S-4/Amendment No. 2
Table of Contents

As filed with the Securities and Exchange Commission on October 4, 2018

Registration No. 333-226618

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

DELL TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

3571

(Primary Standard Industrial

Classification Code Number)

 

80-0890963

(I.R.S. Employer

Identification Number)

One Dell Way

Round Rock, Texas 78682

(800) 289-3355

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Richard J. Rothberg, Esq.

General Counsel and Secretary

Dell Technologies Inc.

One Dell Way

Round Rock, Texas 78682

(800) 289-3355

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Janet Bawcom, Esq.
Senior Vice President—
Corporate, Securities & Finance Counsel
Dell Technologies Inc.
One Dell Way
Round Rock, Texas 78682
(800) 289-3355
 

Richard Capelouto, Esq.

Daniel N. Webb, Esq.
Simpson Thacher & Bartlett LLP
2475 Hanover Street
Palo Alto, California 94304
(650) 251-5000

 

Kenneth B. Wallach, Esq.

Benjamin P. Schaye, Esq.

Xiaohui (Hui) Lin, Esq.

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000

Richard J. Parrino, Esq.
Kevin K. Greenslade, Esq.
Hogan Lovells US LLP
555 Thirteenth Street, N.W.
Washington, D.C. 20004
(202) 637-5600
 

Mark D. Gerstein, Esq.
Bradley C. Faris, Esq.
Latham & Watkins LLP
330 N. Wabash Avenue, Suite 2800
Chicago, Illinois 60611
(312) 876-7700

 

Steven A. Rosenblum, Esq.

Gordon S. Moodie, Esq.

Wachtell, Lipton, Rosen & Katz

51 W. 52nd Street

New York, New York 10019

(212) 403-1000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon the satisfaction or waiver of all other conditions to consummation of the transactions described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer         Accelerated filer  
Non-accelerated filer    ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
      Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of
securities to be registered
  Amount
to be
registered
  Proposed
maximum
offering price
per unit
 

Proposed
maximum

aggregate
offering price(3)

  Amount of
registration fee(4)

Class C Common Stock, par value $0.01 per share

  275,000,000 shares(1)(2)   N/A   $18,675,448,211   $2,325,094(5)

 

 

(1)

Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers an indeterminate number of additional shares of Class C Common Stock, par value $0.01 per share (“Class C Common Stock”), of the registrant as may be issuable as a result of stock splits, stock dividends or similar transactions.

(2)

Represents the maximum number of shares of Class C Common Stock issuable pursuant to the merger described in the enclosed proxy statement/prospectus, including the total number of shares of Class C Common Stock issuable under outstanding equity awards covering Class V Common Stock, par value $0.01 per share (“Class V Common Stock”), of the registrant.

(3)

Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act and calculated in accordance with Rule 457(c), Rule 457(f)(1) and Rule 457(f)(3) under the Securities Act as follows: the product of (A) $92.80, the average of the high and low sales prices per share of Class V Common Stock, as reported on the New York Stock Exchange on July 31, 2018, and (B) 201,244,054, the estimated maximum possible number of shares of Class V Common Stock that may be cancelled and exchanged in the merger, including the total number of shares of Class V Common Stock issuable under outstanding equity awards.

(4)

Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $124.50 per $1,000,000 of the proposed maximum aggregate offering price.

(5)

Previously paid in connection with the initial filing of this registration statement on August 6, 2018.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is subject to completion and amendment. A registration statement relating to the securities described in this proxy statement/prospectus has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration under the securities laws of any such jurisdiction.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED OCTOBER 4, 2018

                , 2018

 

 

LOGO

THE CLASS V TRANSACTION PROPOSAL—YOUR VOTE IS VERY IMPORTANT

 

 

Dear fellow stockholders:

You are cordially invited to attend a special meeting of the stockholders of Dell Technologies Inc. (“Dell Technologies,” the “Company,” “we,” “our” or “us”) which will be held at [            ] a.m., Central Time, on [                ], [                ], 2018, at the Dell Round Rock Campus, 501 Dell Way (Building 2-East), Round Rock, Texas 78682. At the special meeting, holders of our common stock will be asked to vote on a number of matters relating to a proposed transaction, which would be implemented pursuant to an Agreement and Plan of Merger, dated as of July 1, 2018 (as amended from time to time, the “merger agreement”), between the Company and Teton Merger Sub Inc., a wholly owned subsidiary of the Company.

Subject to the terms and conditions of the merger agreement, upon the completion of the Class V transaction, each share of our Class V Common Stock will be converted into the right to receive, at the election of the holder of such share, either (1) 1.3665 shares of our Class C Common Stock or (2) $109 in cash, without interest, subject to a cap of $9 billion on the aggregate amount of cash consideration. If holders of Class V Common Stock elect in the aggregate to receive more than $9 billion in cash, the cash elections will be subject to proration as described in the accompanying proxy statement/prospectus. The Company expects to issue between approximately 272,420,782 shares of Class C Common Stock (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) and 159,590,507 shares of Class C Common Stock (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash). The Class C Common Stock will be entitled to one vote per share with respect to matters to be voted upon by the stockholders of the Company and will represent an interest in Dell Technologies’ entire business and, unlike the Class V Common Stock, will not track the performance of any distinct assets or business.

The Company has applied to list the Class C Common Stock on the New York Stock Exchange under the symbol “DELL.” If the listing is approved, the shares of Class C Common Stock will begin trading following the completion of the Class V transaction. If the Class V transaction is completed, there will no longer be any outstanding shares of Class V Common Stock, which is currently listed on the NYSE under the ticker symbol “DVMT.”

The completion of the Class V transaction is contingent on, among other things, the holders of a majority of the outstanding shares of our Class V Common Stock (excluding shares held by affiliates of the Company) approving the adoption of the merger agreement and an amended and restated certificate of incorporation of the Company that is described in the accompanying proxy statement/prospectus. Our board of directors formed a Special Committee comprised entirely of independent and disinterested directors to evaluate the Class V transaction and other potential alternatives solely on behalf of, and solely in the interests of, the holders of Class V Common Stock. Following its evaluation of potential alternatives, the Special Committee unanimously determined that the merger agreement and the Class V transaction are advisable and in the best interests of the holders of the Class V Common Stock. The Special Committee unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated certificate of incorporation of the Company. Our board of directors also has unanimously determined that the merger agreement and the Class V transaction are advisable and in the best interests of the Company and all of its stockholders. The board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated certificate of incorporation of the Company.

The accompanying proxy statement/prospectus provides important information regarding the special meeting and a detailed description of the Class V transaction, the merger agreement, a number of related transactions and agreements, and the matters to be presented at the special meeting. We urge you to read the accompanying proxy statement/prospectus, including the section “Risk Factors” which begins on page 58 and any documents incorporated by reference into the accompanying proxy statement/prospectus, carefully and in its entirety.

Regardless of the number of shares of common stock you own, your vote is important. We cannot complete the Class V transaction without the approval of the adoption of the merger agreement and the amended and restated certificate of incorporation of the Company by our stockholders, including the holders of our Class V Common Stock. Whether or not you plan to attend the special meeting, we urge you to submit a proxy as promptly as possible to authorize in advance of the special meeting the voting of your shares by using one of the methods described in the accompanying proxy statement/prospectus and to complete your election form when you receive it and submit it so that your election form is received by our exchange agent by 5:30 p.m., New York City time, on [            ], 2018, which is the business day before the special meeting. If you fail to submit a properly completed election form prior to this deadline or fail to properly elect which form of consideration to receive, you will be deemed to have made a share election and will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock). If you fail to vote or abstain from voting on the adoption of the merger agreement or the amended and restated certificate of incorporation of the Company, the effect will be the same as a vote against the Class V transaction.

We hope to see you at the special meeting and look forward to the successful completion of the Class V transaction.

Sincerely,

Michael S. Dell

Chairman of the Board and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the transactions described in the accompanying proxy statement/prospectus or determined that the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated [                ], 2018 and is first being mailed to Dell Technologies stockholders on or about [                ], 2018.


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ADDITIONAL INFORMATION

The accompanying proxy statement/prospectus incorporates important business, financial and other information about the Company from documents that are not included in or delivered with the accompanying proxy statement/prospectus. We will provide to each person, including any beneficial owner, to whom this proxy statement/prospectus is delivered copies of any of the documents incorporated by reference into this proxy statement/prospectus, excluding any exhibit to those documents unless the exhibit is specifically incorporated by reference into those documents, at no cost, by written or oral request directed to:

Dell Technologies Inc.

One Dell Way

Round Rock, Texas 78682

Attention: Investor Relations

Telephone: (512) 728-7800

If you have questions about the Class V transaction or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, please contact Investor Relations at (512) 728-7800 or investor_relations@dell.com. You will not be charged for any of these documents that you request.

If you would like to request documents incorporated by reference into this proxy statement/ prospectus, please do so by no later than [            ], 2018, which is five business days before the date of the special meeting of stockholders.

See “Where You Can Find More Information” for additional information, including how you can view the incorporated documents via the internet.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction, to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.


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NOTICE TO STOCKHOLDERS

DELL TECHNOLOGIES INC.

One Dell Way

Round Rock, Texas 78682

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [            ], 2018

 

 

[                ], 2018

To the Stockholders of Dell Technologies Inc.:

A special meeting of stockholders of Dell Technologies will be held at [            ] Central Time, on [            ], 2018, at the Dell Round Rock Campus, 501 Dell Way (Building 2-East), Round Rock, Texas 78682. At the special meeting, stockholders will be asked to take the following actions:

 

   

to adopt the Agreement and Plan of Merger, between Dell Technologies and Teton Merger Sub Inc., dated as of July 1, 2018, as it may be amended from time to time, referred to herein as the merger agreement, attached as Annex A to the accompanying proxy statement/prospectus, pursuant to which Teton Merger Sub Inc. will be merged with and into Dell Technologies, and Dell Technologies will continue as the surviving corporation, which transaction is referred to herein as the merger;

 

   

to adopt the Fifth Amended and Restated Certificate of Incorporation of Dell Technologies Inc., referred to herein as the amended and restated Company certificate, in the form attached as Exhibit A to the merger agreement that is attached as Annex A to the accompanying proxy statement/prospectus, which is part of the merger agreement;

 

   

to approve, on a non-binding, advisory basis, compensation arrangements with respect to the named executive officers of Dell Technologies related to the Class V transaction described in the accompanying proxy statement/prospectus, referred to herein as the transaction-related compensation proposal; and

 

   

to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement or adopt the amended and restated Company certificate, referred to herein as the adjournment proposal.

Dell Technologies will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the accompanying proxy statement/prospectus for further information with respect to the business to be transacted at the special meeting.

The Dell Technologies board of directors has fixed the close of business on [            ], 2018 as the record date for the special meeting. Only holders of record of Dell Technologies common stock as of the record date are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof.

Attendance at the special meeting will be limited to Dell Technologies stockholders as of the record date and to guests of Dell Technologies, as more fully described under “Special Meeting of Stockholders—Date, Time and Location” beginning on page 124 of the accompanying proxy statement/prospectus. Stockholders who come to the special meeting will be required to present evidence of stock ownership as of [            ], 2018. You can obtain this evidence from your bank, brokerage firm or other nominee, typically in the form of your most recent monthly statement. All stockholders who attend the meeting will be required to present valid government-issued picture identification, such as a driver’s license or passport, and will be subject to security screenings.


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Adoption of the merger agreement and the amended and restated Company certificate each require the affirmative vote, in person or by proxy, of (1) holders of record of a majority of the outstanding shares of Class V Common Stock (excluding shares held by affiliates of Dell Technologies), voting as a separate class, (2) holders of record of a majority of the outstanding shares of Class A Common Stock, voting as a separate class, (3) holders of record of a majority of the outstanding shares of Class B Common Stock, voting as a separate class, and (4) holders of record of outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock representing a majority of the voting power of the outstanding shares of all such series of common stock, voting together as a single class. Approval, on a non-binding, advisory basis, of the transaction-related compensation proposal and approval of the adjournment proposal each require the affirmative vote of holders of record of a majority of the voting power of the outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock present in person or by proxy at the meeting and entitled to vote thereon, voting together as a single class.

Under Delaware law, if you are a holder of our Class A Common Stock, our Class B Common Stock or our Class C Common Stock and you do not vote in favor of the proposal to adopt the merger agreement, you have not otherwise waived your statutory appraisal right and you comply with other requirements, you are entitled to statutory appraisal rights under Delaware law in connection with the Class V transaction. If you comply with the requirements of Section 262 of the General Corporation Law of the State of Delaware, referred to herein as DGCL, you are entitled to have the “fair value” (as defined pursuant to Section 262 of the DGCL) of your shares of common stock determined by the Court of Chancery of the State of Delaware and to receive cash payment for those shares based on that valuation. The ultimate amount you would receive in an appraisal proceeding may be more than, the same as or less than the value of the shares you would own after the merger if you did not exercise your appraisal rights. Any holder of Class A Common Stock, Class B Common Stock or Class C Common Stock seeking to assert appraisal rights should carefully review the procedures described in the accompanying proxy statement/prospectus. A copy of the applicable provisions of the DGCL is attached as Annex E to the accompanying proxy statement/prospectus.

The Special Committee, comprised entirely of independent and disinterested directors, which was established to act solely on behalf of, and solely in the interests of, the holders of Class V Common Stock, unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated Company certificate. The board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, “FOR” the approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal.

Your vote is very important. Whether or not you expect to attend the special meeting in person, we urge you to (1) submit your proxy as promptly as possible by (i) accessing the internet website specified on your proxy card, (ii) calling the toll-free number specified on your proxy card or (iii) marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the special meeting, and (2) complete your election form to elect shares of Class C Common Stock or cash when you receive it and submit it so that your election form is received by our exchange agent by 5:30 p.m., New York City time, on [                ], 2018, which is the business day before the special meeting. If you fail to submit a properly completed election form prior to this deadline or fail to properly elect which form of consideration to receive, you will be deemed to have made a share election and will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock). If your shares are held of record in the name of a nominee, please follow the instructions on the voting instruction form furnished by the nominee.


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We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety. In particular, see “Risk Factors” beginning on page 58 of the accompanying proxy statement/prospectus. If you have any questions concerning the Class V transaction, the merger, the special meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus or need help submitting a proxy to have your shares of Dell Technologies common stock voted, please contact Innisfree M&A Incorporated:

Innisfree M&A Incorporated

Stockholders may call toll free: (877) 717-3936

Stockholders outside of the United States and Canada may call: +1 (412) 232-3651

Banks and Brokers may call collect: (212) 750-5833

By Order of the Board of Directors,

Richard J. Rothberg

General Counsel and Secretary


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TABLE OF CONTENTS

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

   vi

Basis of Presentation

   x

Use of Non-GAAP Financial Measures

   xi

Industry and Market Data

   xii

Trademarks and Other Intellectual Property Rights

   xii

QUESTIONS AND ANSWERS REGARDING THE CLASS  V TRANSACTION AND THE SPECIAL MEETING

   1

Questions and Answers Regarding the Class V Transaction

   1

Questions and Answers Regarding the Special Meeting

   10

SUMMARY

   17

Dell Technologies Overview

   17

Ownership and Corporate Structure

   28

Corporate Information

   29

Summary Historical and Pro Forma Financial and Other Data

   30

Class V Transaction Summary

   41

RISK FACTORS

   58

Risks Relating to the Class V Transaction

   58

Risks Relating to Ownership of Class C Common Stock

   63

Risks Relating to our Business and our Industry

   70

Risks Relating to Class  V Common Stock and our Tracking Stock Structure

   82

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

   90

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

   92

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

   95

MARKET PRICE OF THE CLASS V COMMON STOCK; DIVIDEND INFORMATION

   97

Market Price for Class V Common Stock

   97

Dividends

   97

THE COMPANIES

   99

Dell Technologies Inc.

