV 23 / FY2014 for DFS EBITDA and tax-related multiple. considerations Estimated Client corporate and public company cost Preliminarydissynergies Summaryare capitalized Observations at an assumed 11 4.0x EV / FY2014 EBITDA multiple. IllustrativePRELIMINARY Spin-Merger CONFIDENTIAL Analysis DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW A(In spin-merger US$) between Client and Strategic Party has the potential to enhance Denali shareholder value, assuming: PotentialMultiple upliftrevenue of Clientand cost business synergies if New through Strategic a combination Party (pro of forma Client Client and Strategic + Strategic Party Party) trades in-line with Strategic Party’s current standalone multiples OtherEnterprise unquantified business potentialmultiple re-ratingtax and structuring in line with benefits Enterprise related peer to trading New Strategic multiples Party (e.g. foreign jurisdiction for new company) inHowever, a straight issues spin transactionaround execution (including negotiating a merger with a third party), timing and post-transaction trading performance are some of the uncertainties in a spin-merger transaction, in addition to those found CurrentIllustrative EV Trading / FY2014 Multiple EBITDA Sensitivity Analysis (Value per Denali Share) NewStrategic Strategic Party Party: 4.6x EVDenali: / FY2014 2.6 EBITDA 3.6 x 4.6 x 5.6 x Enterprise 5.0 x $ 11.65 $ 12.63 $ 13.62 EV / FY14 7.0 x 14.18 15.17 16.15 EBITDA 9.0 x 16.71 17.70 18.68 NewIllustrative Strategic Denali Party Ownership EV / FY2014 Sensitivity EBITDA Analysis (Value per Denali Share) %3.6 Own. x 4.6 55.0x 5.6 % x 14.70Denali 15.78 S/H 50.116.86 % in $ NQ14.18 60.0 $ 15.17 % 15.23 $ 16.15 16.41 17.59 Note:Source: Please Management, refer to Appendix company A reports page 20 and for IBES additional assumptions and detail. Please refer to Appendix pages 22 and 23 for DFS and tax-related considerations 12Preliminary Summary Observations PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW AppendixGoldman SachsA: Supplemental INVESTMENT Materials BANKING DIVISION PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Goldman in millions, Sachs 3 except Illustrative per share Discounted amounts) Cash Flow Analysis INVESTMENT BANKING DIVISION RevenueFY2013 FY2014$57,490 FY2015$59,933 $63,232FY2016 $66,567FY2017 $68,019 FY2018 $69,562 Terminal $69,562 Year EBITDA% Growth (Pre-GAAP 4.2% 5.5% Adjustments) 5.3% 2.2% $4,5992.3% $4,788 $5,451 $5,872 $6,005 $6,099 $6,099 Unlevered% Margin Free8.0% Cash 8.0% Flow 8.6% $2,219 8.8% $2,880 8.8% $3,443 8.8% $3,9028.8% $4,299 $4,366 $4,344 IllustrativeImplied Share Discount Price RateImplied Perpetuity Terminal Growth Year RateEBITDA Perpetuity Multiple Growth Rate 8.0— % % 1.5 $33.94 % 3.0 $39.45 % — $48.27% 1.5 % 8.9 3.0 x %11.1 x 14.7 x 14.011.0 % 20.6125.45 21.9627.94 23.6931.37 5.16.5 5.87.6 6.79.2 inSensitivity Annual EBITAnalysis Margin Assuming vs. Implied a 11% Share Illustrative Price ImpliedDiscount Terminal Rate and Year 1.5% EBITDA Perpetuity Multiple Growth Rate 9/21in Annual Case Rev.(5.0)% Growth (2.5)% Rate — vs.% (5.0)%9/21 Case (2.5)% in Annual — % Rev. Growth Rate vs. 9/21 Case (2.5)%(5.0)% $9.8616.49 $10.7018.06 19.78 $11.62 7.0 6.1 7.2 x 7.36.3 x 6.5 x Sensitivity— % 23.13 Analysis 25.43 27.94 Assuming 7.4 7.5 a 1.5% 7.6 Perpetuity Growth Rate IllustrativeImplied Share Discount Price ImpliedRate Terminal Terminal Year Year in WC EBITDA as a % Multiple of in Revenue Terminal Year in WC as a % of in Revenue 8.0— % % 10.0 $39.45 % 20.0$38.47 % —$37.49 % 10.0 11.1 % x20.0 10.7 % x 10.3 x 14.011.0 % 27.9421.96 27.3521.56 26.7521.16 7.65.8 7.35.6 7.1 5.4 Note:Source: The Management illustrative discountedand company cash reports flow analysis discounts cash flows to 2013 fiscal year end and assumes management’s non-GAAP tax rate estimate of 21.0%. Assuming excess offshore cash of $7.0 billion is Supplementalrepatriated and Materials subject to 14 a 35% tax rate, the impact on implied share price is an approximate reduction of approximately $1.40 GoldmanPRELIMINARY Sach 3 Illustrative CONFIDENTIAL Present Value DRAFT of Future – SUBJECT Share Price TO Analysis CHANGE INVESTMENT AFTER FURTHER BANKING DILIGENCE DIVISION AND REVIEW Denali(In US$) FY 1 P/E 1Yr.Current Avg. (IBES 7.0 FY 2013) 5.4 x CY2Yr. 1 Avg.P/E/G 8.1 HP2Denali1 NM 3.7 x EUCWholeCo 0.7 1.3 ServicesEnterprise 1.4 1.3 S&PSoftware 0.9 1.3 DilutedFY2013 EPS FY2014 (Non-GAAP) FY2015 FY2016 $1.70 $1.84 FY2017 $2.20 FY2018 $2.45 $2.56 $2.64 % AnnualCAGR fromGrowth FY2013 8.2% 19.6%EPS 8.2% 11.4% 13.7% 4.5% 12.9% 3.1% 10.8% 9.2% @Illustrative a 5.0x Forward PV of Future P/E Multiple Share Price and Illustrative 10.0% Discount Rate $9.19 $9.99 $10.11 $9.61 $9.03 @ a 7.0x5.0x Forward P/E Multiple and Illustrative 10.0%13.0% DiscountDiscount RateRate $12.86$9.19 $9.73 $13.99 $9.58 $14.15 $8.86 $13.45 $8.11 $12.64 @ a 9.0x7.0x Forward P/E Multiple and Illustrative 10.0%13.0% Discount Rate $16.5312.86 13.62 $17.98 13.41 $18.19 12.40 $17.29 11.35 $16.26 Source:@ a 9.0x Management, Forward P/E company Multiple reports,and Illustrative Bloomberg 13.0% and Discount IBES Rate 16.53 17.51 17.24 15.95 14.60 1Note: Denali The EPS illustrative CAGR futurebased onshare January price analysisfiscal year discounts end IBES future estimates. share prices to 2013 fiscal year end. CY1 P/E/G multiples calculated based on CY2012 – CY2014 IBES EPS CAGRS, unless otherwise noted. Supplemental2 HP EPS CAGR Materials based 15on October fiscal year end IBES estimates. PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Goldman in millions, Sachs A except Illustrative per share Leveraged amounts) Buyout Analysis INVESTMENT BANKING DIVISION Illustrative SourcesSources %and of Uses Total RolloverExtant Cash Notes $13,538 5,996 13.630.7% NewRollover $3 billion Structured ABL Financing 2,000 4.5 Debt 1,427 3.2 New Term Loan BA 3,0001,500 6.83.4 New UnsecuredSecured Bond Guaranteed 2,500 5.7 Notes 3,500 7.9 MDTotal Rollover New Debt4 at $15.00 $12,500 per 28.4 share5 3,674 8.3 NewSoutheastern Sponsor AM Equity Rollover 4,918 at11.2 $15.00 per share5 1,989 4.5 IllustrativeTotal Illustrative Uses % Sources of Total $44,042 100.0% AssumedEquity Purchase Existing Price Notes at $15.005,996 13.6 per share 1 $26,080 59.2% RefiAssumed Commercial Existing Paper Structured 1,018 Financing2.3 Debt 1,427 3.2 MinimumTotal Purchase Cash Price 6,500 Excluding 14.8 Cash 34,521 78.4 ConsultingAdvisory Fees / Legal 75 0.2 50 0.1 OID3Financing 30 0.1 Fees2 403 0.9 TotalTax on Illustrative Cash Repatriation4 Uses $44,042 2,463 100.0% 5.6 AssumesIllustrative 21% Returns Non-GAAP Analysis Tax to New Rate Sponsor 3.8Purchase x 4.2 Sharex 4.6 Pricex 4.9 % x Implied5.3 x 5.7 Premium x Implied LTM EBITDA Entry Multiple Implied LTM EBITDA Exit Multiple $14.00$13.00 39%50% 3.84.2 xx 28.1%22.6% 30.4%24.8% 32.6% 26.9% 34.6% 28.9% 36.6% 30.7% 38.5% 32.5% $16.00$15.00 71%60% 4.94.6 xx 14.6%18.2% 16.7%20.4% 18.7%22.4% 20.5% 24.3% 22.3% 26.1% 24.0% 27.8% $18.00$17.00 82%93% 5.35.7 x 11.6%9.0% 11.0% 13.6% 12.8% 15.5% 14.6% 17.3% 16.2% 19.0% 17.8% 20.7% PurchaseAssumes 30%Share Non-GAAP Price % Implied Tax Rate Premium Implied LTM EBITDA Entry Multiple Implied LTM EBITDA Exit Multiple $13.003.8 x 4.2 39% x 4.6 3.8 x x 4.925.9% x 5.3 28.4% x 5.7 30.7% x 32.9% 35.0% 36.9% $15.00$14.00 60%50% 4.64.2 x 16.2%20.5% 18.5%22.9% 20.7%25.1% 22.7%27.2% 24.6% 29.2% 26.4% 31.0% $17.00$16.00 71%82% 4.95.3 x 12.7%9.7% 11.9% 14.9% 13.9% 17.0% 15.8% 19.0% 17.6% 20.8% 19.3% 22.6% Source:$18.00 93%Management 5.7 x 7.1% and 9.2% company 11.2% reports 13.1% 14.8% 16.5% 1Note: Assumes Based an on illustrative management’s purchase non-GAAP price of $15.00tax rate per estimate share, ofimplying 21.0%. a 60% premium to the current share price of $9.35 32 BasedFinancing on an fees estimated estimated OID based of 99 on for fees the of new 2.5% Term for theLoan new B. ABL and Term Loans A and B and fees of 4.0% on new high yield bonds and notes. billion,4 Illustrative is repatriated tax on offshore and subject cash torepatriation a 35.0% taxestimated rate. by assuming that $7.0 billion of offshore cash, representing extant cash of $13.5 billion in excess of an estimated minimum cash balance requirement of $6.5 Supplemental5 Assumes that Materials MD and 16Southeastern Asset Management roll 100% of their existing equity stakes in the transaction. PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW ForGoldman the purposes Sachs Bof Preliminary evaluating the Separation potential Topicsbenefits for and Consideration consideration INVESTMENT of a business separation, BANKING we consider,DIVISION based on management guidance, an illustrative separation of Denali into: — Enterprise:Client: Consists Consists of EUC, of Enterprise the consumer Solutions, business Software, of Services’ the corporate Support business & Deployment of Services (~10% (~90% of Services of Services revenue) revenue) and and the theconsumer-related corporate-related portion portion of ofS&P S&P (~75% (~25 of S&P revenue) PotentiallyPotential Benefits “unlock” embedded shareholder value through trading multiple re-rating and arbitrage —Allows Pursue each and entity execute to pursue growth potentially strategy unique strategic, operation and financial objectives — StrategicManagement flexibility focus and optionality EachIn a public entity market could potentially context, may become allow an each acquisition/merger entity to target potentially target different shareholder bases ThePotential nature, Considerations magnitude and impact of potential operating dissynergies, including the loss of: –— Sales Revenue organization and cross-selling leverage opportunities — COGSEntry into / materials emerging sourcing markets scale via Clientand influence / PC pull-through of Enterprise — ScaleShared / creditcorporate quality