   99

Teton Merger Sub Inc.

   99

IMPORTANT INFORMATION ABOUT DELL TECHNOLOGIES

   100

Overview

   100

Our Transformation Since Going Private and Reemergence at the Forefront of the Technology Industry

   100

Our Strategically Aligned Family of Businesses

   102

 

i


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Our Market Opportunity

   104

Our Strengths

   106

Our Strategies

   107

Research and Development

   109

Manufacturing and Materials

   109

Geographic Operations

   110

Competition

   110

Sales and Marketing

   110

Patents, Trademarks and Licenses

   111

Government Regulation and Sustainability

   112

Product Backlog

   113

Employees

   113

Properties

   113

Legal Proceedings

   114

MANAGEMENT OF DELL TECHNOLOGIES AFTER THE CLASS V TRANSACTION

   115

Board of Directors

   115

Committees of the Board of Directors

   117

Director and Executive Officer Information

   120

SPECIAL MEETING OF STOCKHOLDERS

   126

Date, Time and Location

   126

Attendance

   126

Purpose of the Special Meeting

   126

Recommendation of the Special Committee and the Board of Directors

   127

Record Date; Outstanding Shares; Stockholders Entitled to Vote

   127

Quorum

   128

Required Vote

   128

Voting by Directors and Executive Officers

   129

Voting; Proxies; Revocation; Transferred Shares

   130

Abstentions

   132

Solicitation of Proxies; Expenses of Solicitation

   132

Adjournment

   133

Tabulation of Votes; Results

   133

Other Information

   133

Assistance

   134

 

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ELECTION TO RECEIVE CLASS C COMMON STOCK OR CASH CONSIDERATION

   135

General Description of Election

   135

Holders Eligible to Submit Election Form

   135

Election Deadline

   135

Submission of Election Form

   135

Proration of Aggregate Cash Consideration

   136

Election Forms and Related Documents

   138

PROPOSAL 1—ADOPTION OF THE MERGER AGREEMENT

   139

General

   139

Background of the Class V Transaction

   140

Recommendation of the Special Committee

   167

Recommendation of the Board of Directors

   171

Opinion of Evercore Group L.L.C.

   175

Opinion of Goldman Sachs & Co. LLC

   188

Special Cash Dividend by VMware

   201

Certain Financial Projections

   203

Important Information About the Financial Projections

   210

Interests of Certain Directors and Officers

   212

Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock

   216

Accounting Treatment

   220

Treatment of Equity Awards

   221

Listing of Shares of Class  C Common Stock and Delisting and Deregistration of Class V Common Stock

   223

Rights of Appraisal of Holders of Class A Common Stock, Class  B Common Stock and Class C Common Stock

   223

THE MERGER AGREEMENT

   230

Effect of the Merger

   230

Closing

   231

Effective Time

   231

Transaction Consideration and Elections

   231

Treatment of Equity Awards

   237

Representations and Warranties

   238

Certain Covenants and Agreements

   239

Conditions to the Merger

   243

Termination

   244

 

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Table of Contents

Amendment and Waiver

   245

Specific Performance; Governing Law and Jurisdiction; Third-Party Beneficiaries

   246

VMware Agreement

   246

Voting and Support Agreement

   248

Stockholders Agreements

   248

PROPOSAL 2—ADOPTION OF AMENDED AND RESTATED COMPANY CERTIFICATE

   256

Summary of Amendments

   256

Stockholder Approval Required for Proposal 2

   257

PROPOSAL 3—NON-BINDING, ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS

   259

PROPOSAL 4—ADJOURNMENT OF SPECIAL MEETING OF STOCKHOLDERS

   260

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   261

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   270

DESCRIPTION OF CAPITAL STOCK BEFORE AND AFTER THE CLASS V TRANSACTION

   274

Ownership and Corporate Structure

   275

Capital Structure After the Class V Transaction

   275

Authorized Capital Stock

   275

Preferred Stock

   276

Common Stock

   277

Conversion of Class A Common Stock, Class  B Common Stock and Class D Common Stock

   278

Liquidation and Dissolution

   279

Capital Structure Before the Class V Transaction

   279

Authorized Capital Stock

   279

Preferred Stock

   279

Common Stock

   279

Dividends

   281

Voting Rights

   282

Additional Class V Group or Class V Common Stock Events

   284

Certain Determinations by the Board of Directors

   290

Conversion

   292

Liquidation and Dissolution

   293

Restrictions on Corporate Actions

   294

Preemptive Rights

   294

Transfer Agent

   294

 

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Table of Contents

Listing of Class C Common Stock

   294

Definitions

   294

COMPARISON OF RIGHTS OF CLASS V STOCKHOLDERS AND CLASS C STOCKHOLDERS

   298

Elimination of Tracking Stock Structure

   298

Comparison of Rights

   298

Tracking Stock Policy

   300

LEGAL MATTERS

   307

EXPERTS

   307

FUTURE STOCKHOLDER PROPOSALS

   308

WHERE YOU CAN FIND MORE INFORMATION

   309

Available Information

   309

Documents Incorporated by Reference

   309

ANNEXES

 

Annex A:    

   Merger Agreement (including the Form of Fifth Amended and Restated Certificate of Incorporation as Exhibit A)

Annex B:

   Proposed Amendments to the Company’s Certificate of Incorporation

Annex C:

   Opinion of Evercore Group L.L.C.

Annex D:

   Opinion of Goldman Sachs & Co. LLC

Annex E:

   Section 262 of General Corporation Law of the State of Delaware

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

Unless otherwise indicated or as the context otherwise requires, a reference in this proxy statement/prospectus to:

 

   

“adjournment proposal” refers to the proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement or adopt the amended and restated Company certificate, as more fully described under “Proposal 4—Adjournment of Special Meeting of Stockholders”;

 

   

“amended and restated Company certificate” refers to the Fifth Amended and Restated Certificate of Incorporation of Dell Technologies Inc., a copy of the form of which is attached as Exhibit A to the merger agreement that is attached as Annex A to this proxy statement/prospectus, which will become effective at the effective time of the merger;

 

   

“Amended Sponsor Stockholders Agreement” refers to the amended Sponsor Stockholders Agreement to be effective upon the completion of the Class V transaction;

 

   

“Boomi” refers to Boomi, Inc., a wholly owned consolidated subsidiary of the Company;

 

   

“cash election” refers to the election by Class V stockholders in the Class V transaction to receive cash in exchange for shares of Class V Common Stock;

 

   

“Class A Common Stock” refers to the series of Dell Technologies common stock, par value $0.01 per share, designated as Class A Common Stock;

 

   

“Class A stockholders” refers to holders of Class A Common Stock;

 

   

“Class A Stockholders Agreement” refers to the Amended and Restated Class A Stockholders Agreement, dated as of September 7, 2016, by and among the Company, the MD stockholders, the MSD Partners stockholders, the SLP stockholders and the New Class A Stockholders (as defined therein);

 

   

“Class B Common Stock” refers to the series of Dell Technologies common stock, par value $0.01 per share, designated as Class B Common Stock;

 

   

“Class B stockholders” refers to holders of Class B Common Stock;

 

   

“Class C Common Stock” refers to the series of Dell Technologies common stock, par value $0.01 per share, designated as Class C Common Stock;

 

   

“Class C stockholders” refers to holders of Class C Common Stock;

 

   

“Class C Stockholders Agreement” refers to the Class C Stockholders Agreement, dated as of September 7, 2016, by and among the Company, the MD stockholders, the MSD Partners stockholders, the SLP stockholders and the New Class C Stockholders (as defined therein);

 

   

“Class D Common Stock” refers to the series of Dell Technologies common stock, par value $0.01 per share, designated as Class D Common Stock;

 

   

“Class V Common Stock” refers to the series of Dell Technologies common stock, par value $0.01 per share, designated as Class V Common Stock, which is intended to track the economic performance of approximately 202 million shares of VMware common stock as of August 31, 2018, which represented approximately 61.1% of the approximately 331 million shares of VMware common stock that constituted the sole assets of the Class V Group as of such date;

 

   

“Class V Group” generally refers to the direct and indirect economic rights of the Company in approximately 331 million shares of VMware common stock owned by the Company as of August 31, 2018, which represented all shares of VMware common stock owned by the Company as of such date;

 

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“Class V stockholders” refers to holders of Class V Common Stock;

 

   

“Class V transaction” refers to the transaction to be effected pursuant to the merger agreement in which each Class V stockholder will receive either shares of Class C Common Stock or cash, or a combination thereof, based on such stockholder’s election and provided that any Class V stockholder that does not make an election will be deemed to have elected to receive shares of Class C Common Stock;

 

   

“common stock” refers collectively to the Class A Common Stock, the Class B Common Stock, the Class C Common Stock, the Class D Common Stock and the Class V Common Stock;

 

   

“Company” refers to Dell Technologies Inc., a Delaware corporation, or, as the context requires, to Dell Technologies Inc. and its consolidated subsidiaries;

 

   

“Company bylaws” refers to the Amended and Restated Bylaws of Dell Technologies Inc.;

 

   

“Company certificate” refers to (1) the existing Company certificate, before the effective time of the merger, and (2) the amended and restated Company certificate, from and after the effective time of the merger;

 

   

“Dell” refers to Dell Inc., a Delaware corporation, or, as the context requires, to Dell Inc. and its consolidated subsidiaries;

 

   

“Dell Technologies” refers to Dell Technologies Inc., a Delaware corporation, or, as the context requires, to Dell Technologies Inc. and its consolidated subsidiaries;

 

   

“DFS” refers to Dell Financial Services;

 

   

“DGCL” refers to the General Corporation Law of the State of Delaware, as amended;

 

   

“DHI Group” generally refers to the direct and indirect interest of the Company and any of its subsidiaries (excluding VMware) in all of the businesses, assets, properties, liabilities and preferred stock of the Company and any of its subsidiaries (other than VMware), other than any businesses, assets, properties, liabilities and preferred stock attributable to the Class V Group, which includes its retained interest or inter-group interest in the Class V Group, consisting of approximately 129 million shares of VMware common stock as of August 31, 2018, which represented approximately 38.9% of the approximately 331 million shares of VMware common stock that constituted the sole assets of the Class V Group as of such date;

 

   

“DHI Group common stock” refers collectively to the series of Dell Technologies common stock, each with a par value $0.01 per share, designated as Class A Common Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock;

 

   

“EMC” refers to EMC Corporation, a Massachusetts corporation, or, as the context requires, to EMC Corporation and its consolidated subsidiaries;

 

   

“EMC merger” refers to the transaction consummated on September 7, 2016 pursuant to which a wholly owned subsidiary of Dell Technologies merged with and into EMC, with EMC surviving the merger as a wholly owned subsidiary of Dell Technologies;

 

   

“Evercore” refers to Evercore Group L.L.C.;

 

   

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

 

   

“exchange agent” refers to American Stock Transfer & Trust Company, LLC;

 

   

“FASB” refers to the Financial Accounting Standards Board;

 

   

“existing Company certificate” refers to the Fourth Amended and Restated Certificate of Incorporation of Dell Technologies Inc., as amended as of June 27, 2017 and in effect before the effective time of the merger;

 

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“GAAP” refers to accounting principles generally accepted in the United States of America;

 

   

“going-private agreement” refers to the Agreement and Plan of Merger, dated as of February 5, 2013, as amended, pursuant to which the going-private transaction of Dell was effected;

 

   

“going-private transaction” refers to the acquisition of Dell by Dell Technologies on October 29, 2013 pursuant to the going-private agreement in which the public stockholders of Dell received cash for their shares of Dell common stock;

 

   

“Goldman Sachs” refers to Goldman Sachs & Co. LLC;

 

   

“Internal Revenue Code” refers to the Internal Revenue Code of 1986, as amended;

 

   

“Management Equity Plan” refers to the Dell Technologies 2013 Stock Incentive Plan;

 

   

“Management Stockholders Agreement” refers to the Amended and Restated Management Stockholders Agreement, dated as of September 7, 2016, by and among the Company, the Stockholders and the Management Stockholders (as defined therein);

 

   

“MD stockholders” refers to Michael S. Dell and the Susan Lieberman Dell Separate Property Trust and any person to whom either of them would be permitted to transfer any equity securities of Dell Technologies under the Company certificate;

 

   

“merger” refers to the merger of Teton Merger Sub Inc. with and into Dell Technologies Inc., with Dell Technologies Inc. continuing as the surviving corporation in such merger, upon the terms and conditions set forth in the merger agreement as it may be amended from time to time;

 

   

“merger agreement” refers to the Agreement and Plan of Merger, dated as of July 1, 2018, by and between Dell Technologies Inc. and Teton Merger Sub Inc., a copy of which is attached as Annex A to this proxy statement/prospectus;

 

   

“Merger Sub” refers to Teton Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Dell Technologies Inc.;

 

   

“MSD Partners” refers to MSD Partners, L.P. and its affiliates;

 

   

“MSD Partners stockholders” refers to MSDC Denali Investors, L.P., a Delaware limited partnership, and MSDC Denali EIV, LLC, a Delaware limited liability company, and any person to whom either of them would be permitted to transfer any equity securities of Dell Technologies under the Company certificate;

 

   

“MSD Partners Stockholders Agreement” refers to the MSD Partners Stockholders Agreement, by and among the Company, the MSD Partners stockholders and the other parties thereto, to be entered into upon the completion of the Class V transaction;

 

   

“NYSE” refers to the New York Stock Exchange;

 

   

“Pivotal” refers to Pivotal Software, Inc., a majority-owned consolidated subsidiary of the Company;

 

   

“record date” refers, as to the Dell Technologies stockholders entitled to receive notice of, and to vote at, the special meeting of Dell Technologies stockholders, as of the close of business on [            ], 2018;

 

   

“Registration Rights Agreement” refers to the Amended and Restated Registration Rights Agreement, dated as of September 7, 2016, by and among the Company, the Stockholders, the Temasek Stockholder and the Management Stockholders (as defined therein);

 

   

“RSA Security” refers to RSA Security LLC, a wholly owned consolidated subsidiary of the Company;

 

   

“SEC” refers to the U.S. Securities and Exchange Commission;

 

   

“SecureWorks” refers to SecureWorks Corp., a majority-owned consolidated subsidiary of the Company;

 

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“Securities Act” refers to the Securities Act of 1933, as amended;

 

   

“share election” refers to the election by Class V stockholders in the Class V transaction to receive shares of Class C Common Stock in exchange for shares of Class V Common Stock;

 

   

“Silver Lake Partners” refers to Silver Lake Management Company III, L.L.C., Silver Lake Management Company IV, L.L.C. and their respective affiliated management companies and investment vehicles;

 

   