overhead to provide and financing public company services coststo customers — Client cash flows for investment in Enterprise ThePotential management customer, pipeline supplier to filland senior employee management reaction positionsand impact at both entities SupplementalPotential shareholder Materials dislocation 17 PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Goldman in millions) Sachs B Illustrative Spin-Off Analysis Overview of Preliminary Assumptions INVESTMENT BANKING DIVISION analysesThe illustrative in the subsequentfinancial projections pages, including below incorporatetax on repatriation estimated of offshore operating cash dissynergies and other relatedone-time to separationsourcing and transaction-related corporate and public costs company costs. Additional transaction-related dissynergies are incorporated into the IllustrativeFurther diligence Client would Financial be required Summary to refine the analysis RevenueFY2013 FY2014 FY2015 FY2016 FY2017 FY2018 %EUC Growth $28,655 (13.8)% $28,915 0.9% $30,096 4.1% 4.0%$31,299 1.0% $31,612 1.0% $31,929 %S&P Growth 6,906 (9.9)%7,044 7,255 2.0% 7,473 3.0% 7,5103.0% 7,5480.5% 0.5% %Services Growth 739 66.8% 724 742 66.8% 785 0.4%803 823 5.7% 2.4% 2.4% %Revenue Growth $36,301 (12.2)% $36,683 1.1% 3.8%$38,093 3.8% $39,557 0.9% $39,926 0.9% $40,299 EUCEBIT $924 $725 $743 $705 $638 $638 S&P% Margin 602 631 3.2% 625 2.5% 600 560 2.5% 500 2.3% 2.0% 2.0% Services% Margin 441 8.7% 419 9.0%429 450 8.6% 457 8.0% 464 7.5% 6.6% EBIT% Margin (Non-GAAP)1, 59.6% 57.9% 2 $1,632 57.8% $1,441 57.3% $1,466 56.9% $1,427 56.4% $1,330 $1,280 EBITDA% Margin (Pre-GAAP 4.5% 3.9% Adj.)23.8% 3.6%$2,011 3.3% $1,809 3.2% $1,828 $1,784 $1,682 $1,628 Illustrative% Margin 5.5%Enterprise 4.9% Financial 4.8% 4.5% Summary 4.2% 4.0% RevenueFY2013 FY2014 FY2015 FY2016 FY2017 FY2018 %Enterprise Growth Solutions2.8% 7.9% $10,559 8.0% 8.0%$11,392 4.2% $12,298 4.3% $13,278 $13,832 $14,425 %Services Growth 7,771 (1.4)% 8,139 4.7% 8,613 5.8% 9,263 7.5% 9,596 3.6% 9,947 3.7% %S&P Growth 2,302 NM 2,348 2.0% 2,418 3.0% 2,491 3.0% 2,503 0.5% 2,516 0.5% %Software Growth 557 NM 1,371 146.3% 1,809 31.9% 1,979 9.4% 2,162 9.2% 2,375 9.9% %Revenue Growth $21,189 2.3% 9.7% $23,250 8.1% $25,139 7.4% 4.0% $27,010 4.2% $28,093 $29,263 EnterpriseEBIT Solutions $326 $550 $685 $850 $950 $990 Services% Margin 1,977 3.1% 2,110 4.8% 2,306 5.6% 2,551 6.4% 2,643 6.9% 2,7356.9% S&P% Margin 151 158 25.4% 156 25.9%150 140 26.8% 125 27.5% 27.5% 27.5% Software% Margin (50) 6.5% (23) 6.7% 290 3506.5% 400 6.0% 430 5.6% 5.0% EBIT% Margin (Non-GAAP)1, NM NM 16.0% 2, 3 $1,587 17.7% $1,966 18.5% $2,60518.1% $3,065 $3,295 $3,439 EBITDA% Margin (Pre-GAAP 7.5% 8.5% Adj.)2 10.4% $1,808 11.3% $2,199 11.7% $2,844 11.8% $3,308 $3,542 $3,691 Source:% Margin Management 8.5% 9.5% and 11.3% company 12.2% reports 12.6% 12.6% 21 Includes allocatedan additional Long-Term estimated Incentive $100 million expenses of annual and other pre-tax cost operatingadjustments expenses and excludes related non-GAAPto assumed adjustments.duplication of certain corporate and public company costs, based on management guidance. Supplemental3 Includes $580 Materials million of18 annual pre-tax sourcing dissynergies associated with an illustrative separation, per management estimates. GoldmanPRELIMINARY Sachs B IllustrativeCONFIDENTIAL Spin-Off DRAFTAnalysis – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$(Cont’d) in millions, INVESTMENT except per BANKING share amounts) DIVISION EBITDA)Illustrative andper shareEnterprise value peersoutcomes (~7.0x to DenaliFY2014 shareholders EBITDA) intrading spin-off multiples scenarios today are driven by potentially achieving a public multiple re-rating to higher multiples that are more in-line with Client peers (~4.0x FY2014 Assumes100% Spin-Off a spin-off w/ No of EnterpriseCash Dividend1 to Denali shareholders, with no cash dividend to shareholders %Illustrative Own. Per Value Share EnterpriseClient Equity Equity Stake Stake 100.0% 100.0% $5.80 9.33 Illustrative After-taxTotal Value Separation $15.12 Costs2 (0.45) Illustrative SensitivityAdjusted Total Analysis Value $14.67 2.0Client x 4.0 EV x/ FY2014E6.0 x EBITDA EVEnterprise / FY14 5.0 7.0 x x $10.05 12.58 14.67$12.13 16.75 $14.22 IllustrativeEBITDA 9.0Sensitivity x 15.12 Analysis 17.20 19.28 —Other 100% spin-off spin-off variations with a includecash dividend to shareholders that is funded by additional debt raised at Client and/or Enterprise Additional— Sponsored leverage spin-off at eitherin which entity a sponsor could potentially makes an equityimpact investment the pro forma for uptrading to a 49.9%multiples, stake thus in Client,changing with the those value cash shareholders proceeds beingmay receive used to pay a cash dividend to shareholders SummarySimilarly, aDissynergy sponsor’s investment Assumptions in Client can be at a negotiated value discount, thereby also affecting the value shareholders may receive —The $580 illustrative million spin-off of annual analyses dissynergies make a at number Enterprise of assumptions related to sourcing regarding (~2.7% potential of Enterpriseoperational, revenue financial and and 5.5% transaction-related of ESG revenue) dissynergies, including: — $1$100 billion million of one-time, each of additional pre-tax transaction-related annual corporate separation and public costs company costs at both separated entities that would need to be duplicated — 35%Does tax not rate assume on repatriation any DFS related-financial of offshore cash impactbalances for deleveraging purposes Illustrative— Lower leverage Impact ofcapacity Dissynergies as a result of lower pro forma EBITDA related to operational dissynergies $580Illustrative Million Dissynergy of Annual Per Enterprise Share Sourcing Dissynergies @ 7.0x3 $2.34 $100 Million of Annual EnterpriseClient Corporate Corporate & Public & Public Company Company Costs Costs @ 4.0x4 @ 7.0x4 0.23 0.40 One-TimeTax on Repatriation Transaction of OffshoreCosts2 0.45 Cash5 0.85 Source:Illustrative Management Total and company reports 21 AssumesIllustrative illustrative analysis assumesone-time Client separation trades costs at 4.0x of $1.0 FY2014 billion, EBITDA taxed at and 21.0%. Enterprise trades at 7.0x FY2014 EBITDA. 43 Assumes $100$580 million of annual dissynergiesdissynergies, at capitalized each entity, at capitalizedassumed Enterprise at assumed trading Enterprise multiple trading of 7.0x multiple FY2014 of 7.0x EBITDA. FY2014 EBITDA and Client trading multiple of 4.0x FY2014 EBITDA. Supplemental5 Assumes taxes Materials of $1.5 19 billion based on repatriation of $4.2 billion of offshore cash, taxed at 35.0%, for Client deleveraging. PRELIMINARY CONFIDENTIAL DRAFT SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW StrategicIllustrative Party Spin Estimates Merger Analysis Based on IBES (In US$) CurrentIllustrative EV Summary1FY2014 EBITDA IllustrativeStrategic Party3: Value 4.6x Denali3: 2.6 New% Own. Strategic Per Share Party Equity Stake 50.1 % $ 6.29 IllustrativeEnterprise EquityTotal Value Stake $100.0 15.62 % 9.33 Illustrative AfterAdjusted tax SeparationTotal Value Costs $ 15.17 (0.45) TheSummary illustrative Synergy spin andmerger Dissynergy analysis makeAssumptions a number of assumptions regarding potential operational, financial and transaction-related synergies and dissynergies, including: $580No revenue million synergies of annual and dissynergies 50 bps of atcombined Enterprise EBITDA related marginto sourcing improvement (2.7% of Enterpriseat New Strategic revenue Party and 5.5% of ESG revenue) $1$100 billion million of one of additionaltime, pre-tax annual transaction-related corporate and separationpublic company costs costs at Enterprise 35%Does tax not rate assume on repatriation any DFS related-financial of offshore cash impactbalances for deleveraging purposes IllustrativeLower leverage Ownership capacity Sensitivity as a result Analysis of lower pro forma EBITDA related to operational dissynergies Illustrative Multiple Sensitivity Analysis NewIllustrative Strategic Synergy Party Sensitivity EV FY2014 Analysis EBITDA 3.6 x 4.6 x 5.9 x Denali S H 50.1 % $ 14.18 $ 15.17 $ 16.15 New% Own. Strategic 55.0 %Party 14.70 EV 15.78 FY2014 16.86 EBITDA in NQ 60.0 % 15.23 16.41 17.59 Assumes3.6 x 4.6 xEnterprise 5.6 x En trades5.0 x $at 11.65 7.0x FY2014$ 12.63 $EBITDA 13.62 EV 7.0 x 14.18 15.17 16.15 9.0 x 16.71 17.70 18.68 Assumes New Strategic Party trades at 4.6x FY2014 EBITDA Source:New Strategic Management, Party EBITDA company Margin reports Improvement and IBES N. Strategic % 0.5 % 1.0 % Party (2.5)% $ 14.33 $ 14.83 $ 15.32 Revenue % 14.67 15.17 15.66 Synergies 2.5 % 15.01 15.50 16.00 1Note: For illustrativeAssumes a spinpurposes, merge assumes transaction no combinedoccurs at fiscal revenue year synergies end 2013 and and a Denali 0.5% EBITDAshareholders’ margin ownership improvement in New relative Strategic to Partythe blended of 50.1% pro at forma Strategic EBITDA Party smargin. current public market equity valuation 32 NewAssumes Strategic a 21% Party tax and rate. Strategic Party based on Strategic Party’s March fiscal year end. Enterprise based on Denali s January fiscal year end. 20Supplemental Materials GoldmanPRELIMINARY Sachs D CONFIDENTIALIllustrative Return ofDRAFT Capital – Analysis SUBJECT INVESTMENT TO CHANGE BANKING AFTER FURTHER DIVISION DILIGENCE AND REVIEW As(US$ a result in millions, of the difference except per between share amounts) Denali’s current P / E multiple and the cost of newly issued debt or the cost of holding cash on the balance sheet (even factoring for a potential 35% repatriation tax), Denali could One-Timepotentially Sharedeliver Repurchase value accretion to shareholders through a debt or cash-funded one-time share repurchase or cash dividend NetIllustrative Debt Proceeds $2 Billion for