“SLP stockholders” refers to Silver Lake Partners III, L.P., a Delaware limited partnership, Silver Lake Technology Investors III, L.P., a Delaware limited partnership, Silver Lake Partners IV, L.P., a Delaware limited partnership, Silver Lake Technology Investors IV, L.P., a Delaware limited partnership, and SLP Denali Co-Invest, L.P. and any person to whom any of them would be permitted to transfer any equity securities of Dell Technologies under the Company certificate;

 

   

“Sponsor Stockholders Agreement” refers to the Amended and Restated Sponsor Stockholders Agreement, dated as of September 7, 2016, by and among Dell Technologies, Denali Intermediate Inc., Dell, EMC, Denali Finance Corp., Dell International L.L.C., Michael S. Dell, Susan Lieberman Dell Separate Property Trust, MSDC Denali Investors, L.P., MSDC Denali EIV, LLC, Silver Lake Partners III, L.P., Silver Lake Technology Investors III, L.P. Silver Lake Partners IV, L.P., Silver Lake Technology Investors IV, L.P., SLP Denali Co-Invest, L.P. and the other stockholders named therein;

 

   

“Special Committee” refers to the special committee of the Dell Technologies board of directors, consisting of two independent and disinterested directors of the Company, formed to evaluate the Class V transaction and other potential alternatives solely on behalf of, and solely in the interests of, the holders of Class V Common Stock;

 

   

“Temasek” refers to Venezio Investments Pte. Ltd., an affiliate of Temasek Holdings (Private) Limited;

 

   

“tracking stock policy” refers to the Tracking Stock Policy Statement regarding DHI Group and Class V Group matters, a copy of which is filed as Exhibit 99.2 to the Company’s annual report on Form 10-K for Fiscal 2018;

 

   

“transaction consideration” refers to the shares of Class C Common Stock and cash (including cash payable in lieu of fractional shares of Class C Common Stock) payable in the merger to Class V stockholders;

 

   

“transaction-related compensation proposal” refers to the proposal to approve, on a non-binding, advisory basis, compensation arrangements with respect to the named executive officers of the Company related to the Class V transaction, as more fully described under “Proposal 3—Non-binding, Advisory Vote on Compensation of Named Executive Officers;

 

   

“Virtustream” refers to Virtustream Group Holdings, Inc., a wholly owned consolidated subsidiary of the Company;

 

   

“VMware,” except as otherwise specified in this proxy statement/prospectus, refers to VMware, Inc., a Delaware corporation, or, as the context requires, to VMware, Inc. and its consolidated subsidiaries;

 

   

“VMware Agreement” refers to the letter agreement, dated July 1, 2018, by and between the Company and VMware relating to the independence and governance of VMware;

 

   

“VMware Class A common stock” refers to the Class A common stock, par value $0.01 per share, of VMware;

 

   

“VMware Class B common stock” refers to the Class B common stock, par value $0.01 per share, of VMware;

 

   

“VMware common stock” refers to VMware Class A common stock and VMware Class B common stock;

 

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“VMware Notes” refers collectively to VMware’s 2.300% senior notes due 2020 in the aggregate principal amount of $1.25 billion, VMware’s 2.950% senior notes due 2022 in the aggregate principal amount of $1.50 billion and VMware’s 3.900% senior notes due 2027 in the aggregate principal amount of $1.25 billion;

 

   

“Voting and Support Agreement” refers to the Voting and Support Agreement, dated as of July 1, 2018, among the Company, the MSD Partners stockholders, the MD stockholders and the SLP stockholders; and

 

   

“we,” “our” and “us” refers to Dell Technologies.

Basis of Presentation

The Company’s fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. As used throughout this proxy statement/prospectus:

 

   

“Fiscal 2017” refers to the Dell Technologies fiscal year ended February 3, 2017;

 

   

“Fiscal 2018” refers to the Dell Technologies fiscal year ended February 2, 2018; and

 

   

“Fiscal 2019” refers to the Dell Technologies fiscal year ending February 1, 2019.

On October 29, 2013, the Company acquired Dell in the going-private transaction. For the purposes of the consolidated financial data included in or incorporated by reference into this proxy statement/prospectus, periods prior to October 29, 2013 reflect the financial position, results of operations and cash flows of Dell and its consolidated subsidiaries prior to the going-private transaction, referred to herein as the Predecessor, and periods beginning on or after October 29, 2013 reflect the financial position, results of operations and cash flows of the Company and its consolidated subsidiaries as a result of the going-private transaction, referred to herein as the Successor. As a result of the going-private transaction, the results of operations and financial position of the Predecessor and Successor are not directly comparable.

On September 7, 2016, the Company completed the EMC merger. The consolidated results of EMC are included in Dell Technologies’ consolidated results for Fiscal 2018, the portion of Fiscal 2017 subsequent to the closing of the EMC merger and the six months ended August 3, 2018 and August 4, 2017. As a result of the EMC merger, the Company’s results of operations, comprehensive income (loss) and cash flows for periods subsequent to the closing of the EMC merger are not directly comparable to the results of operations, comprehensive income (loss) and cash flows for periods prior to the closing of the EMC merger, as the results of the acquired businesses are only included in the consolidated results of Dell Technologies from the date of acquisition. Furthermore, the financial data for all periods preceding the fiscal year ended January 30, 2015 do not reflect discontinued operations.

As disclosed in the Company’s quarterly report on Form 10-Q for the quarterly period ended May 4, 2018, the Company adopted the new accounting standards for revenue recognition set forth in ASC 606, “Revenue From Contracts With Customers,” using the full retrospective method. On August 6, 2018, the Company filed a current report on Form 8-K to present the Company’s audited consolidated financial statements for the fiscal years ended February 2, 2018 and February 3, 2017 on a basis consistent with the new revenue standard. In addition, the consolidated statements of cash flows for the fiscal years ended February 2, 2018 and February 3, 2017 have been recast in accordance with the new accounting standards as set forth in ASC 230, “Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments” and “Statement of Cash Flows—Restricted Cash,” which the Company adopted during the three months ended May 4, 2018. Segment information for the fiscal years ended February 2, 2018 and February 3, 2017 have also been recast in accordance with certain segment reporting changes the Company made during the three months ended May 4, 2018. All historical consolidated financial data presented in or incorporated by reference into this proxy statement/prospectus preceding the fiscal year ended February 3, 2017 have not been recast for such accounting standards adopted, or segment reporting changes made, by the Company and are not comparable with subsequent periods.

 

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In this proxy statement/prospectus, unless otherwise indicated, the number of shares of our common stock to be outstanding after the completion of the Class V transaction is based on 768,062,001 shares of our common stock outstanding as of August 31, 2018.

Numerical figures included in or incorporated by reference into this proxy statement/prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not represent arithmetic aggregations of the figures that precede them.

No separate financial information has been provided in this proxy statement/prospectus for Merger Sub because (1) Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement, (2) Merger Sub does not have any material assets and (3) promptly following the consummation of the merger, Merger Sub will be merged with and into Dell Technologies, with Dell Technologies continuing as the surviving corporation.

Use of Non-GAAP Financial Measures

We believe that the financial statements and the other financial data included in or incorporated by reference into this proxy statement/prospectus have been prepared in a manner that complies, in all material respects, with GAAP and the regulations published by the SEC and are consistent with current practice, with the exception of certain financial measures we identify as “non-GAAP financial measures.”

EBITDA, Adjusted EBITDA, Levered Free Cash Flow, adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc., non-GAAP product net revenue, non-GAAP services net revenue, non-GAAP net revenue, non-GAAP product gross margin, non-GAAP product gross margin percentage, non-GAAP services gross margin, non-GAAP services gross margin percentage, non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP net income from continuing operations, as presented in this proxy statement/prospectus or in the documents incorporated by reference into this proxy statement/prospectus, are supplemental measures of the performance of Dell Technologies that are not required by, and are not presented in accordance with, GAAP. We believe that such non-GAAP financial measures may be useful in evaluating our operating results by facilitating an enhanced understanding of our operating performance and enabling stakeholders to make more meaningful period to period comparisons. These non-GAAP financial measures, as used herein, are not necessarily comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes. The items excluded from such non-GAAP financial measures are significant in assessing our operating results and liquidity.

These non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

   

the non-GAAP financial measures do not reflect the impact of purchase accounting;

 

   

EBITDA and Adjusted EBITDA, in particular, do not reflect costs or cash outlays for capital expenditures or contractual commitments;

 

   

EBITDA and Adjusted EBITDA, in particular, do not reflect changes in, or cash requirements for, our working capital needs;

 

   

EBITDA and Adjusted EBITDA, in particular, do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

 

   

EBITDA and Adjusted EBITDA, in particular, do not reflect period to period changes in taxes, income tax expense or the cash necessary to pay income taxes;

 

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EBITDA and Adjusted EBITDA, in particular, do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA, in particular, do not reflect cash requirements for such replacements.

Because of these limitations, these non-GAAP financial measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness.

For more information, see the Company’s consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly reports on Form 10-Q for the quarterly periods ended May 4, 2018 and August 3, 2018 filed with the SEC, in each case incorporated by reference herein.

For a reconciliation of EBITDA, Adjusted EBITDA, Levered Free Cash Flow, adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc., non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP net income from continuing operations to their respective most directly comparable GAAP measure, see “Summary—Summary Historical and Pro Forma Financial and Other Data” in this proxy statement/prospectus. For a reconciliation of the other non-GAAP financial measures presented in documents incorporated by reference into this proxy statement/prospectus to the most directly comparable GAAP financial measure, see “Management’s Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly reports on Form 10-Q for the quarterly periods ended May 4, 2018 and August 3, 2018 filed with the SEC, in each case incorporated by reference herein.

Industry and Market Data

This proxy statement/prospectus includes information with respect to market share and other industry-related and statistical information, which are based on information from independent industry organizations and other third-party sources, including IDC Research, Inc., referred to herein as IDC. We also have derived some industry and market information from our internal analysis based upon data available from such independent and third-party sources and our internal research. We believe such information to be accurate as of the date of this proxy statement/prospectus. However, this information is subject to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, our internal research is based upon our understanding of industry conditions, and such information has not been verified by any independent sources. Such information also involves risks and uncertainties and is subject to change based on various factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements.”

In this proxy statement/prospectus, references to “share” and “industry share,” unless otherwise indicated, are based on revenue, except with respect to PC units, which are based on number of units sold.

Trademarks and Other Intellectual Property Rights

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. Certain trademarks and/or trade names are subject to registrations or applications to register with the United States Patent and Trademark Office or the equivalent in certain foreign jurisdictions, while others are not subject to registration but protected by common law rights. These registered and unregistered marks include our corporate names, logos and website names used herein. Each trademark, trade name or service mark by any other company appearing in this proxy statement/prospectus belongs to its owner.

 

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Solely for convenience, trademarks, service marks and trade names referred to in this proxy statement/prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensors to these trademarks, service marks or trade names. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, those other parties.

 

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QUESTIONS AND ANSWERS REGARDING THE CLASS V TRANSACTION AND THE SPECIAL MEETING

The following questions and answers address briefly some commonly asked questions regarding the proposed Class V transaction, the merger and the special meeting of stockholders described in this proxy statement/prospectus. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to this proxy statement/prospectus and the documents referred to or incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” for information on how you can obtain copies of the incorporated documents or view them via the internet.

Questions and Answers Regarding the Class V Transaction

 

Q:

Please explain the Class V transaction.

 

A:

The Class V transaction gives Class V stockholders the option to participate in the future value creation of Dell Technologies through ownership of the Class C Common Stock or receive cash, and will also eliminate our tracking stock structure, as follows:

 

   

for each share of Class V Common Stock, holders may elect to receive either (1) 1.3665 shares of Class C Common Stock of Dell Technologies, which will be listed on the NYSE and, unlike the Class V Common Stock, will represent an interest in Dell Technologies’ entire business and will not track the performance of any distinct assets or business or (2) $109 in cash, subject to a cap of $9 billion on the aggregate amount of cash consideration, with the final mix of consideration received by each holder of Class V Common Stock who elects to receive cash subject to proration as a result of the $9 billion cap on cash payments (as described below); and

 

   

the Class V Common Stock will be eliminated.

Class V stockholders that fail to make an election will be deemed to have elected to receive shares of Class C Common Stock. Immediately prior to the completion of the Class V transaction, subject to approval and the satisfaction of other conditions of the Class V transaction, as well as certain other conditions described elsewhere in this proxy statement/prospectus, VMware will pay a special cash dividend to its stockholders of $11 billion in the aggregate. Approximately $8.92 billion of the VMware cash dividend will be received by Dell Technologies and used to fund all or substantially all of the cash consideration paid to holders of the Class V Common Stock.

 

Q:

How will the Class V transaction be accomplished?

 

A:

We will implement the Class V transaction pursuant to a merger agreement, dated as of July 1, 2018, between Dell Technologies and Teton Merger Sub Inc., a wholly owned merger subsidiary of Dell Technologies. Under the merger agreement, the merger subsidiary will merge with and into Dell Technologies, with Dell Technologies continuing as the surviving corporation in the merger.

 

Q:

Why am I receiving this document?

 

A:

You are receiving this proxy statement/prospectus because you are a stockholder of Dell Technologies. This document serves as both a proxy statement for a special meeting of our stockholders that will be held to approve matters related to the Class V transaction and a prospectus for our offering of shares of Class C Common Stock to holders of our Class V Common Stock in the Class V transaction.

For us to complete the Class V transaction, our stockholders, including our Class V stockholders (other than affiliates of the Company), must vote at the special meeting to adopt the merger agreement under which the Class V transaction will be effected and the amended and restated Company certificate (which is part of the

 

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merger agreement). Our board of directors formed a Special Committee comprised entirely of independent and disinterested directors to evaluate the Class V transaction and other potential alternatives solely on behalf of, and solely in the interests of, the holders of Class V Common Stock (other than affiliates of the Company). Following its evaluation of potential alternatives, the Special Committee unanimously determined that the merger agreement and the Class V transaction are advisable and in the best interests of the holders of the Class V Common Stock. The Special Committee unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated Company certificate.

In addition, our board of directors has unanimously determined that the merger agreement and the Class V transaction are advisable and in the best interests of the Company and all of its stockholders. Our board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, “FOR” the approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal.

Your vote is very important. We encourage you to submit your proxy or voting instructions as soon as possible to have your shares of common stock voted. If you fail to vote or abstain from voting on the adoption of the merger agreement or the amended and restated Company certificate, the effect will be the same as a vote against the Class V transaction.

 

Q:

What will holders of Class V Common Stock receive in the Class V transaction?

 

A:

At the effective time of the merger, each share of Class V Common Stock issued and outstanding immediately before the effective time will be cancelled and converted into the right to receive, at the election of the holder, either:

 

   

1.3665 shares of Class C Common Stock, in the case of each share of Class V Common Stock for which a share election has been validly made by the holder and not validly revoked, or

 

   

$109 in cash, without interest, in the case of each share of Class V Common Stock for which a cash election has been validly made by the holder and not validly revoked, subject to proration as described below.

If a holder fails to properly elect which form of consideration to receive, such holder will be deemed to have made a share election and will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock).

 

Q:

What will holders of our Class A Common Stock, Class B Common Stock and Class C Common Stock receive in the Class V transaction?

 

A:

Our outstanding shares of Class A Common Stock, Class B Common Stock and Class C Common Stock will not be converted or exchanged in the Class V transaction and will remain outstanding following the completion of the merger and the Class V transaction, in each case except for any shares held by holders who exercise appraisal rights as described below.

 

Q:

How does the Special Committee recommend that holders of the Class V Common Stock vote?

 

A:

The Special Committee, which was established to act solely on behalf of, and solely in the interests of, the holders of Class V Common Stock unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated Company certificate.

 

Q:

How does our board of directors recommend that stockholders vote?

 

A:

The board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, “FOR” the

 

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  approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal.

 

Q:

Is the number of shares of Class C Common Stock to be issued in connection with the Class V transaction limited?

 

A:

No.

 

Q:

Is the amount of cash payable in the Class V transaction limited?

 

A:

Yes. The total amount of cash payable in the Class V transaction is limited to $9 billion.

 

Q:

What happens if holders of Class V Common Stock do not elect in the aggregate to receive more than $9 billion in cash?

 

A:

If holders of Class V Common Stock do not elect to receive more than $9 billion in cash, all holders will receive the form of consideration they elected to receive or were deemed to have elected to receive.

 

Q:

What happens if holders of Class V Common Stock elect in the aggregate to receive more than $9 billion in cash?

 

A:

If holders of Class V Common Stock elect to receive more than $9 billion in cash, holders making cash elections will be subject to proration, and a portion of the consideration they requested in cash will instead be received in the form of shares of Class C Common Stock.

 

Q:

How will proration of a cash election be calculated under the merger agreement?

 

A:

We will:

 

   

first, calculate the proration factor, which is the percentage of shares of Class V Common Stock covered by a cash election that will be payable in cash, by dividing the $9 billion cash election cap by the total amount of all cash elections; and

 

   

second, determine the number of shares of Class V Common Stock covered by the cash election that will be payable in cash by multiplying the total number of shares covered by the cash election by the proration factor, with the remainder of such shares to be exchanged for shares of Class C Common Stock.

For example, if holders of Class V Common Stock elect in the aggregate to receive $10 billion in cash (representing approximately 46% of all outstanding shares of Class V Common Stock), the proration factor would be 0.9 ($9 billion divided by $10 billion). A holder submitting a cash election for 1,000 shares of Class V Common Stock would be entitled to receive (1) cash in exchange for 900 of such shares (1,000 shares multiplied by the proration factor of 0.9) at $109 per share, or a total of $98,100, and (2) shares of Class C Common Stock for the remaining 100 shares of Class V Common Stock at the exchange rate of 1.3665, or a total of 136 shares of Class C Common Stock and cash in lieu of 0.65000 fractional shares of Class C Common Stock.

If all holders of Class V Common Stock make cash elections (representing elections in the aggregate to receive approximately $21.7 billion in cash), the proration factor would be approximately 0.414 ($9 billion divided by $21.7 billion). A holder submitting a cash election for 1,000 shares of Class V Common Stock would be entitled to receive (1) cash in exchange for 414 of such shares (1,000 shares multiplied by the proration factor) at $109 per share, or a total of $45,126, and (2) shares of Class C Common Stock for the remaining 586 shares of Class V Common Stock at the exchange rate of 1.3665, or a total of 800 shares of Class C Common Stock and cash in lieu of 0.76900 fractional shares of Class C Common Stock.

 

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If holders of Class V Common Stock do not elect to receive more than $9 billion in cash consideration, all holders will receive the form of consideration they elected to receive or were deemed to elect to receive.

See “Election to Receive Class C Common Stock or Cash Consideration—Proration of Aggregate Cash Consideration” for additional information on the proration of the aggregate cash consideration.

 

Q:

If the holders of Class V Common Stock elect in the aggregate to receive less than $9 billion of cash consideration, what will Dell Technologies do with the additional cash that it receives from the VMware special dividend?

 

A:

If any cash from the special dividend from VMware remains following the elections by holders of the Class V Common Stock, we plan to use such remaining cash to repurchase shares of Class C Common Stock or pay down debt.

 

Q:

Will the Class C Common Stock issued in the Class V transaction be a tracking stock?

 

A:

No. Following the Class V transaction, the Class C Common Stock will reflect the performance of our entire business and, unlike the Class V Common Stock, will not track the performance of any distinct assets or business. See Comparison of Rights of Class V Stockholders and Class C Stockholders.

 

Q:

Will the Class C Common Stock be listed on a stock exchange?

 

A:

Yes. The merger agreement requires that the Class C Common Stock be listed on the NYSE. The Class C Common Stock issued in connection with the Class V transaction will be freely transferable by our non-affiliates and will trade just like any other publicly listed common stock. Our other series of common stock that will be outstanding after the Class V transaction, consisting of our Class A Common Stock and the Class B Common Stock, will not be publicly traded.

 

Q:

How do I make an election if I am a holder of Class V Common Stock?

 

A:

Under the merger agreement, each holder of record of shares of Class V Common Stock has the right to submit an election form on or prior to the election deadline. The Company will use its reasonable efforts to cause an election form to be disseminated to persons who, as of the record date for the special meeting, are holders of record of shares of Class V Common Stock at the same time that this proxy statement/prospectus is disseminated to the stockholders of the Company. With respect to all persons who become holders of record of shares of Class V Common Stock between the record date for the special meeting and the election deadline, the Company will use its reasonable efforts to make the election form available to such holders during this period.

Each holder of record of shares of Class V Common Stock may specify the number of shares of Class V Common Stock owned by such holder with respect to which such holder desires to make a share election and the number of shares of Class V Common Stock owned by such holder with respect to which such holder desires to make a cash election. If you fail to make an election, you will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock). You must return your properly completed and signed election form accompanied by stock certificates for your shares of Class V Common Stock, if any, and any additional documents specified in the election form by the election deadline. You are encouraged to return your election form as promptly as practicable. If you hold your shares of Class V Common Stock through a bank, brokerage firm or other nominee, you should follow the instructions provided by such bank, brokerage firm or other nominee to ensure that your election instructions are timely returned. See The Merger AgreementTransaction Consideration and Elections—Election Procedures.

 

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Q:

When must I make an election if I am a holder of Class V Common Stock?

 

A:

Our exchange agent, American Stock Transfer & Trust Company, LLC, must receive your properly completed election form and other required documents by 5:30 p.m., New York City time, on [                ], 2018, the business day before the special meeting, which we refer to as the election deadline.

 

Q:

May I revoke or change my election after I mail my election form?

 

A:

Yes. Holders of Class V Common Stock may revoke or change their elections by sending written notice of the revocation or change to the exchange agent, which notice must be received by the exchange agent prior to the election deadline. In the event an election is revoked, the shares of Class V Common Stock represented by such election will be treated under the merger agreement as non-electing shares, except to the extent a subsequent election is properly made prior to the election deadline. Holders of non-electing shares will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock). See “The Merger Agreement—Transaction Consideration and Elections—Election Procedures.”

 

Q:

What happens if a holder of Class V Common Stock fails to make a share election or a cash election, makes such an election after the election deadline or makes such an election and the election is validly revoked?

 

A:

In such a case, the holder will be deemed to have made a share election and will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock).

 

Q:

Will making an election affect my right as a holder of Class V Common Stock to vote against adoption of the merger agreement?

 

A:

No. Your submission of an election before the special meeting will not preclude you from voting against adoption of the merger agreement.

 

Q:

What happens if I transfer my shares of Class V Common Stock after making an election?

 

A:

If you transfer your shares of Class V Common Stock after making an election, the election will be automatically revoked with respect to such shares, and such shares will be treated as non-electing shares, unless a subsequent election is properly made prior to the election deadline. Holders of non-electing shares will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock).

 

Q:

If a holder of Class V Common Stock makes a share election and the Class V transaction is completed, will the holder be guaranteed to receive only shares of Class C Common Stock?

 

A:

Yes, except that we will pay cash, without interest, for any fractional share of Class C Common Stock to which the holder would otherwise be entitled. The amount of this cash payment will represent the holder’s proportionate interest in the net proceeds from the sale of shares of Class C Common Stock representing all fractional shares conducted by the exchange agent on behalf of all affected holders.

 

Q:

Who currently owns the outstanding shares of the Class C Common Stock?

 

A:

Our Class C Common Stock is currently owned by Michael Dell, other members of our senior management, certain other employees, our independent directors and other investors.

 

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Q:

How many shares of Class C Common Stock are currently outstanding and subject to outstanding awards under stock incentive plans?

 

A:

As of August 31, 2018:

 

   

approximately 22,180,129 shares of Class C Common Stock were outstanding, which represented approximately 3.9% of all outstanding shares of our DHI Group common stock; and

 

   

approximately 35,072,710 shares of Class C Common Stock were subject to outstanding awards under stock incentive plans.

Upon the completion of the Class V transaction, performance-based stock option awards to purchase approximately 18,572,575 shares of Class C Common Stock will vest, assuming such awards have not already vested before the completion of the Class V transaction. Such stock options have an aggregate value of approximately $1,215,001,960 based on an implied value of $79.77 per share. Of such performance-based stock option awards, stock options to purchase approximately 3,907,805 shares of Class C Common Stock, with an aggregate value of approximately $253,485,498 based on such implied value, are held by the executive officers identified under “Proposal 1—Adoption of the Merger Agreement—Interests of Certain Directors and Officers—Golden Parachute Compensation.”

 

Q:

What portion of our outstanding common stock will the Class C Common Stock issued in the Class V transaction represent immediately after the Class V transaction?

 

A:

The mix of share elections and cash elections will determine how many shares of Class C Common Stock we will issue in the Class V transaction. Based on shares of our common stock outstanding as of August 31, 2018:

 

   

if all holders of Class V Common Stock make share elections, we estimate that we would issue a total of approximately 272,420,782 shares of Class C Common Stock, which would represent approximately 30.7% of our total common stock on a fully diluted basis outstanding immediately after the Class V transaction, and approximately 4.6% of the total voting power of our outstanding common stock; and

 

   

if holders of Class V Common Stock make cash elections for $9 billion or more, we estimate that we would issue a total of approximately 159,590,507 shares of Class C Common Stock, which would represent approximately 20.6% of our total common stock on a fully diluted basis outstanding immediately after the Class V transaction, and approximately 2.8% of the total voting power of our outstanding common stock.

 

Q:

What should the U.S. federal income tax consequences of the Class V transaction be for a holder of Class V Common Stock?

 

A:

Subject to the assumptions and qualifications set forth under “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock,” the Class V transaction should constitute a “recapitalization” of the Company within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code. In general, for U.S. federal income tax purposes, a U.S. holder of Class V Common Stock that receives (a) solely Class C Common Stock should not recognize any gain or loss, (b) solely cash for redemption of all of the holder’s Class V Common Stock may recognize either capital gain or loss, subject to the limitations for individuals and corporations on the deductibility of capital losses and (c) a combination of cash and Class C Common Stock may recognize either capital gain (but not loss) or dividend income, in either case to the extent of the lesser of any cash received or gain realized by such holder in the transaction. Holders of Class V Common Stock are strongly urged to consult their tax advisors as to the specific tax consequences to them of the Class V transaction, including the application of federal, state, local and foreign income and other tax laws to their particular facts and circumstances.

 

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Q:

Are our stockholders entitled to exercise appraisal rights in connection with the Class V transaction?

 

A:

If you are a holder of Class V Common Stock, you are not entitled to statutory appraisal rights under Delaware law.

However, under Delaware law, if you are a holder of Class A Common Stock, Class B Common Stock or Class C Common Stock who does not vote in favor of the proposal to adopt the merger agreement, who has not otherwise waived statutory appraisal rights and who complies with other requirements, you are entitled to statutory appraisal rights in connection with the Class V transaction. To exercise your appraisal rights, you must strictly comply with the requirements of the DGCL. See Proposal 1—Adoption of the Merger Agreement—Rights of Appraisal of Holders of Class A Common Stock, Class B Common Stock and Class C Common Stock beginning on page 220 and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced in its entirety as Annex E to this proxy statement/prospectus. Each of the MSD Partners stockholders, the MD stockholders and the SLP stockholders have agreed to waive any appraisal rights that may be available under Delaware law with respect to the merger. See “The Merger Agreement—Voting and Support Agreement.

 

Q:

Is the Company or VMware incurring any debt in connection with the Class V transaction?

 

A:

No. We will fund substantially all of the cash elections from our pro rata portion of the proceeds of a special cash dividend by VMware, and we will fund any remaining balance, which is not expected to be material, from cash on hand. The dividend was declared by VMware’s board of directors on July 1, 2018 and, subject to the contingencies discussed below, is payable to VMware stockholders that include our wholly owned subsidiaries. VMware is not expected to incur any debt to pay the special cash dividend.

If the Class V transaction is not completed, the dividend will not be paid.

 

Q:

What are the conditions to the completion of the merger?

 

A:

In addition to stockholder adoption of the merger agreement and the amended and restated Company certificate at the special meeting, the completion of the merger is subject to the payment of the $11 billion VMware special dividend (approximately $8.92 billion of which will be paid to our wholly owned subsidiaries) and satisfaction of a number of other conditions as described under The Merger AgreementConditions to the Merger.

 

Q:

What are the conditions to the payment of the VMware special dividend?

 

A:

The payment of the VMware special dividend is conditioned on the satisfaction of a number of conditions, including, among others, that (1) the stockholders of the Company adopt the merger agreement on or prior to January 18, 2019, (2) all conditions to closing the merger set forth in the merger agreement and described in greater detail under “The Merger Agreement—Conditions to the Merger” (including stockholder adoption of the merger agreement and the amended and restated Company certificate) other than the payment of the VMware special dividend have been satisfied or (to the extent permitted by the merger agreement) irrevocably waived, (3) the board of directors of VMware and the VMware special committee have received an updated opinion from a nationally recognized expert addressing certain matters described in greater detail under “Proposal 1—Adoption of the Merger Agreement—Special Cash Dividend by VMwareConditions to Payment and (4) the board of directors of VMware and the VMware special committee have determined that VMware and all of VMware’s subsidiaries that must distribute cash or otherwise pass proceeds to VMware in order to enable VMware to pay the special dividend meet all solvency and legal adequacy requirements to dividend, distribute, loan or otherwise transfer such cash amounts. See Proposal 1—Adoption of the Merger Agreement—Special Cash Dividend by VMwareConditions to Payment.

 

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Q:

Will the VMware special dividend be paid if the Class V transaction will not be completed?

 

A:

No. The VMware special dividend will not be paid unless the Class V transaction will be completed. The payment of the VMware special dividend is conditioned upon the satisfaction of all conditions to closing the merger (other than the payment of the special dividend) and is anticipated to be paid on the same day as the completion of the Class V transaction.

 

Q:

When do you expect to complete the Class V transaction?

 

A:

If the merger agreement and the amended and restated Company certificate are each adopted by our stockholders at the special meeting, we expect to complete the merger, pursuant to which the Class V transaction will be effected, promptly after the other conditions to the completion of the merger are satisfied or (to the extent legally permitted) waived in accordance with the merger agreement. As of the date of this proxy statement/prospectus, we expect to complete the merger, pursuant to which the Class V transaction will be effected, during the fourth quarter of calendar year 2018.

For a description of certain matters that could delay or prevent the completion of the Class V transaction, see Risk Factors.

 

Q:

How did Dell Technologies arrive at the valuation? How was the $109 cash consideration per share of Class V Common Stock determined?