LeveragedRepurchase Share $1,980 Repurchase1 %Repurchase of Current Price Basic (@ Shares 10% RepurchasedPremium) $10.28 11.1% FY2014Pro Rata StatusValue perQuo Share EPS $1.14$1.84 %FY2014 EPS Accretion Pro Forma / Dilution EPS 2.04 11.2% 5.0Illustrative x 6.0 x FY2014 P/E Multiple PFPro Value Forma of Share Retained Price Shares $10.21 9.08 $12.25 10.89 IllustrativePro Rata Value $2 Billion $10.22 Cash $12.03 Financed Share Repurchase RepurchaseCash Post-Repatriation Price (@ 10% Tax Premium)for Repurchase $10.28 $1,980 Pro% of Rata Current Value Basic per SharesShare $1.14 Repurchased 11.1% FY2014 StatusPro Forma Quo EPS 2.06$1.84 5.0% EPS x 6.0 Accretion x / Dilution 12.3% Illustrative FY2014 P/E Multiple PFPro Value Forma of Share Retained Price Shares $10.31 9.17 $12.38 11.00 One-TimePro Rata Value Cash $10.31Dividend $12.14 to Shareholders NetIllustrative Debt Proceeds $2 Billion for Dividend Dividend Recapitalization1 $1,980 DividendBasic Shares per OutstandingShare $1.14 1,735 FY2014 StatusPro Forma Quo EPS 1.81$1.84 Illustrative% EPS Accretion FY2014 / Dilution P/E Multiple (1.5)% Pro5.0 xForma 6.0 x Share Price $9.05 $10.86 ProPer ShareRata Value Dividend $10.19 1.14 $12.00 1.14 CashIllustrative Post-Repatriation $2 Billion Cash Tax Financedfor Dividend Dividend $1,980 DividendBasic Shares per OutstandingShare $1.14 1,735 FY2014 StatusPro Forma Quo EPS 1.83$1.84 5.0% EPS x 6.0 Accretion x / Dilution (0.4)% Illustrative FY2014 P/E Multiple PerPro ShareForma Dividend Share Price 1.14 $9.15 1.14 $10.98 Source:Pro Rata Management Value $10.29 and $12.12 company reports 1Note: Assumes Illustrative $2.0 billion analysis of assumesnew debt a issuance21.0% non-GAAP via $500 million tax rate, of a T+125pre-tax new interest senior rate notes on cash due balances February of 2015, 0.5%, $750 a 35.0% million tax ofrate T+200 on repatriated new senior offshore notes duecash February balances 2017 and $750 million of T+237.5 new senior Supplementalnotes due February Materials 2022. 21 Assumes fees of 1.0% on new issuances and a pro forma credit rating of Baa1 / BBB. GoldmanPRELIMINARY Sachs Preliminary CONFIDENTIAL DFS Topics DRAFT for Consideration – SUBJECT INVESTMENT TO CHANGE BANKING AFTER FURTHER DIVISION DILIGENCE AND REVIEW 1Summary What is theof Selected impact of Key a sub-investment Topics and Preliminary grade corporate Perspectives credit rating on DFS? —There Inability are likely to source two primary funding impacts via the ofcommercial a credit downgrade paper market on DFS: —– Denali Higher could funding potentially costs across increase the rangethe size of offunding the securitization sources program and / or access other forms of funding (e.g., an ABL revolver) to replace the commercial paper funding sources 2The Could Company DFS be should “ring-fenced” however tocontinue mitigate to the have potential access impactsto the conduit of a corporate and securitization credit rating markets, downgrade? as well as the unsecured market wouldWhile therebe rated are withinexamples 1-2 ofnotches similar of situations the parent whereby the rating agencies have delineated between opco / holdco structures when dealing with captive financing subsidiaries (e.g., Ford), it is likely that the ring-fenced entity subsidiary,— A range theof other standalone factors credit could qualityinfluence of the chancessubsidiary, of benefittingperceptions from around a ring-fence the parent’s approach, credit strengthincluding and the the nature level of of the co-dependence protections / barriersbetween put the in parent place andbetween subsidiary, the parent among and otherssubsidiary, the ownership structure of the 3On Would balance, a separation we do not of believe Denali the into Company Client and would Enterprise materially businesses benefit automaticallyfrom a ring-fenced require structure a divestiture given ofthe DFS? Company would still likely be able to access key funding markets, albeit at slightly higher funding costs —A separation, Key factors in to and consider of itself, would would include not necessarily the credit qualityrequire anda divestiture ratings of of the DFS. new There companies, exists thethe potentialportfolio to, diversity in effect, of separatethe receivables the DFS within portfolio each and DFS establish successor a DFS entity successor and the resultingentity at each ability of toClient access and the Enterprise funding markets 4and Are cost there of fundingpotential third party alternatives available for DFS? There isare likely examples to be ofinterest other fromcompanies third partiesthat have in acquiringoutsourced all their or a financingportion of activities DFS and established relationships with third party financing providers (e.g., Apple / Barclays, Kohl’s / Capital One) standards,— Key factors financing will likely terms, center veto aroundrights and what final level authority) of control Denali would like to maintain from a customer interfacing perspectives and determining a set of governance controls for the relationship (e.g., underwriting 22Supplemental Materials PreliminaryPRELIMINARY Tax Considerations CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW DomicileLeveraged of Buyout parent company ExistingShould parent offshore reincorporate cash to foreign country (i.e., “inversion”) AbilityTax leakage to minimize from using repatriation offshore tax cash via to inversion fund buyout ImpactOngoing of tax additional rate considerations leverage on tax rate given need to repatriate cash flow to fund debt service ReduceInversion: repatriation potential rationaletax leakage on offshore cash Inversion:Intercompany considerations debt, etc… TechnicalImpact on issues business (e.g., and rollover brand/reputation shareholders, desire for tax-deferral) ImpactDFS: ability of corporate to use as tax home reform for offshore cash AbilitySpin-off to / Separationconsummate tax-free spin-off Some potential tax leakage even if overall spin is tax-free Inversion not feasible in stand-alone spin-off EffectiveRepatriation tax taxrates leakage of separate if offshore companies cash used to fund debt reduction or return of capital to shareholders Client likely to have significantly lower tax rate than Enterprise Spin-Merger Tax-free status of overall transaction PotentialDenali shareholders inversion of need Client to businessown >50% as partof combined of merger company NeedMerger to with consider foreign structures partner for(e.g., Denali Strategic shareholders Party) facilitates to defer inversion gain (e.g., exchangeable shares) ReturnRepatriation of Capital tax leakage if offshore cash used to fund debt reduction or return of capital to shareholders LimitedTax leakage capacity if offshore for additional cash is utilized tax-efficient repatriation RepatriationUse of debt vs. holiday offshore cash depends in part on views regarding future tax policy ImpactCorporate of additional tax reform leverage on ongoing tax rate yourGoldman employees, Sachs does representatives, not provide andaccounting, other agents) tax, or may legal disclose advice. to Notwithstanding any and all persons anything the US in thisfederal document income to and the state contrary, tax treatment and except and as tax required structure to enableof the transactioncompliance and with all applicable materials securitiesof any kind law, (including you (and tax each of 23opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. GoldmanPRELIMINARY Sachs Selected CONFIDENTIAL Precedent Leveraged DRAFT Buyouts – SUBJECT INVESTMENT TO CHANGE BANKING AFTER DIVISION FURTHER DILIGENCE AND REVIEW Announcement(US$ in millions) Date Acquirer Target Debt Financing Equity Financing Enterprise Value Premium 1-Apr-0726-Feb-07 Brothers/KKR/TPG/Goldman Morgan Stanley/Citigroup/Lehman Sachs TXUKKR $31,650 First Data $8,000 22,000 $43,800 7,000 22%29,000 28 3-Jul-0720-May-07 Blackstone TPG/Goldman Hilton SachsHotels Alltel 20,600 24,000 4,372 4,60024,972 28,600 40 9 25-Jun-0729-May-07 BC Lehman Partners/Unison Brothers/Tishman Capital/Silver Speyer Lake Properties Intelsat Archstone-Smith 15,000 1,600 16,600 Trust NA 15,640 5,100 20,740 18 14-May-071-Mar-11 Blackstone Cerberus CentroChrysler Properties NA NA Group-US9,250 NA Assets NA NA 9,400 NA 11-May-0719-Jun-07 Carlyle Apax/OMERS Group/Clayton Capital Dubilier Partners & Thomson Rice/Bain Learning Capital Home5,580 1,920Depot 7,500 Supply NA 6,000 2,500 8,500 NA 23-Nov-114-Jun-07 Silver KKR/Crestview Lake/TPG AvayaPartners/NGP 5,250 2,015 Energy 7,265 Capital/Itochu 11 Corporation Samson 3,600 3,600 7,200 NA 2-May-0724-Feb-12 ClaytonApollo/Riverstone Dubilier & Holdings/Access Rice/KKR US Foodservice Industries EP NA Energy NA 7,100 Corporation NA (El Paso) 3,500 3,600 7,100 NA 29-May-0711-Mar-07 KKR/Citigroup/GoldmanMadison Dearborn Partners Sachs CDW Dollar 4,449 General 2,403 6,852 4,200 14 2,805 7,005 34 5-Jul-1118-Jul-12 Apax/CPP/Public BC Partners/CPPIB Sector Cequel Pension Communications Investment Board 4,615 of 1,985Canada 6,600 Kinetic NA Concepts 4,800 1,759 6,300 4 2-Jul-0719-Jun-07 Carlyle Madison Group Dearborn/Citigroup/DLJ/BAML/Wachovia Manor Care 4,600 1,299 5,899 6 Nuveen Investments 3,600 2,700 6,300 22 MedianMean $10,534 5,250 $3,3682,700 7,383 $13,299 18 19% Note:Source: Leveraged Capital IQ buyout transactions reflect the top 20 deals since 2007 that are greater than $5.0 billion in announced transaction value 24Supplemental Materials PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Goldman in billions) Sachs Selected Precedent Spin-Off Transactions INVESTMENT BANKING DIVISION SAICParent 4.0Parent TechnicalServicesCo Market Cap3 SpinCo 8/30/2012 Announcement 3.8% Date Parent Relative Share Price Reaction4 NewsPPG 15.6 Corporation1 ChemicalsCo 48.8 (To PublishingCo merge with 6/26/2012Georgia Gulf) 7.8% 7/19/2012 7.2% CovidienTyco International 20.9 PharmaCo Limited2 12/15/2011 24.4 FlowControlCo 3.0% (To merge with Pentair) 3/28/2012 4.8% AbbottEntergy Labs 12.3 TransmissionCo82.1 PharmaCo 10/19/2011(To merge with 2.8% ITC) 12/5/2011 2.9% McGraw-HillTyco International 11.7 McGraw-HillLimited 20.3 ADTEducation / FlowControlCo 9/12/2011 3.3% / CommercialSecurityCo 9/19/2011 3.4% KraftAMR Foods,1.2 Eagle Inc. 8/11/2011 60.3 Kraft 0.5% Foods Group, Inc. 8/4/2011 3.4% MedianMean 3.9% 3.4% 1Note: Though Highlighted the News transactions Corporation denote spin-off Goldman was officially Sachs advisory announced role on 6/27/2012, a leak on 6/26/2012 caused the majority of the market reaction. On 6/27/2012, News Corporation outperformed the S&P 500 by 1.6% price2 Tyco reaction initially includes announced both a Tyco three price way reactionsspin in September (in September 2011. 