 

A:

The consideration to be paid to Class V stockholders was determined through arms’-length negotiation between the Company and the Special Committee. In analyzing the valuation of the Company, the Special Committee was advised by Evercore, its independent financial advisor, and the Company was advised by Goldman Sachs, its financial advisor, on the valuation of the Company. The fairness opinion provided by Evercore to the Special Committee that the transaction consideration was fair, from a financial point of view, to the Class V stockholders (other than the Company and its affiliates) and the fairness opinion provided by Goldman Sachs to the Company as to the fairness, from a financial point of view, to the Company of the aggregate consideration to be paid by Dell Technologies in the Class V transaction for all of the shares of Class V Common Stock pursuant to the merger agreement are attached as Annex C and Annex D, respectively, to this proxy statement/prospectus. The Special Committee also sought independent analysis from an independent industry expert on key aspects of the strategy and model underlying the financial projections of the Company. In addition, the Special Committee received feedback from more than 20 stockholders representing nearly 40% of the outstanding shares of Class V Common Stock, which feedback is described under “Proposal 1—Adoption of the Merger Agreement—Background of the Class V Transaction.” The Special Committee considered three other distinct business options, namely (1) maintaining the status quo with the Company’s existing capital structure, (2) pursuing an initial public offering of the Company’s Class C Common Stock, following which the board of directors would have discretion to convert the Class V Common Stock into Class C Common Stock at a premium of 10%-20% to the then-current trading values and (3) a negotiated

 

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  business combination of the Company and VMware. Following this comprehensive evaluation and after extensive negotiations with the Company, the Special Committee determined that the Class V transaction—a negotiated exchange with a cash election option that represents a significant and immediate 29% premium to the closing price of the Class V Common Stock as of June 29, 2018, the last trading day before the transaction was announced—was in the best interests of the Class V stockholders and recommended that the board of directors of the Company approve the merger agreement and the Class V transaction.

 

Q:

Does the implied valuation price guarantee the future trading price of the Class C Common Stock?

 

A:

No. The implied value of $79.77 per share of Class C Common Stock was based on the analysis of each of the Special Committee and the Company and their related negotiations, with Goldman Sachs acting as financial advisor to Dell Technologies and Evercore acting as independent financial advisor to the Special Committee. The accuracy of any valuation of the Company is inherently subject to many assumptions and other factors, and will change from time to time based in part on the Company’s financial results, prospects and strategy.

The implied valuation price of the Class C Common Stock should not be viewed as indicative of the opening and future trading prices of the Class C Common Stock. The opening public price of the Class C Common Stock upon listing on the New York Stock Exchange will be determined by buy and sell orders collected by the New York Stock Exchange from various broker-dealers and will be set based on the designated market maker’s determination of where buy orders can be matched with sell orders at a single price. We have engaged (in alphabetical order) Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Code Advisors LLC, Credit Suisse Securities (USA) LLC, DBO Partners LLC, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Securities USA LLC, Moelis & Company LLC, Morgan Stanley & Co. LLC, MUFG Americas Corporate Advisory, Inc., RBC Capital Markets, LLC, Sandler O’Neill & Partners, L.P., SG Americas Securities, LLC, Solebury Trout LLC, UBS Securities LLC and Wells Fargo Securities, LLC to act as listing advisors in connection with the listing of the Class C Common Stock. The subsequent trading price of the Class C Common Stock will depend on various factors, including, among others: announcements of new products, services or technologies, commercial relationships, acquisitions or other events by the Company or its competitors; changes in how customers perceive the effectiveness of the Company’s products, services or technologies; changes in the Company’s financial guidance or estimates by securities analysts; price and volume fluctuations in the overall stock market from time to time; significant volatility in the market price and trading volume of technology companies in general and of companies in the information technology industry in particular; actual or anticipated changes in the expectations of investors or securities analysts; fluctuations in the trading volume of the Class C Common Stock or the size of the trading market for shares held by non-affiliates; litigation involving the Company, its industry, or both, including disputes or other developments relating to the Company’s ability to obtain patent protection for its processes and technologies and protect its other proprietary rights; regulatory developments in the United States and other jurisdictions in which the Company operates; general economic and political factors, including market conditions in the Company’s industry or the industries of its clients; major catastrophic events; sales of large blocks of the Class C Common Stock; and additions or departures of key employees. Many of these factors are not within the Company’s control. We cannot assure you that the Class C Common Stock will open or trade at any particular price.

 

Q:

Are there any important risks about the Class V transaction or the Company’s business of which I should be aware?

 

A:

Yes, there are important risks, contingencies and uncertainties involved. Before making any decision on how to vote, you are urged to read the section of this proxy statement/prospectus titled “Risk Factors” carefully and in its entirety. You also should read and carefully consider the risk factors that are contained in the documents that are incorporated by reference into this proxy statement/prospectus.

 

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Questions and Answers Regarding the Special Meeting

 

Q:

What matters will stockholders vote on at the special meeting?

 

A:

You will be asked to consider and vote on the following proposals:

 

   

Proposal 1, to adopt the merger agreement, which is attached as Annex A to this proxy statement/prospectus;

 

   

Proposal 2, to adopt the amended and restated Company certificate, which is attached as Exhibit A to the merger agreement that is attached as Annex A to this proxy statement/prospectus and proposes certain changes to the corporate governance structure of the Company in connection with the merger and the Class V transaction;

 

   

Proposal 3, to approve, on a non-binding, advisory basis, the compensation arrangements with respect to the named executive officers of the Company related to the Class V transaction; and

 

   

Proposal 4, to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement or adopt the amended and restated Company certificate.

 

Q:

Where and when is the special meeting?

 

A:

The special meeting will be held at the Dell Round Rock Campus, 501 Dell Way (Building 2-East), Round Rock, Texas 78682 on [                    ], 2018, at [        ] a.m., Central Time.

 

Q:

Who may attend and vote at the special meeting?

 

A:

All holders of record of our outstanding common stock as of the close of business on [                ], 2018, which is the record date for the special meeting, are entitled to receive notice of, and to attend and vote at, the special meeting or any adjournment or postponement thereof. Attendance at the special meeting will be limited to Dell Technologies stockholders as of the record date and to guests of Dell Technologies. If you are a stockholder and plan to attend, you will be required to present evidence of stock ownership as of [                ], 2018. A complete list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder at the Dell Round Rock Campus, 501 Dell Way, Round Rock, Texas 78682, during regular business hours for a period of no less than ten days before the special meeting, and at the special meeting.

Street name holders who wish to vote at the special meeting will need to obtain a proxy executed in the holder’s favor from the nominee that holds their shares of common stock (commonly referred to as a legal proxy). All stockholders who attend the meeting will be required to present valid government-issued picture identification, such as a driver’s license or passport, and will be subject to security screenings. Seating will be limited at the special meeting.

In accordance with the Company bylaws, the chairman of the special meeting, who is expected to be the Chairman of the Board, has the right and authority to convene and (for any or no reason) recess and/or adjourn the special meeting, and to prescribe such rules, regulations and procedures and do all such acts as, in the judgment of the chairman, are appropriate for the proper conduct of the special meeting, including, but not limited to, establishing the agenda or order of business for the special meeting and establishing rules and procedures for maintaining order at the special meeting and the safety of those present, without the vote of any Dell Technologies stockholder.

If you have a disability, Dell Technologies can provide reasonable assistance to help you participate in the special meeting. If you plan to attend the special meeting and require assistance, please write or call Investor Relations no later than [                ], 2018, at 501 Dell Way, Round Rock, Texas 78682, telephone number (512) 728-7800.

 

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Q:

What shares of common stock may be voted?

 

A:

Shares of our outstanding Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock may be voted at the special meeting. You may vote all shares of each such series of common stock owned by you at the close of business on the record date.

 

Q:

How many votes do stockholders have?

 

A:

At the special meeting:

 

   

holders of Class V Common Stock are entitled to one vote per share;

 

   

holders of Class A Common Stock are entitled to ten votes per share;

 

   

holders of Class B Common Stock are entitled to ten votes per share; and

 

   

holders of Class C Common Stock are entitled to one vote per share.

As of the record date, there was outstanding and entitled to be voted at the special meeting:

 

   

[                ] shares of Class V Common Stock, representing a total of [                ] votes;

 

   

[                ] shares of Class A Common Stock, representing a total of [                ] votes;

 

   

[                ] shares of Class B Common Stock, representing a total of [                ] votes; and

 

   

[                ] shares of Class C Common Stock, representing a total of [                ] votes.

 

Q:

What constitutes a quorum for the special meeting?

 

A:

For each proposal to be considered at the special meeting, there must be a quorum present. For a quorum at the special meeting, there must be present in person or represented by proxy:

 

   

holders of record of outstanding shares of common stock representing a majority of the voting power of the outstanding shares of common stock entitled to vote thereat; and

 

   

for each additional vote of holders of a series of common stock, voting as a separate class, required to adopt the merger agreement or the amended and restated Company certificate, holders of record of outstanding shares of common stock of such series representing a majority of the voting power of the outstanding shares of such series.

Abstentions and broker non-votes, if any, will be counted as present in determining the presence of a quorum. A broker non-vote occurs with respect to a proposal when a nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the nominee with such instructions. Because none of the proposals to be voted on at the special meeting is a routine matter for which brokers may have discretionary authority to vote without instructions from the beneficial owner of the shares, the Company does not expect any broker non-votes at the special meeting. As a result, failure to provide instructions to your bank, brokerage firm or other nominee on how to vote will result in your shares not being counted as present in determining the presence of a quorum.

 

Q:

What stockholder vote is required (1) to adopt the merger agreement, (2) to adopt the amended and restated Company certificate, (3) to approve, on a non-binding, advisory basis, the transaction-related compensation proposal and (4) to approve the adjournment proposal?

 

A:

Proposal 1—Adoption of the Merger Agreement: Adoption of the merger agreement requires:

 

   

the affirmative vote of holders of record of a majority of the outstanding shares of Class V Common Stock (excluding shares held by affiliates of the Company), voting as a separate class;

 

   

the affirmative vote of holders of record of a majority of the outstanding shares of Class A Common Stock, voting as a separate class;

 

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the affirmative vote of holders of record of a majority of the outstanding shares of Class B Common Stock, voting as a separate class; and

 

   

the affirmative vote of holders of record of outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock representing a majority of the voting power of the outstanding shares of all such series of common stock, voting together as a single class.

Proposal 2—Adoption of Amended and Restated Company Certificate: Adoption of the amended and restated Company certificate requires the same vote as adoption of the merger agreement.

Proposal 3—Non-binding, Advisory Vote on Compensation of Named Executive Officers: Assuming a quorum is present, approval, on a non-binding, advisory basis, of the transaction-related compensation proposal requires the affirmative vote of holders of record of a majority of the voting power of the outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock present in person or by proxy at the meeting and entitled to vote thereon, voting together as a single class.

Proposal 4—Adjournment of Special Meeting of Stockholders: Assuming a quorum is present, approval of the adjournment proposal requires the affirmative vote of holders of record of a majority of the voting power of the outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock present in person or by proxy at the meeting and entitled to vote thereon, voting together as a single class.

Michael Dell and his affiliated investment entities and investment funds affiliated with Silver Lake Partners, subject to certain terms and conditions, have agreed to vote in favor of each of the proposals. Such stockholders collectively hold a majority of the outstanding Class A Common Stock and all of the outstanding Class B Common Stock, as well as a majority of the voting power of all series of common stock voting together as a single class. Holders of the Class C Common Stock are not entitled under the DGCL or the Company certificate to vote as a separate class on any of the Proposals. As a result, we expect both Proposal 1 and Proposal 2 to be adopted if they receive the required vote of the holders of the outstanding shares of the Class V Common Stock (excluding shares held by affiliates of the Company) voting as a separate class.

If you abstain from voting on any of the proposals, your abstention will have the same effect as a vote “AGAINST” that proposal.

The adoption of the amended and restated Company certificate as set forth in the merger agreement is a condition to closing the merger. Accordingly, a vote against or abstaining from voting on Proposal 2 with respect to the adoption of the amended and restated Company certificate will have the same effect as a vote “AGAINST” adoption of the merger agreement. The amended and restated Company certificate will not become effective unless the merger is consummated and, as a result, any vote against or abstaining from voting on Proposal 1 with respect to the adoption of the merger agreement will have the same effect as a vote “AGAINST” adoption of the amended and restated Company certificate.

 

Q:

Why are stockholders being asked to approve, on a non-binding, advisory basis, compensation arrangements with respect to the Company’s named executive officers related to the Class V transaction?

 

A:

The SEC has adopted rules that we believe require the Company to seek such a vote in connection with the Class V transaction.

 

Q:

Have Michael Dell and the investment funds affiliated with Silver Lake Partners committed to vote in favor of Proposals 1, 2, 3 and 4?

 

A:

Yes. In connection with the execution of the merger agreement, the Company entered into a Voting and Support Agreement with Michael Dell and his affiliated investment entities and the funds affiliated with Silver Lake Partners that have investments in the Company. Subject to certain terms and conditions, these stockholders have agreed, among other things, to vote the shares of the Company’s common stock over

 

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  which they have voting power in favor of the merger, the adoption of the merger agreement, the adoption of the amended and restated Company certificate and the other transactions contemplated by the merger agreement. Such stockholders collectively hold a majority of the outstanding Class A Common Stock and all of the outstanding Class B Common Stock, as well as a majority of the voting power of all series of common stock voting together as a single class. Holders of the Class C Common Stock are not entitled under the DGCL or the Company certificate to vote as a separate class on any of the Proposals. As a result, we expect both Proposal 1 and Proposal 2 to be adopted if they receive the required vote of the holders of outstanding shares of the Class V Common Stock (excluding shares held by affiliates of the Company) voting as a separate class.

 

Q:

For purposes of voting on the adoption of the merger agreement and the adoption of the amended and restated Company certificate, how will the Class V stockholder class vote that excludes votes of the Company’s affiliates be computed?

 

A:

For purposes of the separate Class V stockholder class votes for the adoption of the merger agreement and the adoption of the amended and restated Company certificate, outstanding shares of Class V Common Stock held by our affiliates will not be counted either as shares entitled to vote or as shares voted. For such purposes, our affiliates include all of our directors and executive officers as well as a separate property trust for the benefit of Michael Dell’s wife, and the SLP stockholders. For more information about our affiliates, see “Proposal 1—Adoption of the Merger Agreement—Interests of Certain Directors and Officers” and “Security Ownership of Certain Beneficial Owners and Management,” including notes 10, 11 and 13 to the beneficial ownership table. As of the record date for the special meeting, our directors and executive officers collectively held approximately [             ] shares of Class V Common Stock, while neither Mr. Dell’s wife’s trust nor the SLP stockholders held any shares of Class V Common Stock. In addition, while the MSD Partners stockholders consist of certain investment funds affiliated with MSD Partners, L.P., an investment firm formed by principals of MSD Capital, L.P., the investment firm that manages the capital of Mr. Dell and his family, the MSD Partners stockholders are not our affiliates. As of the record date, the MSD Partners stockholders did not hold any shares of Class V Common Stock.

Each of the adoption of the merger agreement and the adoption of the amended and restated Company certificate requires, among other votes, the affirmative vote of holders of record of a majority of the outstanding shares of Class V Common Stock (excluding shares held by our affiliates), voting as a separate class. As of the record date for the special meeting, there were approximately [             ] shares of Class V Common Stock outstanding that were not held by our affiliates, or [     ]% of all outstanding shares of Class V Common Stock.

 

Q:

How might the voting power of shares held by our directors and executive officers affect approval of the special meeting proposals?

 

A:

As of the record date for the special meeting, our directors and executive officers beneficially owned, in the aggregate:

 

   

approximately [    ]% of the outstanding shares of Class V Common Stock;

 

   

approximately [    ]% of the outstanding shares of Class A Common Stock;

 

   

none of the outstanding shares of Class B Common Stock; and

 

   

outstanding shares of our Class V Common Stock, Class A Common Stock and Class C Common Stock representing approximately [    ]% of the total voting power of the outstanding shares of all series of our common stock.

As noted above, shares of Class V Common Stock held by our directors and executive officers will not be counted in the Class V Common Stock stockholder class vote on the adoption of the merger agreement or the adoption of the amended and restated Company certificate.

 

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Q:

What will happen if stockholders do not vote to adopt the merger agreement?

 

A:

If the merger agreement is not adopted by the required vote of our stockholders, the merger and the Class V transaction will not be implemented and our Class V Common Stock will continue to be outstanding. In addition, the amended and restated Company certificate will not go into effect if the merger agreement is not adopted by our stockholders or for any other reason the merger is not consummated.

 

Q:

What will happen if stockholders do not vote to adopt the amended and restated Company certificate?

 

A:

Because the amended and restated Company certificate is part of the merger agreement, stockholder adoption of the amended and restated Company certificate is a condition to the completion of the merger and the Class V transaction. If the amended and restated Company certificate described in Proposal 2 is not adopted by the required vote of the stockholders, the merger and the Class V transaction will not be implemented and our Class V Common Stock will continue to be outstanding.

 

Q:

Is my vote important?

 

A:

Yes, your vote is very important. The Class V transaction cannot be completed without the adoption of the merger agreement and the amended and restated Company certificate by our stockholders, including our Class V stockholders (other than affiliates of the Company) voting as a separate class. The Special Committee unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated Company certificate. The board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, “FOR” the approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal.

 

Q:

How do I vote?

 

A:

You may vote in person at the special meeting or you may designate another person—your proxy—to vote your shares of common stock. The written document used to designate someone as your proxy is called a proxy or proxy card. We urge you to submit a proxy to have your shares voted even if you plan to attend the special meeting. You may always change your vote at the special meeting.

If you hold shares of common stock directly in your name on records maintained by our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the “stockholder of record” with respect to those shares. If you are a stockholder of record, you may have your shares voted at the special meeting in person or submit a proxy by mail or via the internet or by telephone by following the instructions on your proxy card.

If your shares are held through a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of shares held in “street name,” and this proxy statement/prospectus is being forwarded to you by your nominee along with a voting instruction form. You may use the voting instruction form to direct your nominee on how to vote your shares, using one of the methods described on the voting instruction form.

 

Q:

If my shares are held in “street name” by my bank, brokerage firm or other nominee, will my nominee automatically vote my shares for me?

 

A:

No. Your bank, brokerage firm or other nominee will not vote your shares if you do not provide your bank, brokerage firm or other nominee with a signed voting instruction form with respect to your Dell Technologies common stock. None of the proposals to be voted on at the special meeting is a routine matter for which brokers may have discretionary authority to vote without instruction from the beneficial owner of the shares. As a result, failure to provide instructions to your bank, brokerage firm or other nominee on how to vote will result in your shares not being counted as present at the meeting and therefore will have the same effect as a vote “AGAINST” Proposal 1 and “AGAINST” Proposal 2. Such failure to provide instructions will have no

 

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  effect on the outcome of the voting for Proposal 3 and Proposal 4 because such shares will not be present at the meeting and entitled to vote on such matters. You should instruct your bank, brokerage firm or other nominee to vote your common stock by following the directions your nominee provides.

 

Q:

What will happen if I submit my proxy without indicating how to vote?

 

A:

If you submit your proxy without indicating how to vote your shares on any particular proposal, the common stock represented by your proxy will be voted in accordance with the recommendation of the board of directors concerning that proposal. The board of directors has unanimously recommended that such proxies be voted “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, “FOR” the approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal.

 

Q:

May I revoke my proxy or change my voting instructions?

 

A:

Yes. You may revoke your proxy or change your voting instructions at any time before your shares are voted at the special meeting.

If you are a holder of record as of the record date, you may revoke your proxy by:

 

   

submitting a later proxy via the internet or by telephone;

 

   

submitting a later dated proxy by mail;

 

   

providing written notice of your revocation to our Corporate Secretary at Dell Technologies Inc., One Dell Way, Round Rock, Texas 78682, Attn: Corporate Secretary such that the notice is received before the special meeting; or

 

   

voting your shares at the special meeting.

Stockholders of record may change their proxy by using any one of these methods regardless of the method they previously used to submit their proxy. Only the latest dated proxy card you submit will be counted.

Your attendance at the special meeting will not automatically revoke your proxy unless you vote at the meeting or file a written notice with our Corporate Secretary requesting that your prior proxy be revoked.

If you are a beneficial owner of shares held through a bank, brokerage firm or other nominee, you may submit new voting instructions by:

 

   

submitting new voting instructions in the manner stated in the voting instruction form; or

 

   

voting your shares at the special meeting.

 

Q:

What happens if I transfer my shares of common stock before the special meeting?

 

A:

The record date for the special meeting is earlier than the date of the special meeting and the date on which the merger and the Class V transaction are expected to be completed. If you transfer your shares of common stock after the record date but before the special meeting, you will retain your right to vote at the special meeting, unless the transferee requests a proxy from you and you grant such proxy. However, if you are a holder of Class V Common Stock, you will have transferred the right to participate in the Class V transaction and receive the transaction consideration. To receive the transaction consideration, you must hold your shares of Class V Common Stock through the effective time of the merger.

 

Q:

What do I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus, the proxy card or the voting instruction form sent to you by your nominee. This can occur if you hold your shares in more than one brokerage account, if you hold shares directly as a holder of record and

 

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  also in street name, or otherwise through another holder of record, and in certain other circumstances. If you receive more than one set of voting materials, please sign and return each set separately to ensure that all of your shares are voted.

 

Q:

How do I obtain the voting results from the special meeting?

 

A:

Preliminary voting results will be announced at the special meeting, and will be set forth in a press release that we intend to issue after the special meeting. The press release will be available on the Investors page of our website at http://investors.delltechnologies.com. Final voting results for the special meeting will be disclosed in a current report on Form 8-K filed by us with the SEC within four business days after the special meeting. A copy of such current report on Form 8-K will be available after filing with the SEC on our website and on the SEC’s website at www.sec.gov.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in and incorporated by reference into this proxy statement/prospectus, including its annexes, please (1) submit your proxy as promptly as possible, so that your shares may be represented and voted at the special meeting, and (2) complete your election form when you receive it and submit it so that your election form is received by our exchange agent by 5:30 p.m., New York City time, on [            ], 2018, the business day before the special meeting.

You may submit your proxy or vote by:

 

   

signing, dating, marking and returning the enclosed proxy card in the accompanying postage-paid return envelope;

 

   

submitting your proxy via the internet or by telephone by following the instructions included on your proxy card; or

 

   

attending the special meeting and voting by ballot in person.

If you hold shares in street name, please instruct your bank, brokerage firm or other nominee to vote your shares by following the instructions on the voting instruction form which the nominee provides you with these materials. Your nominee will vote your shares of common stock for you only if you provide instructions to it on how to vote. Please refer to the voting instruction form used by your nominee to see how you may submit voting instructions via the internet or by telephone.

 

Q:

How can I obtain additional information about the Company?

 

A:

We will provide a copy of our annual report on Form 10-K for the fiscal year ended February 2, 2018, excluding certain of its exhibits, and other documents incorporated by reference into this proxy statement/prospectus at no cost, by written or oral request directed to: Dell Technologies Inc., One Dell Way, Round Rock, Texas 78682, Attention: Investor Relations, Telephone: (512) 728-7800. The Company’s annual report on Form 10-K and other SEC filings also may be accessed via the internet at www.sec.gov or on the Investors page on our website at http://investors.delltechnologies.com. Information included on or accessed through our website is not incorporated by reference into this proxy statement/prospectus. For a more detailed description of the information available, see Where You Can Find More Information.

 

Q:

Who can help answer my questions?

 

A:

We have retained Innisfree M&A Incorporated as the proxy solicitor and information agent to assist you if you have questions or would like to obtain additional copies of this proxy statement/prospectus. Persons in the United States and Canada may call Innisfree toll-free at (877) 717-3936, persons outside the United States and Canada may call +1 (412) 232-3651 and banks, brokers and other financial institutions may call (212) 750-5833 (collect) to request additional documents and to ask any questions.

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read this entire proxy statement/prospectus and the other documents referred to or incorporated by reference into this proxy statement/prospectus in order to fully understand the Class V transaction, the merger, the merger agreement and the other related transactions and agreements. See “Where You Can Find More Information” for information on how you can obtain copies of the incorporated documents or view them via the internet. To the extent any item in this summary refers to a page number, such page number represents the beginning page of this proxy statement/prospectus on which we discuss that subject in more detail.

Dell Technologies Overview

Dell Technologies is a leading global end-to-end technology provider, with a comprehensive portfolio of IT hardware, software and service solutions spanning both traditional infrastructure and emerging, multi-cloud technologies that enable our customers to meet the business needs of tomorrow. We operate eight complementary businesses: our Infrastructure Solutions Group and our Client Solutions Group, as well as VMware, Pivotal, SecureWorks, RSA Security, Virtustream and Boomi. Together, our strategically aligned family of businesses operates in close coordination across key functional areas such as product development, go-to-market and global services, and are supported by Dell Financial Services. We believe this operational philosophy enables our platform to seamlessly deliver differentiated and holistic IT solutions to our customers, which has driven significant revenue growth and share gains.

As a result of our significant transformation since the going-private transaction in 2013, Dell Technologies today operates on an extraordinary scale with an unmatched breadth of complementary offerings. Digital transformation has become essential to all businesses, and we have expanded our portfolio to include holistic solutions that enable our customers to drive their ongoing digital transformation initiatives. Dell Technologies’ integrated solutions help customers modernize their IT infrastructure, address workforce transformation and provide critical security solutions to protect against the ever increasing and evolving security threats. With our extensive portfolio and our commitment to innovation, we have the ability to offer secure, integrated solutions that extend from the intelligent edge to the multi-cloud data center ecosystem, and we are at the forefront of the software-defined and cloud-native infrastructure era. Our end-to-end portfolio is supported by a differentiated go-to-market engine, which includes a 40,000-person sales force and 150,000 channel partners across 180 countries, and a world class supply chain that together drive revenue growth and operating efficiencies.

We have significant momentum across our business units, regions and customer segments, delivering strong financial results for the periods indicated below:

 

     Six Months Ended      %
Change
    Fiscal Year Ended
February 2, 2018
 
     August 3, 2018      August 4, 2017  
     (in millions, except percentages)  

Total net revenue

   $ 44,298      $ 37,521        18   $ 79,040  

Operating loss

   $ (166    $ (1,937      91   $ (2,416

Net loss

   $ (999    $ (1,942      49   $ (2,926

Non-GAAP net revenue

   $ 44,665      $ 38,211        17   $ 80,309  

Non-GAAP operating income

   $ 4,134      $ 3,291        26   $ 7,772  

Non-GAAP net income

   $ 2,523      $ 1,873        35   $ 4,370  

Adjusted EBITDA

   $ 4,842      $ 3,975        22   $ 9,134  

See “—Summary Historical and Pro Forma Financial and Other Data” for a reconciliation of non-GAAP net revenue, non-GAAP operating income, non-GAAP net income and Adjusted EBITDA to the most directly comparable GAAP financial measures.



 

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Our Transformation Since Going Private and Reemergence at the Forefront of the Technology Industry

We have dramatically transformed our business since the going-private transaction in 2013 and have become a leader in both traditional and emerging technologies. We have accomplished this by successfully executing the following initiatives:

 

   

Expanded our Portfolio and Increased our Scale. The EMC merger in 2016 combined Dell’s strengths in PCs, servers and networking and EMC’s leadership (with VMware and Pivotal) in storage, converged and hyper-converged infrastructure, virtualization software, cloud-native application development tools and security solutions to create a leading global IT company that provides a comprehensive and integrated portfolio of IT solutions. The EMC merger, together with strong organic growth, also significantly increased our scale. Our net revenue has grown by 39% to $79.0 billion for Fiscal 2018 from $56.9 billion for the fiscal year ended February 1, 2013, the last fiscal year prior to the going-private transaction.1

 

   

Created a Best-in-Class Go-to-Market Model. We have made significant investments to expand our go-to-market engine, which now includes a 40,000-person sales force and 150,000 channel partners across 180 countries. We have leveraged our differentiated direct go-to-market capabilities and our vast network of channel partners and have capitalized on the complementary customer segments of stand-alone Dell and EMC – combining Dell’s leadership position in the mid-market with EMC’s strength in large enterprises – to create significant cross-selling opportunities. We sell Dell PCs and servers and VMware virtualization software to EMC’s existing customer base, and sell EMC enterprise storage solutions and VMware virtualization software to Dell’s existing customer base. We have also enabled other cross-selling functions, such as Pivotal cloud-native application development solutions through VMware. In Fiscal 2018, we realized strong revenue growth both in historical EMC accounts where Dell Technologies previously had little or no footprint before the EMC merger, and in historical Dell accounts where EMC had little or no footprint before the EMC merger, nearly doubling the revenues for these underpenetrated accounts.

 

   

Focused on Long-term Growth and Innovation. We have made significant investments to position our company to achieve sustainable, long-term growth and share gain. For example, we have invested more than $12 billion in research and development, referred to herein as R&D, in the past three fiscal years (including EMC’s R&D expenditures before the EMC merger), and software engineers currently represent approximately 85% of our ISG engineering staff. We believe that these investments have helped us to achieve and maintain our leadership in multiple industry categories and will enable us to address our customers’ evolving needs and, as a result, capture an increased share of customers’ growing IT expenditures.

 

   

Refined our Operating Model. Under our refined operating model, our strategically aligned family of businesses operates in close coordination across key functional areas to execute our strategic objectives, while remaining independent to allow for increased flexibility. Our businesses benefit from our integrated go-to-market approach to drive incremental cross-selling revenue. In addition, rather than offering stand-alone products from multiple vendors, we benefit from our coordinated R&D activities, which enable us to provide integrated solutions that incorporate the distinct set of hardware, software and services capabilities across our businesses.

 

   

Reinvigorated our Storage Business. We have dedicated significant resources and focus to reaccelerate growth in our storage business. As part of this initiative, we have bolstered the Infrastructure Solutions Group management team, enhanced our current mid-range portfolio (such as adding in-line data de-duplication and synchronous file replication) and simplified the product roadmap to focus on a single best-in-class solution for each customer segment with powerful next-generation

 

1 

Revenue for Fiscal 2018 is accounted for under ASC 606 and excludes discontinued businesses, while revenue for the fiscal year ended February 1, 2013 is accounted for under ASC 605 and includes discontinued businesses.