2011 On March and in 28,March 2012 2012). Tyco announced that the FlowControlCo separation will be achieved via a spin-merger with Pentair. Mean and Median parent stock 43 ShareMarket price capitalization reaction is of calculated parent at relative time of toannouncement. the S&P 500. 25Supplemental Materials PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Goldman in millions) Sachs Selected Precedent Spin-Merger Transactions INVESTMENT BANKING DIVISION DateOwnership Announced at Signing1 Date Completed Relative Price Size Reaction Parent Spinco On Announcement2 Merger Partner Parent Merger Partner Parent Merger Partner 28-Mar-1219-Jul-12 - -$2,100 4,900 TycoPPG CommodityFlow Control Chemicals Pentair 52.5% Georgia 47.5% Gulf 4.8% 50.5% 15.6% 49.5% 7.2% 12.9% 17-Nov-115-Dec-11 - 5,3321-May-12 Entergy 860 ElectricMeadWestvaco Transmission Consumer ITC Holdings& Office 50.1%ACCO 49.9%Brands 2.9% 50.5% 2.1% 49.5% 7.6% 28.1% 4-Jun-0813-May-09 5-Nov-08 1-Jul-10 3,3008,600 ProcterVerizon & Local Gamble Wireline Folgers Operations J.M. Smucker Frontier 53.5% Communications 46.5% 0.0% 66.0 (1.8)% - 71.0% 29.0 - 34.0% 0.3% (2.7)% 16-Jan-0715-Nov-07 31-Mar-08 4-Aug-08 2,6002,700 KraftVerizon Foods Verizon’s Post Ralcorp New England Holdings Local 54.0% Fairpoint 46.0% Communications(0.6)% 13.8% 60.0% 40.0% (1.2)% - 7-Aug-0623-Aug-06 31-Jul-07 7-Mar-07 1,200 3,300 AmerisourceBergen Weyerhaeuser Weyerhaeuser Corp. and FineKindred Paper Healthcare Domtar 55.0%PharMerica 45.0% and 2.2% Kindred (5.9)% Pharmacy Services (KPS) PharMerica and KPS merged to form New PharMerica 50.0% 50.0% (0.1)% 4.7% 9-Dec-056-Feb-06 12-Jun-0717-Jul-06 9,0962,700 AlltelWalt Disney Corp. Windstream Co. ABC Radio Valor Networks Communications Citadel Broadcasting 85.0% 15.0% 52.0% (0.3)% 48.0% (0.7)% 7.5% - 9.6%16-Mar-05 16-Aug-05 1,100 Fortune Brands ACCO World General Binding 66.0% 34.0% 2.7% 39.9% 13-Jun-02 20-Dec-02 2,788 HJ Heinz Selected Heinz food brands Del Monte Foods 74.5% 25.5% (4.1)% 19-Dec-0125-Feb-02 30-Sep-0218-Nov-02 428 72,041 Helmerich AT&T & AT&T Payne Broadband H&P Oil and Comcast Gas Division Corp. 54.8% Key Production 40%3 1.7% 65.3% (8.4)% 34.8% 0.4% 1.0% Mean10-Oct-01 $7,277 31-May-02 58.5% 41.2% 671 P&G 1.6% Jif 9.4% and Crisco J.M. Smucker 53.0% 47.0% (3.8)% 33.3% Note:Median Highlighted $2,700 53.8% transactions 46.5% denote0.4% 3.4% Goldman Sachs advisory role Frontier’s1 All ownership share price.stakes were fixed at time of signing the merger agreement except Verizon / Frontier spin-merger, which employed a collar clause that allowed pro-forma ownership of combined entity to vary based on 32 PriceMicrosoft reaction owned is relative the remaining to S&P 5.3%500. economic interest in the merged entity. 26Supplemental Materials Exhibit (c) (24) PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW PreliminaryINVESTMENT Summary BANKING Discussion DIVISION Materials Prepared for Goldman,The Special Sachs Committee & Co. of the Opal Board of Directors GoldmanOctober 10, Sachs 2012 does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you (and each of opinionsyour employees, and other representatives, tax analyses) thatand otherare provided agents) tomay you disclose relating to to any such and tax all treatment persons the and US tax federal structure, income without and stateGoldman tax treatment Sachs imposing and tax structureany limitation of the of transaction any kind. and all materials of any kind (including tax DisclaimerPRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW “ConfidentialAt the request Information”)of the Special forCommittee the information of the Board and assistance of Directors of the (the senior “Special management Committee”) and the of OpalSpecial (the Committee “Company”), of the Goldman, Board of SachsDirectors & Co. of the(“GS”) Company has prepared in connection these materials with their and consideration GS’s related of presentation the matters referred (the discloseto herein. to Without any person GS’s the prior US writtenfederal consent,income andthe Confidentialstate income Informationtax treatment may and not tax be structure circulated of anyor referred transaction to publicly, described or hereindisclosed and to all any materials other person. of any Notwithstanding kind (including taxanything opinions hereinto and other the contrary, tax analyses) the Company that are hide may writtenprovided agreement to the Company between relating the Company, to such thetax Boardtreatment and/or and any tax committeestructure, withouttab thereof, GS imposingon the one any hand, limitation and GS, of on any the kind. other The hand. Confidential to Information, including this disclaimer, is subject to, and governed by, any investment,GS and its affiliates financial areplanning, engaged benefits in commercial counseling, and risk investment management, banking GSOffice and financial hedging, advisory financing, services, brokerage market activities making and and other trading, financial research and non-financial and investment activities management and services (both for public various and persons private andinvesting), entities. principalGS and its currencies,in affiliates, credit and funds default or otherswaps entities and other in which financial they instruments invest or with of thewhich Company, they co-invest, any other may party at any to any time transaction purchase, sell,and anyhold of or their vote respective long or short affiliates positions or anyand currencyinvestments or commodity in securities, that derivatives, may be involved loans, commodities, in any option Thetransaction Confidential for the Information accounts of GShas andbeen its prepared affiliates and and based their customers.on information obtained by GS from publicly available sources, the Company’s management and/or other sources. 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GS assuming does not anyprovide responsibility accounting, for tax, independent legal or regulatory verification, advice. the accuracyGS’s role and in anycompleteness due diligence of all review of the is financial, legal, regulatory, tax, accounting and other information provided necessarilyGuide: limited indicative solely toof performingactual future such results, a review which as may it shall be significantlydeem necessary more to orsupport Area lessits own favorable advice than and suggestedanalysis and by shallthese notanalyses, be on behalfand GS of does the Company.not assume Analyses responsibility based if upon future forecasts results areof future materially results different are not from those forecast. obligationGS has not to made evaluate an independent the solvency evaluation of the Company or appraisal or any of person the assets under and any liabilities law. The of analyses the Company in the (includingConfidential any Information contingent, are derivative not appraisals or other nor off-balance-sheet do they necessarily assets reflect and theliabilities) prices at or which any other businesses person orand securities has no hereinactually as may compared be sold to or any purchased. other alternative The Confidential that may Informationbe available doesto the not Company. address theThe underlying Confidential business Information decision is necessarilyof the Company based to on engage economic, in any monetary, transaction, market or the and relative other meritsconditions of any as strategicin effect on,alternative and the referred to 2information made available to GS as of, the date of such Confidential Information and GS assumes no responsibility for updating or revising the Confidential Information. TheGoldman Goldman Sachs Sachs Team INVESTMENTPRELIMINARY BANKING CONFIDENTIAL DIVISION DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW GeorgeTechnology Lee GlobalInvestment Co-Head Banking of TMT Opal PawanCoverage Tewari Managing Director Guy Nachtomi Managing Director Ray Kwong Vice President Peter Brundage Managing Director SrinidhiCorporate Raghavan Finance BenjaminSolutions Mensah Michael Tepatti Daniel Shefter LeveragedAssociate Analyst Finance Analyst Credit HeadRisk Mgmtof Corporate & Advisory Finance Solutions 3Matt DeFusco Head of TMT Leveraged Finance Anne Russ Vice President Eric Lindberg Vice President IntroductionGoldman Sachs GoldmanPRELIMINARY Sachs would CONFIDENTIAL like to thank the DRAFT Special Committee– SUBJECT for TO the CHANGE opportunity AFTER to share FURTHER our preliminary DILIGENCE observations AND on severalREVIEW key INVESTMENTquestions regarding BANKING Opal today: DIVISION 21 HowWhat dois themanagement’s public market’s financial perception projections of Opal compare and why in thedoes context Opal trade of public the way market that perceptions? it does? —3 What In addition are some to theof thepotential potential financial alternatives impacts, available what are to theOpal key today strategic, and how operational might they and impact transactional shareholder issues value? to also