 

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functionality (such as launching a new enterprise-class solution featuring end-to-end non-volatile memory express (NVMe) for real-time analytics, genomics, artificial intelligence, machine learning and Internet of Things capabilities). In addition, we have hired more than 1,000 specialty sales personnel who are dedicated to storage, realigned sales compensation, and instituted a new Future-Proof Storage Loyalty Program that offers storage customers investment protection and multiple cost-saving benefits. In the second quarter of Fiscal 2019, we grew storage revenue 13% year-over-year. Additionally, in the second quarter of calendar year 2018, we gained approximately 100 basis points of industry share according to IDC. We believe our recent performance is an encouraging sign of the longer-term growth potential related to this initiative.

 

   

Unlocked Value at our Subsidiaries. We conducted initial public offerings of two of our subsidiaries, SecureWorks and Pivotal, in April 2016 and April 2018, respectively. Our publicly traded subsidiaries are able to operate their businesses independently with greater flexibility, while still benefitting from remaining coordinated with our other businesses. We believe this has allowed our publicly traded subsidiaries to grow faster than they otherwise would have as private wholly owned subsidiaries, creating incremental stockholder value. VMware, Pivotal and SecureWorks will remain independent publicly traded subsidiaries following the Class V transaction.

We have accomplished this successful transformation while still continuing to grow our traditional PC, software and peripherals business, as well as our x86 server offerings. We have increased share in the global PC industry year-over-year for 22 consecutive quarters and have become the leading worldwide vendor of x86 servers. With our leadership position across multiple segments of the IT industry, we believe we are well-positioned for future growth.

Our Strategically Aligned Family of Businesses

We design, develop, manufacture, market, sell and support a wide range of hardware, software and services through our eight complementary businesses. Together, our strategically aligned family of businesses operates in close coordination across key functional areas and is supported by Dell Financial Services:

 

   

Infrastructure Solutions Group (ISG) — ISG enables the digital transformation of our customers through our trusted multi-cloud and big data solutions, which are built upon a modern data center infrastructure. Our comprehensive portfolio of advanced storage solutions includes traditional storage solutions as well as next-generation storage solutions (such as all-flash arrays, scale-out file, object platforms and software-defined solutions), while our server portfolio includes high-performance rack, blade, tower and hyperscale servers. Our networking portfolio helps our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences and accelerate business applications and processes. Our strengths in server, storage and virtualization software solutions enable us to offer leading converged and hyper-converged solutions, allowing our customers to accelerate their IT transformation by acquiring scalable integrated IT solutions instead of building and assembling their own IT platforms. ISG also offers attached software, peripherals and services, including support and deployment, configuration and extended warranty services. For Fiscal 2018, ISG generated net revenue of approximately $30.9 billion and operating income of approximately $3.1 billion.

 

   

Client Solutions Group (CSG) CSG includes branded hardware (such as PCs, workstations and notebooks) and branded peripherals (such as monitors and projectors), as well as third-party software and peripherals. Our computing devices are designed with our commercial and consumer customers’ needs in mind, and we seek to optimize performance, reliability, manageability, design and security. In addition to our traditional PC business, we also have a portfolio of thin client offerings that we believe will allow us to benefit from the growth trends in cloud computing. CSG hardware and services also provide the architecture to enable the Internet of Things and connected ecosystems to securely and efficiently capture massive amounts of data for analytics and actionable insights for customers. CSG



 

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also offers attached services, including support and deployment, configuration, and extended warranty services. For Fiscal 2018, CSG generated net revenue of approximately $39.2 billion and operating income of approximately $2.0 billion.

 

   

VMware (NYSE: VMW) provides compute, management, cloud, networking and security, storage, mobility and other end-user computing infrastructure software to businesses that provides a flexible digital foundation for the applications that empower businesses to serve their customers globally. VMware has continued to broaden its product and solution offerings beyond software-defined compute software to enable customers to modernize data centers, integrate public clouds, transform networking and security and empower digital workspaces. For Fiscal 2018, the VMware reportable segment within Dell Technologies generated net revenue of approximately $8.0 billion and operating income of approximately $2.8 billion. As of August 31, 2018, Dell Technologies owned approximately 81% of VMware.

 

   

Pivotal (NYSE: PVTL) provides a leading cloud-native platform that makes software development and IT operations a strategic advantage for customers. Pivotal’s cloud-native platform, Pivotal Cloud Foundry, accelerates and streamlines software development by reducing the complexity of building, deploying and operating new cloud-native applications and modernizing legacy applications. As of August 31, 2018, Dell Technologies owned approximately 65% of Pivotal, including through VMware.

 

   

SecureWorks (NASDAQ: SCWX) is a leading global provider of intelligence-driven information security solutions singularly focused on protecting its clients from cyber attacks. SecureWorks’s solutions enable organizations of varying size and complexity to fortify their cyber defenses to prevent security breaches, detect malicious activity in near real time, prioritize and respond rapidly to security incidents and predict emerging threats. As of August 31, 2018, Dell Technologies owned approximately 86% of SecureWorks.

 

   

RSA Security provides essential cybersecurity solutions engineered to enable organizations to detect, investigate and respond to advanced attacks, confirm and manage identities and, ultimately, help reduce IP theft, fraud and cybercrime. Dell Technologies owns 100% of RSA Security.

 

   

Virtustream offers cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run and manage mission-critical applications in cloud-based IT environments, which is a key element of our strategy to help customers support their applications in a variety of cloud-native environments. Dell Technologies owns 100% of Virtustream.

 

   

Boomi specializes in cloud-based integration, connecting information between existing on-premise and cloud-based applications to ensure that business processes are optimized, data is accurate and workflow is reliable. Dell Technologies owns 100% of Boomi.

 

   

Dell Financial Services (DFS) supports our businesses by offering and arranging various financing options and services for our customers in North America, Europe, Australia and New Zealand. Dell Financial Services originates, collects and services customer receivables primarily related to the purchase of our product, software and service solutions. Dell Financial Services further strengthens our customer relationships through its flexible consumption models, which enable us to offer our customers the option to pay over time and, in certain cases, based on utilization, providing them with financial flexibility to meet their changing technological requirements. Dell Financial Services’ offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with third-party financing. As a result, while the initial funding is reflected as an impact to cash flows from operations, it is largely subsequently offset by cash flows from financing. For Fiscal 2018, Dell Financial Services had new financing originations of $6.3 billion and, as of August 3, 2018, had $8.2 billion of total net financing receivables.



 

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ISG, CSG and VMware constitute our reportable segments. Our “Other businesses,” which include Pivotal, SecureWorks, RSA Security, Virtustream and Boomi, do not meet the requirements for a reportable segment. For Fiscal 2018 and for the six months ended August 3, 2018, Pivotal, SecureWorks, RSA Security, Virtustream and Boomi generated aggregate net revenue of approximately $2.2 billion and $1.2 billion, respectively, and had an aggregate operating loss of $125 million and $99 million, respectively.

We have increased coordination of the operations and strategies of our businesses, while maintaining their independence to ensure operational flexibility. We believe this approach has resulted in distinct competitive and financial advantages, including:

 

   

Ability to provide integrated solutions to meet our customers’ evolving technology needs: Through our coordinated R&D activities, we are able to jointly engineer leading innovative solutions that incorporate the distinct set of hardware, software and services capabilities across our businesses. Some examples include:

 

   

Our VxRail and VxRack hyper-converged products, which were created by combining our best-of-breed software-defined data center layers from VMware with our industry-leading x86 servers and storage. As a result, we have become the leader in hyper-converged infrastructure solutions and have achieved triple-digit growth in sales of our VxRail and VxRack hyper-converged offerings.

 

   

Our commitment to utilizing VMware’s vSAN software stack for storage orchestration and virtualization and VMware’s NSX software solution for networking and security orchestration and virtualization.

 

   

The Pivotal-VMware Cloud-Native Stack, which is a single, integrated solution that provides a complete cloud-native software stack through a combination of Pivotal Cloud Foundry and VMware Photon Platform technologies.

 

   

Creation of cross-selling opportunities and revenue synergies: We leverage our differentiated go-to-market model to drive incremental revenue across our businesses. For example, VMware generated approximately $400 million of incremental annual bookings synergies in Fiscal 2018 with Dell Technologies and expects to realize an estimated $700 million of incremental annual bookings synergies in Fiscal 2019. In addition, new financing originations by Dell Financial Services increased by 40% from Fiscal 2017 to Fiscal 2018, and by 33% for the six months ended August 3, 2018 compared to the six months ended August 4, 2017, primarily as a result of increased offerings related to customer purchases of products and services from the businesses acquired as part of the EMC merger.

Our Market Opportunity

We believe that successfully navigating digital transformation is essential to all businesses, from Global Fortune 500 companies to governmental institutions, non-profit organizations and small and medium-sized businesses. Digital transformation in turn is enabled by three other key transformations: workforce transformation; security transformation; and, most important, IT infrastructure transformation. In addition, the confluence of transformative IT trends such as multi-cloud environments, edge computing and the Internet of Things, ubiquitous connectivity through broadband and 5G, and artificial intelligence and machine learning, has transformed the way we use data. These trends have resulted in an acceleration in IT spending, which is expected to increase by 37.5% from $2.4 trillion in 2017 to $3.3 trillion in 2021, driven by an approximately $1.0 trillion expected increase in IT spending associated with digital transformation, alongside steady demand for traditional IT infrastructure solutions. We believe that this will give rise to increased demand for IT solutions, as described below:

 

   

Transforming and Modernizing IT Infrastructure: Multi-Cloud Solutions. Enterprise customers are increasingly focused on digital transformation, which necessitates the transformation and



 

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modernization of their traditional data center infrastructure in order to optimize their IT operations. This has resulted in increased demand for next-generation IT architectures and technologies such as hybrid cloud solutions, which consist of a mix of on- and off-premise IT infrastructure and software. Hybrid cloud solutions combine the control and security of on-premise infrastructure with the scalability and flexibility of off-premise cloud platforms. According to an IDC report, 72% of respondents have already adopted a multi-cloud approach and 81% of respondents have repatriated some portion of their workloads from the public cloud back to a private cloud or on-premise environment to address cost and security concerns. Further, IT organizations are increasingly focused on software-defined compute, networking, storage and security offerings, which enhance the responsiveness and efficiency of modern data center infrastructure to changing operating conditions and business needs. This has caused a substantial shift in customer demand from building and assembling IT platforms to purchasing cloud-ready scalable integrated IT solutions, such as converged and hyper-converged infrastructure, as customers seek to accelerate their digital transformation and enable modern IT environments.

 

   

Managing Exponential Growth of Data: Innovative IT Solutions. The rapid growth in digital data continues to challenge IT departments as businesses seek to store, manage and use such data. Organizations of all sizes seek to gain insights and competitive advantages through the real-time investigation of data by employing analytical methods, including artificial intelligence or machine learning techniques. The retention, processing and analysis of increasing quantities of digital data necessitate new computing, networking, storage and security resources, which creates significant demand for innovative data center infrastructure products, services and applications.

 

   

Enabling Productivity for the Next-Generation Workforce: End-User and Infrastructure Solutions. Today’s workforce expects to be able to work and stay connected regardless of where they are physically located, and businesses across all segments now seek to enable and connect their increasingly mobile workforce from anywhere in the world and at any time. This new focus on constant connectivity puts significant strain on our customers’ data center infrastructure. In addition, our customers are focused on ensuring that the tools and technology they offer the workforce enable productivity and collaboration in a natural, seamless way. These changing expectations are driving demand for digital workspace solutions, management and support solutions and data security solutions.

 

   

Protecting Against Evolving Security Threats: IT Security Solutions. The transformation of traditional data center infrastructure and applications to hybrid cloud and software-based solutions, the exponential growth of digital data and the demand for ubiquitous connectivity, as well as the pervasiveness and increasing sophistication of cyber attacks all drive the growing demand for IT security solutions.

Industry Outlook

With the IT industry projected to grow at an 8% compound annual growth rate, referred to as CAGR, from $2.4 trillion in 2018 to $3.3 trillion in 2021, as a result of the trends described above, we see significant opportunity for growth across both traditional and emerging technologies. For example:

 

   

The hyper-converged infrastructure segment is expected to grow at a 30% CAGR from $4 billion in 2017 to $11 billion in 2021. By comparison, we have been experiencing triple-digit growth in sales of our VxRail and VxRack hyper-converged solutions, which were introduced to the market in early 2016.

 

   

The x86 server segment is projected to grow at a 10% CAGR from $62 billion in 2017 to $91 billion in 2021. In contrast, our server revenue as published by IDC grew by 23% in calendar year 2017 and 53% year-over-year in the second quarter of calendar year 2018. We expect to continue to outperform the overall segment.



 

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The virtualization software segment – including software-defined compute software, software-defined storage, software-defined networking and client computing – is expected to grow at a 12% CAGR from $20 billion in 2017 to $30 billion in 2021.

 

   

The external storage segment is expected to grow at a 2% CAGR from $24 billion in 2017 to $27 billion in 2021. However, we believe we will be able to gain meaningful share in the segment, as we benefit from the actions we have taken to reinvigorate our storage business and continue to leverage our leading position in higher-growth areas such as all-flash arrays.

 

   

The PC industry is expected to grow at a 1% CAGR from $183 billion in 2017 to $190 billion in 2021, with demand buoyed by the release of new operating systems and the end-of-life of support for older operating systems. The PC industry has experienced ongoing consolidation over the last six years, during which time the aggregate share of the largest three PC vendors, including Dell Technologies, has increased from 42% to 64%. We expect we will continue to gain industry share due, in part, to this ongoing consolidation trend.

Our Strengths

We believe the following competitive strengths have been instrumental to our performance and position us for future success:

Leader in Large and Attractive Industry Categories. We are a global leader in the hyper-converged infrastructure, x86 server, software-defined compute software, storage and PC segments, which have a combined market size of $322 billion in 2018. Our industry leadership positions, based on the most recent relevant period, include:

 

Industry

   Global Rank

Hyper-converged infrastructure

   #1

x86 servers

   #1

Software-defined compute software

   #1

External storage solutions

   #1

PCs (by reported revenue) (1)

   #1

PCs (by units)

   #3

 

(1)

Based on Company analysis. Reflects the overall PC business, which includes software, services and peripherals (excluding printers and ink) that attach to sales of PC units.

Since the announcement of the going-private transaction in February 2013, we have increased share in the global PC industry year-over-year for 22 consecutive quarters, achieving our highest ever PC industry share. We also have become the global industry leader in x86 servers and external storage. Our share in external storage is as large as that of the two next largest competitors combined. In addition, we hold #1 positions across all key storage categories, including high-end, mid-range and entry external storage, all-flash storage arrays and storage-related data protection products. We also have strong positions in emerging technologies such as software-defined storage and networking, cloud-native application development, cloud-based application and data integration and cybersecurity through VMware, Pivotal, Boomi, SecureWorks and RSA Security.

Integrated, End-to-End Technology Provider at Scale. Dell Technologies offers a comprehensive portfolio of essential technology from the edge to the core to the cloud and provides customers with exceptional products and solutions that meet a diverse range of workloads and applications that can be further customized to meet a customer’s particular needs. Through our strategically aligned family of businesses, we offer customers integrated solutions that are easily deployed and supported by a single framework that significantly enhances the



 

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customer experience. We support our offerings with robust financing alternatives through Dell Financial Services, which provides customers with the flexibility to meet their changing financial needs as their technology requirements continue to evolve. We believe our global scale and the breadth, depth and ease of use of our offerings differentiates us from our competitors.