consider? We4 What have would reviewed be the information recommended provided next steps by management in order to further to date, evaluate including: the potential alternatives? — Management’sInitial documents 9/21 provided Case financial by management projections in and the thedata July room 2012 Board Strategy Plan In— reachingOther publicly our preliminary available documentsobservations, we have relied upon management’s 9/21 Case 4Additional diligence and management discussions and input would be required in order to further develop and refine our preliminary observations and analyses Goldman Sachs PRELIMINARY1 Public Market Perspectives CONFIDENTIAL on Opal DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT BANKING DIVISION TimeViewed Period over Opala range HP of WholeCo historical EUC time Enterpriseperiods, Opal’s Software share Services price has S&P underperformed relative to that of its peer groups1 Last 510 Years Years (66)% (62)% (70)% 31% 1296%54% (21)% 99% 1% 271% 54% 329% 61% 382%(6)% 43% Last 31 YearsYear (35)% (37)% (35)%(67)% 25%61% 25%26% 16%14% 17%51% 34%61% 1%(4)% theOpal’s PC currentmarket publicoutlook, trading an expectation multiples ofalso lower lag those growth, of itsoverhang peers, likely of recent owing underperformance, to a range of potential and a factors, “show me”including investor but viewpointnot limited regarding to, EUC segmentthe Company’s financials strategy overwhelming the Enterprise segment financials, views on acquisitions— Additionally, that Opal’smay have significant limited cashP&L balances impact in may the notnear be term attributed full value by investors as it consists primarily of offshore cash and also because some investors may have the view that the cash will be used for EnterpriseCY2013E Multiple Value / OpalSales2 HP 0.2 WholeCo / 0.3 x 0.4EUC x Enterprise2.3 x 0.1 x Software 1.3 x 2.6 Services x 1.1 x S&P0.1 x PEnterprise / E 5.3 3.6 Value 12.3 / 12.6EBITDA2 12.6 11.7 2.6 /11.8 3.4 3.27.3 7.0 5.7 5.4 7.3 8.2 3.3 52%Operating and 41% P / E3of Wall 1.4 2.4 Street 9.4 research 7.4 7.9 9.1analysts 11.0 have5.1 a Buy or Hold recommendation on Opal, respectively, with a median price target of $14.00 and a price target ranging from $9.00 to $18.50 Source:— EPS estimatesBloomberg, for companyFY2014 andreports, FY2015 public have filings, trended Capital downward IQ and since IBES the first and second quarter earnings announcements EMC,1 WholeCo HP, IBM, peer compositeJuniper and consists NetApp. of Accenture,Services peer Apple, composite Cisco, consistsEMC, HP, of IBM,BMC Microsoft,Software, CA,Oracle, Compuware, SAP. EUC Informatica, peer composite Microsoft, consists Oracle, of Acer, SAP, AsusTek Symantec and Lenovo. and Tibco. Enterprise S&P peer peer composite composite consists consists of of Ingram Brocade, Micro Cisco, and 2TechData. First figure represents Opal’s EV / EBITDA multiple. Second figure assumes the public market adjusts Opal’s cash balance for the tax associated with repatriating Opal’s offshore cash balances, assuming 100% of cash is offshore. 53 Operating P / E calculated by removing cash per share from each company’s share price. 2Goldman Management Sachs Financial Projections (US$PRELIMINARY in millions) CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW INVESTMENT BANKING DIVISION TheManagement’s reduction in revisions operating to marginsthe July 2012impact Board EUC, Strategy Enterprise Plan and to formulate S&P most the significantly 9/21 Case financial projections reflect lower revenue growth rates and operating margins across most of the business FY2013July 2012 FY2014 Board Strategy FY2015 Plan FY2016 9/21 Case FY2017 % Difference1 FY2018 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 EUCRevenue $32,784 Dollars $34,252 $36,013 $38,141 $39,206 $40,382 $28,655 $28,915 $30,096 $31,299 $31,612 $31,929 (13)% (16)% (16)% (18)% (19)% (21)% ServicesEnterprise $8,713 $11,897 $9,268 $12,920 $9,964 $14,033 $10,810 $15,203 $11,281 $15,992 $11,768 $16,855 $8,511 $10,559 $8,863 $9,355$11,392 $10,047 $12,298 $10,399 $13,278 $10,770 $13,832 (2)% $14,425 (4)% (11)%(6)% (7)% (12)% (8)% (12)% (8)% (13)% (14)% (14)% S&PSoftware $10,018 $430 $10,465 $1,566 $10,973$2,063 $2,379 $11,490 $2,576 $11,777 $2,803 $12,072 $557 $9,208 $1,371 $9,392 $1,809 $9,674 $1,979 $9,964 $2,162 $10,014 $2,375 $10,064 29% (12)% (8)% (12)% (10)% (17)% (12)% (16)% (13)% (15)% (15)% (17)% RevenueWholeCo Growth $63,021 $65,972 $69,546 $74,022 $76,831 $79,880 $57,490 $59,933 $63,232 $66,567 $68,019 $69,562 (9)% (9)% (9)% (10)% (11)% (13)% EnterpriseEUC (1)% 16%5% 5% 9% 6% 9% 3% 8% 3% 5% (14)% 5% 3% 1% 8% 4% 8% 4% 8% 1% 4% 1% 4% (12)% (13)% (4)% (1)% (1)% (1)% (2)% (0)% (2)% (1)% (2)% (1)% SoftwareServices 5% NA 6% 264% 8% 32%9% 4% 15% 4% 8% 2% 9% 4% NA 6% 146% 7% 4% 32% 4% 9% (2)% 8% (2)% 10% (2)% NM (118)%(1)% (1)% 0% (1)% (6)% 0% 1% WholeCoS&P (2)% 2% 5% 5% 5% 5% 5% 6% 3% 4% 3% 4% (10)% (7)% 2% 4% 3% 6% 3% 5% 5% 2% 5% 2% (8)% (9)% (3)% (1)% (2)% 0% (1)%(2)% (2)% 3% 3% (2)% EUCOperating 5% 5%Margins 6% 6% 8% 8% 3% 3% 3% 2% 2% 2% (30)% (53)% (55)% (58)% (75)% (75)% ServicesEnterprise 27% 7% 29%10% 29%10% 30%11% 32%11% 32%11% 28%3% 5% 29% 6% 29% 6% 30%7% 7% 30% (56)% 30% (51)%5% -- (46)%% -- % (44)% (0)% (7)%(35)% (8)% (35)% S&PSoftware 10% (2)% 11% (2)%11% 12% 17%14% 21%14% 23%8% 8% (9)% 8% (2)% 8% 7%16% 6% 18% (17)% 19% (25)% 18% NM (29)% NM (35)% 34% 2%(49)% (12)% (55)% (20)% Source:WholeCo Management 8% 9% 9% 9%and 12%IBES 12% 7% 7% 8% 8% 8% 8% (15)% (18)% (13)% (16)% (35)% (36)% 61 Highlighted figures represent operating margin declines of 25% of greater. 2Goldman Management Sachs Financial Projections (US$(Cont’d) in millions) INVESTMENTPRELIMINARY BANKING CONFIDENTIAL DIVISION DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW —IBES Analysts estimates expect indicate little thatto no Wall revenue Street growth research in FY2014analysts haveand FY2015 different and expectations have lower regarding EPS projections Opal’s financial than the outlook9/21 Case than financial are suggested projections by the 9/21 Case financial projections FY20139/21 Case FY2014 Opal IBES FY2015 Estimates FY2013 IBES FY2014 less 9/21 FY2015 Case FY2013 FY2014 FY2015 Revenue $57,490Growth $59,933(7.4)% 4.2% $63,232 5.5% $57,443 (7.5)% $58,001 1.0% (1.5)% $57,143 (0.1)% $(47) (3.2)% $(1,932) (7.0)% $(6,089) %Operating Margins Income 7.0% 7.0% $3,999 7.7% $4,188 7.0% $4,851 7.1% $4,0297.0% 0.0% $4,099 0.1% $4,001 (0.7)% $30 $(88) $(850) %EPS Difference $1.70 $1.84 2.4% $2.20 (2.2)% $1.74 (18.6)% $1.80 $1.79 $0.04 $(0.04) $(0.41) 7Source: Management and IBES Goldman Sachs 2PRELIMINARY Illustrative Status CONFIDENTIAL Quo Financial Analysis DRAFT INVESTMENT – SUBJECT BANKINGTO CHANGE DIVISION AFTER FURTHER DILIGENCE AND REVIEW (US$Based in on millions, 9/21 Case except Financial per share Projections amounts) HighIllustrative unlevered Discounted free cash Cash flows Flow during Analysis the projection period in the 9/21 Case financial projections drive illustrative DCF share price values that are greater than that of Opal’s current share price currentThe revenue share growthprice rate and operating margin assumptions in the 9/21 Case financial projections would need to be meaningfully reduced in order to arrive at illustrative DCF values that are more in line with Opal’s RevenueFY2013 FY2014$57,490 FY2015$59,933 $63,232FY2016 $66,567FY2017 $68,019 FY2018 $69,562 Terminal $69,562 Year EBITDA% Growth (Pre-GAAP 4.2% 5.5% Adjustments) 5.3% 2.2% $4,5992.3% $4,788 $5,451 $5,872 $6,005 $6,099 $6,099 Unlevered% Margin Free8.0% Cash 8.0% Flow 8.6% $2,219 8.8% $2,880 8.8% $3,443 8.8% $3,9028.8% $4,299 $4,366 $4,344 IllustrativeImplied Share Perpetuity Price Implied Growth Terminal Rate Perpetuity Year EBITDA Growth Rate Multiple 8.0%Discount $33.94 Rate $39.45 -- % 1.5% $48.27 3.0% 8.9 -- %x 11.11.5% x 3.0% 14.7 x 14.0%11.0% 20.6125.45 21.9627.94 23.6931.37 5.16.5 5.87.6 6.79.2 inSensitivity Annual EBITAnalysis Implied Assuming Share aPrice 11% Implied Illustrative Terminal Discount Year Rate EBITDA and 1.5% Multiple Perpetuity Growth Rate 9/21Margin Case vs. (5.0)% in Annual (2.5)% Rev. -- Growth % (5.0)% Rate (2.5)% vs. 9/21 -- %Case in Annual Rev. Growth Rate vs. 9/21 Case (2.5)%(5.0)% $9.8616.49 $10.7018.06 19.78 $11.62 7.0 6.1 7.2 x 7.36.3 x 6.5 x Sensitivity-- % 23.13 Analysis25.43 27.94 Assuming 7.4 7.5 a 1.5%7.6 Perpetuity Growth Rate IllustrativeImplied Share Terminal Price ImpliedYear in TerminalWC as a % Year of in EBITDA Revenue Multiple Terminal Year in WC as a % of in Revenue 8.0%Discount $39.45 Rate $38.47 -- % 10.0% $37.49 20.0% 11.1 -- x % 10.7 10.0% x 10.3 20.0% x 14.0%11.0% 27.9421.96 27.3521.56 26.7521.16 7.65.8 7.35.6 7.1 5.4 Note:Source: The Management illustrative discountedand company cash reports flow analysis discounts cash flows to 2013 fiscal year end and assumes management’s non-GAAP tax rate estimate of 21.0%. Assuming excess offshore cash of $7.0 billion is 8repatriated and subject to a 35% tax rate, the impact on implied share price is an approximate reduction of approximately $1.40 Goldman Sachs 2PRELIMINARY Illustrative Status CONFIDENTIAL Quo Financial Analysis DRAFT INVESTMENT – SUBJECT BANKINGTO CHANGE DIVISION AFTER FURTHER DILIGENCE AND REVIEW (US$Based in on millions, 9/21 Case except Financial per share Projections amounts) AssumingIllustrative Opal Present continues Value ofto Futuretrade at Share a forward Price P/EAnalysis multiple consistent with today’s multiple, an illustrative present value of future share price analysis would imply share price values in the high single-digits to low-teens OpalPeer PEGFY 1 multiples P/E based on IBES estimates would suggest that the EPS growth profile suggested by the 9/21 Case financial projections would result in Opal forward P/E multiples significantly higher than current 1Yr.Current Avg. (IBES 7.1 FY 2013) 5.4 x CY2Yr. 1 Avg.P/E/G 8.1 HP2Opal1 1.2 3.7 x EUCWholeCo 0.7 1.4 ServicesEnterprise 1.5 1.4 S&PSoftware 0.9 1.3 DilutedFY2013 EPS FY2014 (Non-GAAP) FY2015 FY2016 $1.70 $1.84 FY2017 $2.20 FY2018 $2.45 $2.56 $2.64 % AnnualCAGR fromGrowth FY2013 8.2% 19.6%EPS 8.2% 11.4% 13.7% 4.5% 12.9% 3.1% 10.8% 9.2% @Illustrative a 5.0x Forward PV of Future P/E Multiple Share Price and Illustrative 10.0% Discount Rate $9.19 $9.99 $10.11 $9.61 $9.03 @ a 7.0x5.0x Forward P/E Multiple and Illustrative 10.0%13.0% DiscountDiscount RateRate $12.86$9.19 $9.73 $13.99 $9.58 $14.15 $8.86 $13.45 $8.11 $12.64 @ a 9.0x7.0x Forward P/E Multiple and Illustrative 10.0%13.0% Discount Rate $16.5312.86 13.62 $17.98 13.41 $18.19 12.40 $17.29 11.35 $16.26 Source:@ a 9.0x Management, Forward P/E company Multiple reports,and Illustrative Bloomberg 13.0% and Discount IBES Rate 16.53 17.51 17.24 15.95 14.60 1Note: Opal The EPS illustrative CAGR based future on share January price fiscal analysis year discounts end IBES future estimates. share prices to 2013 fiscal year end. CY1 P/E/G multiples calculated based on CY2012 – CY2014 IBES EPS CAGRS, unless otherwise noted. 92 HP EPS CAGR based on October fiscal year end IBES estimates. PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW Alternatives3 Summary Overview of Selected Potential INVESTMENT BANKING DIVISION AOpal B C D 100%Status Spin-OffQuo Take-Private with No CashLeveraged Dividend Buyout 100% Separation Spin-Off via with Spin-Off Cash Dividend Separation Sponsored via Client Spin-Off Spin-Merger Share ReturnRepurchase of Capital (Via Newto Shareholders Debt or Existing Cash) Cash Dividend (Via New Debt or Existing Cash) 10Note: Dotted blue lines denote alternatives that Opal could pursue on a standalone basis PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW BasedA Illustrative on 9/21 LeveragedCase Financial Buyout Projections Analysis INVESTMENT BANKING DIVISION Illustrative(US$ in millions, Sources except and Uses per share amounts) Illustrative% of Sources Total RolloverExtant Cash Notes $13,538 5,996 13.630.7% NewRollover $3 billion Structured ABL Financing 2,000 4.5 Debt 1,427 3.2 New Term Loan BA 3,0001,500 6.83.4 New UnsecuredSecured Bond Guaranteed 2,500 5.7 Notes 3,500 7.9 MDTotal Rollover New Debt4 at $15.00 $12,500 per 28.4 share5 3,674 8.3 NewSoutheastern Sponsor AM Equity Rollover 4,918 at11.2 $15.00 per share5 1,989 4.5 IllustrativeTotal Illustrative Uses % Sources of Total $44,042 100.0% AssumedEquity Purchase Existing Price Notes at $15.005,996 13.6 per share 1 $26,080 59.2% RefiAssumed Commercial Existing Paper Structured 1,018 Financing2.3 Debt 1,427 3.2 MinimumTotal Purchase Cash Price 6,500 Excluding 14.8 Cash 34,521 78.4 ConsultingAdvisory Fees / Legal 75 0.2 50 0.1 OID3Financing 30 0.1 Fees2 403 0.9 TotalTax on Illustrative Cash Repatriation4 Uses $44,042 2,463 100.0% 5.6 AssumesIllustrative 21% Returns Non-GAAP Analysis Tax to New Rate Sponsor 3.8Purchase x 4.2 Sharex 4.6 Pricex 4.9 % x Implied5.3 x 5.7 Premium x Implied LTM EBITDA Entry Multiple Implied LTM EBITDA Exit Multiple $14.00$13.00 37%48% 3.84.2 xx 28.1%22.6% 30.4%24.8% 32.6% 26.9% 34.6% 28.9% 36.6% 30.7% 38.5% 32.5% $16.00$15.00 69%58% 4.94.6 xx 14.6%18.2% 16.7% 20.4% 18.7% 22.4% 20.5% 24.3% 22.3% 26.1% 24.0% 27.8% $18.00$17.00 80%90% 5.35.7 x 11.6%9.0% 11.0% 13.6% 12.8% 15.5% 14.6% 17.3% 16.2% 19.0% 17.8% 20.7% PurchaseAssumes 30%Share Non-GAAP Price % Implied Tax Rate Premium Implied LTM EBITDA Entry Multiple Implied LTM EBITDA Exit Multiple $13.003.8 x 4.2 37% x 4.6 3.8 x x 4.925.9% x 5.3 28.4% x 5.7 30.7% x 32.9% 35.0% 36.9% $15.00$14.00 58%48% 4.64.2 x 16.2%20.5% 18.5%22.9% 20.7%25.1% 22.7%27.2% 24.6%29.2% 26.4%31.0% $17.00$16.00 80%69% 5.34.9 x 9.7%12.7% 11.9% 14.9% 13.9% 17.0% 15.8% 19.0% 17.6% 20.8% 19.3% 22.6% Source:$18.00 90%Management 5.7 x 7.1% and 9.2% company 11.2% reports 13.1% 14.8% 16.5% 1Note: Assumes Based an on illustrative management’s purchase non-GAAP price of tax$15.00 rate perestimate share, of based 21.0%. on a 58% premium to the current share price of $9.47 32 BasedFinancing on an fees estimated estimated OID based of 99 on for fees the of new 2.5% Term for theLoan new B. ABL and Term Loans A and B and fees of 4.0% on new high yield bonds and notes. billion,4 Illustrative is repatriated tax on offshore and subject cash torepatriation a 35.0% taxestimated rate. by assuming that $7.0 billion of offshore cash, representing extant cash of $13.5 billion in excess of an estimated minimum cash balance requirement of $6.5 115 Assumes that MD and Southeastern Asset Management roll 100% of their existing equity stakes in the transaction. PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW ForB Preliminary the purposes Separation of evaluating Topics the forpotential Consideration benefits andINVESTMENT consideration BANKING of a business DIVISION separation, we consider, based on management guidance, an illustrative separation of Opal into: — Enterprise:Client: Consists Consists of EUC, of Enterprise the consumer Solutions, business Software, of Services’ the corporate Support business & Deployment of Services (~10% (~90% of Services of Services revenue) revenue) and and the theconsumer-related corporate-related portion portion of ofS&P S&P (~75% (~25 of S&P revenue) PotentiallyPotential Benefits “unlock” embedded shareholder value through trading multiple re-rating and arbitrage —Allows Pursue each and entity execute to pursue growth potentially strategy unique strategic, operation and financial objectives — StrategicManagement flexibility focus and optionality EachIn a public entity market could potentially context, may become allow an each acquisition/merger entity to target potentially target different shareholder bases ThePotential nature, Considerations magnitude and impact of potential operating dissynergies, including the loss of: –— Sales Revenue organization and cross-selling leverage opportunities — COGSEntry into / materials emerging sourcing markets scale via Clientand influence / PC pull-through of Enterprise — ScaleShared / creditcorporate quality overhead to provide and financing public company services coststo customers — Client cash flows for investment in Enterprise ThePotential management customer, pipeline supplier to filland senior employee management reaction positionsand impact at both entities 12Potential shareholder dislocation PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW OverviewB Illustrative of Spin-OffPreliminary Analysis Assumptions (US$ in millions) INVESTMENT BANKING DIVISION ForSummary the purposes Overview of performing of Assumptions a preliminary and Methodology and illustrative analysis to examine a separation of Opal into a “Client” business and an assumptions“Enterprise” business, as described on the prior page, we prepared illustrative financial projections for each entity based on the 9/21 Case financial projections and management guidance regarding high-level separation The— Further illustrative diligence financial would projections be required below to refine also incorporate the analyses operating dissynergies related to sourcing and corporate and public company costs. Additional transaction-related dissynergies are incorporated into the analyses Illustrativein the subsequent Client pages, Financial including Summary tax on repatriation of offshore cash and other one-time separation transaction-related costs RevenueFY2013 FY2014 FY2015 FY2016 FY2017 FY2018 %EUC Growth $28,655 (13.8)% $28,915 0.9% $30,096 4.1% 4.0%$31,299 1.0% $31,612 1.0% $31,929 %S&P Growth 6,906 (9.9)%7,044 7,255 2.0% 7,473 3.0% 7,5103.0% 7,5480.5% 0.5% %Services Growth 739 66.8% 724 742 66.8% 785 0.4%803 823 5.7% 2.4% 2.4% %Revenue Growth $36,301 (12.2)% $36,683 1.1% 3.8%$38,093 3.8% $39,557 0.9% $39,926 0.9% $40,299 EUCEBIT $924 $725 $743 $705 $638 $638 S&P% Margin 602 631 3.2% 625 2.5% 600 560 2.5% 500 2.3% 2.0% 2.0% Services% Margin 441 8.7% 419 9.0%429 450 8.6% 457 8.0% 464 7.5% 6.6% EBIT% Margin (Non-GAAP)1, 59.6% 57.9% 2 $1,632 57.8% $1,441 57.3% $1,466 56.9% $1,427 56.4% $1,330 $1,280 EBITDA% Margin (Pre-GAAP 4.5% 3.9% Adj.)23.8% 3.6%$2,011 3.3% $1,809 3.2% $1,828 $1,784 $1,682 $1,628 Illustrative% Margin 5.5%Enterprise 4.9% Financial 4.8% 4.5% Summary 4.2% 4.0% RevenueFY2013 FY2014 FY2015 FY2016 FY2017 FY2018 %Enterprise Growth Solutions2.8% 7.9% $10,559 8.0% 8.0%$11,392 4.2% $12,298 4.3% $13,278 $13,832 $14,425 %Services Growth 7,771 (1.4)% 8,139 4.7% 8,613 5.8% 9,263 7.5% 9,596 3.6% 9,947 3.7% %S&P Growth 2,302 NM 2,348 2.0% 2,418 3.0% 2,491 3.0% 2,503 0.5% 2,516 0.5% %Software Growth 557 NM 1,371 146.3% 1,809 31.9% 1,979 9.4% 2,162 9.2% 2,375 9.9% %Revenue Growth $21,189 2.3% 9.7% $23,250 8.1% $25,139 7.4% 4.0% $27,010 4.2% $28,093 $29,263 EnterpriseEBIT Solutions $326 $550 $685 $850 $950 $990 Services% Margin 1,977 3.1% 2,110 4.8% 2,306 5.6% 2,551 6.4% 2,643 6.9% 2,7356.9% S&P% Margin 151 158 25.4% 156 25.9%150 140 26.8% 125 27.5% 27.5% 27.5% Software% Margin (50) 6.5% (23) 6.7% 290 3506.5% 400 6.0% 430 5.6% 5.0% EBIT% Margin (Non-GAAP)1, NM NM 16.0% 2, 3 $1,587 17.7% $1,966 18.5% $2,60518.1% $3,065 $3,295 $3,439 EBITDA% Margin (Pre-GAAP 7.5% 8.5% Adj.)2 10.4% $1,808 11.3% $2,199 11.7% $2,844 11.8% $3,308 $3,542 $3,691 Source:% Margin Management 8.5% 9.5% and 11.3% company 12.2% reports 12.6% 12.6% 21 Includes allocatedan additional Long-Term estimated Incentive $100 million expenses of annual and other pre-tax cost operatingadjustments expenses and excludes related non-GAAPto assumed adjustments.duplication of certain corporate and public company costs, based on management guidance. 133 Includes $580 million of annual pre-tax sourcing dissynergies associated with an illustrative separation, per management estimates. Goldman Sachs BPRELIMINARY Illustrative Spin-Off CONFIDENTIAL Analysis DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$(Cont’d) in millions, except per share amounts) INVESTMENT BANKING DIVISION EBITDA)Illustrative andper shareEnterprise value peersoutcomes (~7.0x to OpalFY2014 shareholders EBITDA) in trading spin-off multiples scenarios today are driven by potentially achieving a public multiple re-rating to higher multiples that are more in-line with Client peers (~4.0x FY2014 Assumes100% Spin-Off a spin-off w/ No of EnterpriseCash Dividend1 to Opal shareholders, with no cash dividend to shareholders %Illustrative Own. Per Value Share EnterpriseClient Equity Equity Stake Stake 100.0% 100.0% $5.80 9.33 Illustrative After-taxTotal Value Separation $15.12 Costs2 (0.45) Illustrative SensitivityAdjusted Total Analysis Value $14.67 2.0Client x 4.0 EV x/ FY2014E6.0 x EBITDA EVEnterprise / FY14 5.0 7.0 x x $10.05 12.58 14.67$12.13 16.75 $14.22 IllustrativeEBITDA 9.0Sensitivity x 15.12 Analysis 17.20 19.28 —Other 100% spin-off spin-off variations with a includecash dividend to shareholders that is funded by additional debt raised at Client and/or Enterprise Additional— Sponsored leverage spin-off at eitherin which entity a sponsor could potentially makes an equityimpact investment the pro forma for uptrading to a 49.9%multiples, stake thus in Client,changing with the those value cash shareholders proceeds beingmay receive used to pay a cash dividend to shareholders SummarySimilarly, aDissynergy sponsor’s investment Assumptions in Client can be at a negotiated value discount, thereby also affecting the value shareholders may receive —The $580 illustrative million spin-off of annual analyses dissynergies make a at number Enterprise of assumptions related to sourcing regarding (~2.7% potential of Enterpriseoperational, revenue financial and and 5.5% transaction-related of ESG revenue) dissynergies, including: — $1$100 billion million of one-time each of additional transaction-related annual corporate separation and costs public (taxed company at 21%) costs at both separated entities that would need to be duplicated — 35%Does tax not rate assume on repatriation any DFS related-financial of offshore cash impactbalances for deleveraging purposes Impact— Lower on leverageValue from capacity Various as a Illustrative result of lower Dissynergies pro forma EBITDA related to operational dissynergies $580mmSource of AnnualDissynergy Sourcing Per Share @ Enterprise Amount at 7x $2.34 $100mm Annual Corporate and Public Company Costs @ EnterpriseClient at 4x at 0.23 7x 0.40 $1000mmTax on Repatriation of One-time of Off-ShoreTransaction Cash3 Expenses 0.85 (Taxed at 21%) 0.45 Source:Total Dissynergy Management / Share and $4.27 company reports 21 IllustrativeAssumes a analysis21% tax assumes rate. Client trades at 4.0x FY2014 EBITDA and Enterprise trades at 7.0x FY 2014 143 Assumes taxes of $1.5 billion based on repatriating $4.2 billion offshore cash, taxed at 35%, for Client deleveraging. PRELIMINARY CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW BasedIllustrative on 9/21 Spin-Merger Case Financial Analysis Projections | Strategic Party Based on IBES (In US$) MultipleA spin-merger uplift ofbetween Client Clientbusiness and if StrategicNew Strategic Party Partyhas the (pro potential forma Clientto result + Strategicin Opal shareholder Party) trades value in-line enhancement with Strategic assuming: Party current standalone multiples EnterprisePotential revenue business and multiple cost synergies re-rating through in line witha combination Enterprise of peer Client trading and Strategicmultiples Party However,Other unquantified issues around potential execution, tax and timing structuring and post-transaction benefits related trading to New performance Strategic Party are (e.g.some foreign of the uncertaintiesjurisdiction for in newa spin-merger company) transaction, including those in a straight spin transaction Illustrative Value Summary1 New% Own. Strategic Per Share Party Equity Stake 50.1 % $ 6.65 Enterprise Equity Stake 100.0 % 9.33 Illustrative After-taxTotal Value Separation $ 15.98 Costs2 (0.45) CurrentIllustrative EV Adjusted / FY2014 Total EBITDA Value $ 15.52 SummaryStrategic Party3: Synergy 4.9x and Opal3: Dissynergy 2.6 Assumptions NoThe revenue illustrative synergies spin-merger and 50 analysis bps of combinedmake a number EBITDA of assumptions margin improvement regarding potentialat New Strategic operational, Party financial and transaction-related synergies and dissynergies, including: $100$580 million of additionalannual dissynergies annual corporate at Enterprise and public related company to sourcing costs (~2.7% at Enterprise of Enterprise revenue and 5.5% of ESG revenue) Does$1 billion not assumeof one-time any transaction-relatedDFS related-financial separation impact costs Lower35% tax leverage rate on capacityrepatriation as aof result offshore of lower cash probalances forma for EBITDA deleveraging related purposes to operational dissynergies ValueIllustrative to Opal Ownership S/H of New Sensitivity Strategic Analysis Party equity stake %New Own. Strategic 55.0 % Party 6.22 EV 7.30 / FY2014 8.38 in EBITDA3NQ 60.0 % 3.9 6.78 x 4.9 7.96 x 5.99.14 x Opal S/H 50.1 % $ 5.66 $ 6.65 $ 7.63 NewIllustrative Strategic Multiple Party Sensitivity EV / FY2014 Analysis EBITDA 3.9 x 4.9 x 5.9 x En 5.0 x $ 12.00 $ 12.99 $ 13.97 EV / FY14 7.0 x 14.53 15.52 16.51 9.0EBITDA3 x 17.07 18.05 19.04 AssumesIllustrative New Synergy Strategic Sensitivity Party tradesAnalysis at 4.9x FY2014 EBITDA NewAssumes Strategic Enterprise Party tradesEBITDA at 7.0x Margin FY2014 Improvement EBITDA N. Strategic -- % 0.5 % 1.0 % Party (2.5)% $ 14.62 $ 15.16 $ 15.69 Revenue -- % 14.99 15.52 16.06 Synergies 2.5 % 15.35 15.88 16.42 Note:Source: Assumes Management, a spin mergecompany transaction reports and occurs Wall at Street fiscal researchyear end 2013 and Opal shareholders’ ownership in New Strategic Party of 50.1% Strategic Party’s current public market equity valuation 21 ForAssumes illustrative a 21% purposes, tax rate. assumes no combined revenue synergies and a 0.5% EBITDA margin improvement relative to the blended pro forma EBITDA margin. 153 New Strategic Party and Strategic Party based on Strategic Party’s March fiscal year end. Enterprise based on Opal’s January fiscal year end. Goldman Sachs DPRELIMINARY Illustrative Return CONFIDENTIAL of Capital Analysis DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW AsBased a result on 9/21 of the Base difference Case Financial between ProjectionsOpal’s current (US$ P / inE millions,multiple and except the costper shareof newly amounts) issued INVESTMENTdebt or the cost ofBANKING holding cash DIVISION on the balance sheet (even factoring for a potential 35% repatriation tax), Opal could potentially One-Timedeliver value Share accretion Repurchase to shareholders through a debt or cash-funded one-time share repurchase or cash dividend NetIllustrative Debt Proceeds $2 Billion for LeveragedRepurchase Share $ 1,980 Repurchase1 %Repurchase of Current Price Basic (@ Shares 10% RepurchasedPremium) $10.41 11.0% FY2014Pro Rata StatusValue perQuo Share EPS $1.14$1.84 %FY2014 EPS Accretion Pro Forma / Dilution EPS 2.04 11.0% 5.0Illustrative x 6.0 x FY2014 P/E Multiple PFPro Value Forma of Share Retained Price Shares $10.19 9.08 $12.23 10.89 IllustrativePro Rata Value $2 Billion $10.22 Cash $12.03 Financed Share Repurchase RepurchaseCash Post-Repatriation Price (@ 10% Tax Premium) for Repurchase $10.41 $1,980 Pro% of Rata Current Value Basic per SharesShare $1.14 Repurchased 11.0% FY2014 StatusPro Forma Quo EPS 2.06$1.84 Illustrative% EPS Accretion FY2014 / Dilution P/E Multiple 12.1% Pro5.0 Formax 6.0 x Share Price $10.30 $12.36 ProPF Value Rata Valueof Retained $10.31 Shares $12.14 9.17 11.00 IllustrativeOne-Time Cash$2 Billion Dividend Dividend to Shareholders Recapitalization1 BasicNet Debt Shares Proceeds Outstanding for Dividend 1,735 $ 1,980 FY2014Dividend Status per Share Quo $1.14 EPS $1.84 %FY2014 EPS Accretion Pro Forma / Dilution EPS 1.81 (1.5)% 5.0Illustrative x 6.0 x FY2014 P/E Multiple PerPro ShareForma Dividend Share Price 1.14 $9.05 1.14 $10.86 IllustrativePro Rata Value $2 Billion $10.19 Cash $12.00 Financed Dividend BasicCash Post-RepatriationShares Outstanding Tax 1,735 for Dividend $1,980 FY2014Dividend Status per Share Quo $1.14 EPS $1.84 %FY2014 EPS Accretion Pro Forma / Dilution EPS 1.83 (0.4)% 5.0Illustrative x 6.0 x FY2014 P/E Multiple PerPro ShareForma Dividend Share Price 1.14 $9.15 1.14 $10.98 Source:Pro Rata Management Value $10.29 and $12.12 company reports 1Note: Assumes Illustrative $2.0 billion analysis of assumesnew debt a issuance21.0% non-GAAP via $500 million tax rate, of a T+125pre-tax new interest senior rate notes on cash due balances February of 2015, 0.5%, $750 a 35.0% million tax ofrate T+200 on repatriated new senior offshore notes duecash February balances 2017 and $750 million of T+237.5 new senior 16notes due February 2022. Assumes fees of 1.0% on new issuances and a pro forma credit rating of Baa1 / BBB. Goldman Sachs PreliminaryPRELIMINARY DFS Topics CONFIDENTIAL for Consideration DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW 1Summary What is theof Selectedimpact of Key a sub-investment Topics and Preliminary grade corporate Perspectives credit rating INVESTMENT on DFS? BANKING DIVISION —There Inability are likely to source two primary funding impacts via the ofcommercial a credit downgrade paper market on DFS: —– Opal Higher could funding potentially costs acrossincrease the the range size of of funding the securitization sources program and / or access other forms of funding (e.g., an ABL revolver) to replace the commercial paper funding sources 2The Could Company DFS be should “ring-fenced” however tocontinue mitigate to the have potential access impactsto the conduit of a corporate and securitization credit rating markets, downgrade? as well as the unsecured market wouldWhile therebe rated are withinexamples 1-2 ofnotches similar of situations the parent whereby the rating agencies have delineated between opco / holdco structures when dealing with captive financing subsidiaries (e.g., Ford), it is likely that the ring-fenced entity subsidiary,— A range theof other standalone factors credit could qualityinfluence of the chancessubsidiary, of benefittingperceptions from around a ring-fence the parent’s approach, credit strengthincluding and the the nature level of of the co-dependence protections / barriersbetween put the in parent place andbetween subsidiary, the parent among and otherssubsidiary, the ownership structure of the 3On Would balance, a separation we do not of believe Opal into the CompanyClient and would Enterprise materially businesses benefit automatically from a ring-fenced require structurea divestiture given of theDFS? Company would still likely be able to access key funding markets, albeit at slightly higher funding costs —A separation, Key factors in to and consider of itself, would would include not necessarily the credit qualityrequire anda divestiture ratings of of the DFS. new There companies, exists thethe potentialportfolio to, diversity in effect, of separatethe receivables the DFS within portfolio each and DFS establish successor a DFS entity successor and the resultingentity at each ability of toClient access and the Enterprise funding markets 4and Are cost there of fundingpotential third party alternatives available for DFS? There areis likely examples to be ofinterest other companiesfrom third partiesthat have in acquiringoutsourced all their or a financing portion of activities DFS and established relationships with third party financing providers —(e.g., Key Apple factors / Barclays, will likely Kohl’s center / aroundCapital whatOne) level of control Opal would like to maintain from a customer interfacing perspectives and determining a set of governance controls for the relationship (e.g., underwriting 17standards, financing terms, veto rights and final authority) Preliminary Tax Considerations DomicileLeveraged of Buyout parent company ExistingShould parent offshore reincorporate cash to foreign country (i.e., “inversion”) AbilityTax leakage to minimize from using repatriation offshore tax cash via to inversion fund buyout ImpactOngoing of tax additional rate considerations leverage on tax rate given need to repatriate cash flow to fund debt service ReduceInversion: repatriation potential rationaletax leakage on offshore cash Inversion:Intercompany considerations debt, etc… TechnicalImpact on issues business (e.g., and rollover brand/reputation shareholders, desire for tax-deferral) ImpactDFS: ability of corporate to use as tax home reform for offshore cash AbilitySpin-off to / Separationconsummate tax-free spin-off Some potential tax leakage even if overall spin is tax-free Inversion not feasible in stand-alone spin-off EffectiveRepatriation tax taxrates leakage of separate if offshore companies cash used to fund debt reduction or return of capital to shareholders Client likely to have significantly lower tax rate than Enterprise Spin-Merger Tax-free status of overall transaction PotentialOpal shareholders inversion needof Client to own business >50% as of part combined of merger company NeedMerger to with consider foreign structures partner for(e.g., Opal Strategic shareholders Party) facilitates to defer gain inversion (e.g., exchangeable shares) ReturnRepatriation of Capital tax leakage if offshore cash used to fund debt reduction or return of capital to shareholders LimitedTax leakage capacity if offshore for additional cash is utilized tax-efficient repatriation RepatriationUse of debt vs. holiday offshore cash depends in part on views regarding future tax policy ImpactCorporate of additional tax reform leverage on ongoing tax rate yourGoldman employees, Sachs does representatives, not provide andaccounting, other agents) tax, or may legal disclose advice. to Notwithstanding any and all persons anything the US in thisfederal document income to and the state contrary, tax treatment and except and as tax required structure to enableof the transactioncompliance and with all applicable materials securitiesof any kind law, (including you (and tax each of 18opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. PRELIMINARYGoldman Sachs CONFIDENTIAL DRAFT – SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW (US$Selected in millions, Recent Precedent except per M&A share Transactions amounts) INVESTMENT BANKING DIVISION AnnouncementTechnology M&A Transactions 18-Aug-11Date Acquirer HP Target Autonomy Size Premium$10,295 79% 10-May-1115-Aug-11 GoogleMicrosoft Motorola Skype 9,124Mobility NA 9,401 63 4-Apr-1120-May-12 Texas Alibaba Instruments Group Alibaba National Group/Yahoo! Semiconductor 7,100 6,502 NA 78 22-May-1215-Mar-12 Cisco SAP AribaNDS 5,0224,520 NA 20 17-Feb-12Advent International/ TransUnion 4,493 NA 4-May-11Goldman SachsApplied Materials Varian Semiconductor 4,293 55 12-Sep-117-Mar-11 Western Broadcom Digital NetLogic Hitachi 3,464 GST 57 4,250 NA 14-Dec-113-Dec-11 SAP LAM SuccessFactors Research Novellus 3,357 3,073 52 28 5-Jan-114-Aug-11 QualcommBlackstone AtherosEmdeon Communications3,027 17 2,941 22 31-Aug-112-Jul-12 Micron Sony/Toshiba/Hitachi Elpida 2,671 NA Japan Display 2,668 NA 28-Mar-112-Jul-12 Dell Ebay Quest GSI Software Commerce 2,372 2,329 20 51 Mean19-May-11 $4,660 Toshiba 45% Landis+Gyr 2,300 NA LeveragedMedian 3,857 Buyout 52 Transactions DateAnnouncement Acquirer Target Debt Equity Financing Enterprise Financing Value Premium 26-Feb-07Morgan Stanley/Citigroup/Lehman TXU $31,650 $8,000 $43,800 22% 1-Apr-07Brothers/KKR/TPG/Goldman KKR First Data 22,000 Sachs 7,000 29,000 28 3-Jul-0720-May-07 Blackstone TPG/Goldman Hilton SachsHotels Alltel 20,600 24,000 4,372 4,60024,972 28,600 40 9 25-Jun-0729-May-07 BC Lehman Partners/Unison Brothers/Tishman Capital/Silver Speyer Lake Properties Intelsat Archstone-Smith 15,000 1,600 16,600 Trust NA 15,640 5,100 20,740 18 1-Mar-11Centro Properties Blackstone Group-US NA NA 9,400 NA 14-May-07Assets Cerberus Chrysler NA NA 9,250 NA 11-May-0719-Jun-07 Carlyle Apax/OMERS Group/Clayton Capital Dubilier Partners & Thomson Rice/Bain Learning Capital Home5,580 1,920Depot 7,500 Supply NA 6,000 2,500 8,500 NA KKR/Crestview4-Jun-07 Silver Lake/TPGPartners/NGP Avaya Energy 5,250 Capital/Itochu 2,015 7,265 11 Corporation23-Nov-11 Samson 3,600 3,600 7,200 NA 24-Feb-12EP Energy Apollo/Riverstone Corporation (El Holdings/Access Industries 3,500 3,600 7,100 NA 2-May-07Paso) Clayton Dubilier & Rice/KKR US Foodservice NA NA 7,100 NA 29-May-0711-Mar-07 KKR/Citigroup/GoldmanMadison Dearborn Partners Sachs CDW Dollar 4,449 General 2,403 6,852 4,200 14 2,805 7,005 34 Apax/CPP/Public18-Jul-12 BC Partners/CPPIB Sector Pension Cequel Investment Communications Board of 4,615 1,985 6,600 NA Canada5-Jul-11 Kinetic Concepts 4,800 1,759 6,300 4 19-Jun-07Madison Dearborn/Citigroup/DLJ/BAML/Wachovia Nuveen Investments 3,600 2,700 6,300 22 2-Jul-07Capital/Deutsche Carlyle GroupBank Manor Care 4,600 1,299 5,899 6 MedianMean $10,534 5,250 $3,3682,700 7,383 $13,299 18 19% Note:Source: Technology Capital IQ M&A transactions reflect the top 20 deals since 2011 that are greater than $2.0 billion in announced transaction value. Leveraged buyout transactions reflect the top 20 deals since 2007 that are greater 19than $5.0 billion in announced transaction value 4PRELIMINARY Preliminary Perspectives CONFIDENTIAL Regarding Potential DRAFT Next – SUBJECT Steps TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW AfterEvaluation the in-person of Potential management M&A Interest meetings, allow each of Sponsor A and Salamander 1 – 2 additional follow up diligence calls within the next 7 – 10 days InitialRequest indications that initial containing indications price, of interest financing be submitted / structuring in writing/ tax / accounting in ~1 – 2 weeks / legal assumptions, and other process and timing-related information RequestReview indicationsthat the parties and provideresubmit feedback initial indications with respect based to any on feedbackmaterially incorrect assumptions IfBased decision on resubmitted is made to proceed, indications, a single Special third-party Committee financing to make source a “go should / no go”be selected decision to provide parties market check on financing terms InRequest parallel that with Sponsor market A check and Salamanderprocess, the confirmSpecial Committee revised indication should decideand leverage in parallel following whether market to contact check a short process list of other potential sponsors/strategics to gauge interest Evaluation of Spin-Off / Spin-Merger Alternatives WhichIf a decision businesses is made each to entity further would evaluate contain potential separation alternatives, management should undertake a process to determine how Opal might be organized into two or more separate entities, including considering: ReviewDetermining the potential how each dissynergies entity would of bea separation, operated and including any potential operational, agreements financial, between structural the entities and transaction-related to minimize and dissynergies / or mitigate any separation-related dissynergies OncePrepare the financial financial projections projections for are each prepared, entity asthey a standalone should be incorporatedcompany, including into a financial quantifying analysis the financial to determine impact the of potential any potential value dissynergies outcomes associated with a separation 20In parallel, further work should be done to evaluate the process and timetable required to effect a potential separation