Best-in-Class Go-to-Market Model. Our sales force comprises over 40,000 individuals across 72 countries complemented by a strong and growing global partner program that includes approximately 150,000 partners across 180 countries. Our direct distribution business model emphasizes direct communication, which builds deeper relationships with customers and provides us with significant cross-selling and up-selling opportunities. The success of our differentiated go-to-market approach and channel program is evidenced by the fact that in Fiscal 2018, 97% of our top 500 customers purchased products and services from at least two of the three of historical Dell, historical EMC and VMware. In addition, during the first half of Fiscal 2019, more than 80 customers purchased in excess of $40 million of our products and services. We will continue to capitalize on our best-in-class, integrated go-to-market model to drive revenue growth.

Strong Cash Flow Generation from Diversified and Recurring Revenue Streams. We have consistently generated strong free cash flows due to our diversified and recurring revenue streams, low capital expenditure requirements, global supply chain capabilities and efficient cash conversion cycle. Our revenues are highly diversified with respect to customers, geographies and products. We serve 99% of Fortune 500 companies, in addition to other large global and national corporate businesses, public institutions and small and medium-sized businesses, as well as retail customers across the world. Recurring and re-occurring revenue streams – such as software maintenance, extended warranty services and our flexible consumption offerings – also represent a growing portion of our total revenue. As a result, our deferred revenues have increased from $17.8 billion at the end of Fiscal 2017 to $20.8 billion at the end of Fiscal 2018 and $21.7 billion as of August 3, 2018. In addition, we have a proven track record of increasing cash flow generation by reducing operating costs and realizing operating efficiencies. Our cash flows from operating activities for Fiscal 2018 and the six months ended August 3, 2018 were $6.8 billion and $3.8 billion, respectively. Cash on hand is used to initially fund DFS financing receivables, of which a majority is subsequently offset through third-party financing. Excluding the impact of financing receivables on cash flows from operations, our cash flow from operations would have been $8.5 billion and $4.5 billion for Fiscal 2018 and the six months ended August 3, 2018, respectively.

Experienced Management Team. Dell Technologies is led by a committed and highly experienced management team with an average of 24 years of experience in the IT industry. Our management team has a deep understanding of changing industry trends, customer needs and innovative technologies and a proven track record of executing upon strategies in a dynamic marketplace to achieve profitable growth, including leading our company through a successful transformation of its business. Following the Class V transaction, our management team will remain unchanged. Michael Dell, our founder and Chief Executive Officer, will continue to lead the Company as chairman and Chief Executive Officer, together with Tom Sweet as our Chief Financial Officer, Jeff Clarke as our Vice Chairman of Products and Operations, Marius Haas as our President and Chief Commercial Officer, Bill Scannell as our President of Global Enterprise Sales at Dell EMC and Howard Elias as our President of Services Digital and IT. Our management team has significant stock ownership in, and is committed to the success of, Dell Technologies. We believe our management team has the vision and experience to successfully implement our business strategies to achieve sustainable, long-term growth.

Our Strategies

Our objective is to become the leading and essential IT infrastructure company – from the edge to the core to the cloud – both for traditional and emerging IT infrastructure solutions. We intend to accomplish our goal by leading businesses through digital, IT infrastructure, workforce and security transformation, as well as the



 

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consolidation of the core infrastructure markets in which we compete. We believe that executing on the following will enable us to achieve our objective:

Expand our Leadership Position. We are focused on profitably leveraging our expansive portfolio of industry-leading IT hardware, software and services solutions to expand our preeminent position by:

 

   

Providing a Broad Portfolio of Technology Solutions. Dell Technologies offers a broad range of integrated and innovative IT hardware, software and services solutions that meet the diverse needs of our customers across different industry segments and empower our customers to optimize their IT operations. We will continue to expand our extensive portfolio to enable our customers to simplify the purchasing process, ensure hardware and software compatibility and provide an integrated user experience.

 

   

Broadening our Customer Reach. We intend to expand both the breadth and depth of our customer relationships by investing in our sales force and leveraging our successful go-to-market engine to continue our upselling and cross-selling of products and services to existing customers.

 

   

Expanding Our Geographic Footprint. We are focused on strategically expanding our international presence. Dell Technologies has strong brand recognition in many countries and we aim to continue expanding our sales coverage and investing in localized R&D to capitalize on regional growth trends.

Develop and Commercialize Innovative Technologies. We have a strong track record of driving innovation. Over the past three fiscal years, we have invested more than $12 billion in R&D (including EMC’s R&D expenditures before the EMC merger) and expect to continue to invest approximately $4.5 billion in R&D annually. Through our commitment to innovation and R&D, and by capitalizing on the best technologies and products from across our portfolio, we believe we will be able to develop and commercialize next-generation IT solutions and capture a greater share of customers’ growing IT expenditures. For example, we will leverage our leading compute and storage capabilities, Virtustream’s and Pivotal’s next-generation cloud technologies, VMware’s virtualization expertise and SecureWorks’ strength in cybersecurity to develop integrated IT solutions that address our customers’ rapidly evolving technology needs. We will focus on strategic growth areas, such as hyper-converged infrastructure and other next-generation technologies.

Leverage our Economies of Scale. We intend to derive benefits from our global scale to drive profitable growth by taking advantage of our:

 

   

Aggregated Purchasing Power and Procurement Capabilities. We believe that our global supply chain of local, regional and international suppliers and significant procurement scale will enable us to continue to offer high-quality products with attractive margins at competitive prices.

 

   

Global Logistics Platform and Expanded Manufacturing and Distribution Footprint. We have 25 Company-owned and contract manufacturing locations, approximately 50 distribution and configuration centers and approximately 900 parts distribution centers globally. We intend to leverage our multi-mode logistics platform and expansive manufacturing and distribution network for the cost- and time-efficient manufacture and delivery of products and parts to our customers located across the world.

 

   

Expansive Sales Force and Customer Service Capabilities. In addition to our 40,000-person sales force, we have over 30,000 full-time customer service and support employees who speak more than 40 languages and approximately 2,200 service centers supported by more than 25 repair facilities globally.

We believe these factors will enable us to continue to profitably deliver high-quality solutions and services with compelling value at lower costs.



 

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Focus on De-Leveraging to Achieve Corporate Investment Grade Credit Ratings and Further Enhance Financial Flexibility. One of our long-term objectives is to reduce indebtedness to achieve and maintain corporate investment grade credit ratings. Since the EMC merger closed in September 2016, we have repaid approximately $13.7 billion of gross debt, excluding debt related to Dell Financial Services. We intend to continue to execute a disciplined capital allocation process by paying down debt while continuing to invest in our businesses. We have repaid $3.7 billion of gross debt so far in Fiscal 2019 and expect to repay an additional $0.8 billion by the end of the fiscal year. Following our announcement of the Class V transaction, Moody’s, S&P and Fitch have all held credit ratings constant for both Dell Technologies and VMware debt. We are committed to achieving corporate investment grade credit ratings and believe that our strong operating cash flows will enable us to achieve our goal.

Selectively Pursue Opportunities for Strategic Acquisitions and Investments. We have demonstrated our ability to execute complementary acquisitions, such as the EMC merger, that have expanded our capabilities and accelerated the development of new and innovative technologies. We intend to continue to augment our organic growth by making disciplined acquisitions of businesses, technologies and products that strengthen our industry-leading positions, enhance our hardware, software and services portfolio and leverage our scale across the entire family of Dell Technologies businesses. In addition, we will continue to evaluate opportunities for strategic investments through our venture capital investment arm, Dell Technologies Capital, with a focus on emerging technology areas that are relevant to our family of businesses and that will complement our existing portfolio of solutions. We may also enter into joint ventures and alliances with selected partners to jointly develop and market new products, software and solutions.

Class V Transaction Overview

With our successful transformation and the significant momentum in our business, we believe that this is the right time for us to issue a new class of publicly traded common stock that reflects the full business and value of Dell Technologies. The Class V transaction will significantly simplify our capital structure and further align the interests of holders of all classes of Dell Technologies common stock. In particular, the transaction will afford Class V stockholders the opportunity to participate in the future value creation of Dell Technologies through ownership of the Class C Common Stock (at an exchange ratio of 1.3665 shares of Class C Common Stock for each share of Class V Common Stock), which, unlike the Class V Common Stock, reflects the entire business and all of the assets of Dell Technologies, or to receive $109 in cash for each share of Class V Common Stock (subject to a $9 billion cap and proration as described in this proxy statement/prospectus), representing a significant and immediate 29% premium to the closing price of the Class V Common Stock as of June 29, 2018, the last trading day before the transaction was announced, and a 22% premium to the all-time highest trading price of the Class V Common Stock prior to the announcement of the transaction. Upon the closing of the Class V transaction, the Class V Common Stock will be eliminated and the Class C Common Stock will be publicly listed and will trade on the NYSE.

The Class V transaction will not materially change how Dell Technologies operates today. Our focus will remain on long-term sustainable growth and generation of free cash flow. Our publicly traded subsidiaries will continue to operate and manage their businesses independently while remaining closely aligned with the broader Dell Technologies family of businesses.

Evaluation of the Class V Transaction and Alternative Business Opportunities

Dell Technologies formed a Special Committee of its board of directors, consisting of two independent and disinterested directors, to act solely on behalf of, and solely in the interests of, the Class V stockholders in evaluating the Class V transaction and considering alternative business opportunities. As part of their independent evaluation, which was conducted over a five-month period, the Special Committee retained



 

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independent financial and legal advisors, obtained a fairness opinion from Evercore, its independent financial advisor, sought independent analysis from DISCERN Analytics, Inc., or DISCERN, an independent industry expert, on key aspects of the strategy and financial model underlying the financial projections of Dell Technologies, which analysis is described under “Proposal 1—Adoption of the Merger Agreement—Certain Financial Projections,” and also received feedback from more than 20 Class V stockholders representing nearly 40% of the outstanding shares of Class V Common Stock, which feedback is described under “Proposal 1—Adoption of the Merger Agreement—Background of the Class V Transaction.” Over the course of its evaluation, the Special Committee considered three other distinct business options to maximize Class V stockholder value, namely:

 

   

Maintaining the status quo with the existing ownership structure, under which our Class V Common Stock would remain outstanding;

 

   

Conducting an initial public offering of Class C Common Stock, following which the board of directors would have discretion to convert the Class V Common Stock into Class C Common Stock at a premium of 10%-20% to the then-current trading values, depending on the timing of the conversion; and

 

   

Engaging in a business combination transaction between Dell Technologies and VMware, subject to, among other conditions, approval by the VMware board of directors (including the separate approval of a committee of the VMware board of directors consisting solely of independent and disinterested directors).

Following this comprehensive evaluation and after extensive negotiations with Dell Technologies, the Special Committee determined that this transaction – a negotiated exchange with a cash election option that represents a significant and immediate 29% premium as described above – was in the best interests of the Class V stockholders and recommended that our board of directors approve the merger agreement and the Class V transaction. The merger agreement and the Class V transaction have been approved by the Special Committee and the Dell Technologies board of directors. The Special Committee and the Dell Technologies board of directors unanimously recommend that all Class V stockholders entitled to vote thereon vote in favor of the adoption of the merger agreement pursuant to which the Class V transaction will be effected.

See “Proposal 1—Adoption of the Merger Agreement—Background of the Class V Transaction” and “—Certain Financial Projections” for more details regarding the evaluation of the Class V transaction by the Special Committee.

Recent Developments

Since the announcement of the Class V transaction, the Company has conducted meetings with various Class V stockholders. In those meetings a number of Class V stockholders expressed concerns regarding the economic terms of the Class V transaction. The board of directors and the Special Committee continue to believe that the Class V transaction is in the best interests of the Class V stockholders and the Company remains committed to the Class V transaction. However, in light of such feedback and the continued strength of the Company’s financial and operational performance, in late September 2018, the Company began to re-evaluate an initial public offering of the Class C Common Stock as a potential contingency plan in the event that the Class V transaction is not consummated. As part of that evaluation, representatives of the Company and Silver Lake Partners recently met with certain investment banks to explore a potential initial public offering. The decision to explore a potential initial public offering was not the result of any specific feedback received from Class V stockholders regarding such a potential offering. If the Class V transaction is not consummated, there is no assurance that the board of directors will determine to proceed with an initial public offering of the Class C Common Stock.



 

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Ownership and Corporate Structure

The following chart illustrates the legal ownership, economic interest and corporate structure with respect to the Company and VMware as of August 31, 2018 (1) prior to the Class V transaction and (2) on a pro forma basis giving effect to the Class V transaction (assuming that all Class V stockholders elect to receive shares of Class C Common Stock) as though it had been completed as of such date.

 

Current Structure

Prior to the Class V Transaction

  

Pro Forma Structure

Giving Effect to the Class V Transaction

 

LOGO

  

 

LOGO

 

(1)

Represents economic interest.

(2)

Represents voting power.

(3)

Represents the economic interest in the Class V Group that is attributable to the DHI Group. As of August 31, 2018, approximately 331 million shares of VMware common stock were held by the Class V Group, of which approximately 38.9% was attributable to the DHI Group.

(4)

As of August 31, 2018, the approximately 331 million shares of VMware common stock held by the Class V Group represented approximately 80.9% of the total outstanding VMware common stock. As indicated above, as of such date, approximately 38.9% of the Class V Group was attributable to the DHI Group and approximately 61.1% of the Class V Group was attributable to the holders of Class V Common Stock.

(5)

We have applied to list our shares of Class C Common Stock for trading on the NYSE upon the completion of the Class V transaction.

(6)

Assumes that all Class V stockholders elect to receive shares of Class C Common Stock. If Class V stockholders elect in the aggregate to receive $9 billion or more of cash, holders of Class A Common Stock, holders of Class B Common Stock and holders of Class C Common Stock would hold approximately 56.2% of the economic interest and 72.5% of the voting power, 18.8% of the economic interest and 24.3% of the voting power and 25.0% of the economic interest and 3.2% of the voting power, respectively, of the outstanding shares of our common stock.



 

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Corporate Information

Dell Technologies Inc. is a holding company that conducts its business operations through Dell Inc. and its direct and indirect subsidiaries. Dell Technologies’ principal executive offices are located at One Dell Way, Round Rock, Texas 78682, and its telephone number is (512) 728-7800. Dell Technologies’ website address is www.delltechnologies.com. The information contained in, or that may be accessed through, Dell Technologies’ website is not incorporated into this proxy statement/prospectus.



 

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Summary Historical and Pro Forma Financial and Other Data

The following tables present the Company’s summary historical consolidated financial data.

The consolidated balance sheet data as of February 2, 2018 and February 3, 2017 and the summary consolidated results of operations and cash flow data for the fiscal years ended February 2, 2018 and February 3, 2017 have been derived from the Company’s audited consolidated financial statements included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and incorporated by reference into this proxy statement/prospectus. The consolidated balance sheet data as of August 3, 2018 and the consolidated results of operations and cash flow data for the six months ended August 3, 2018 and August 4, 2017 have been derived from the Company’s unaudited consolidated financial statements included in the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC and incorporated by reference into this proxy statement/prospectus. The summary historical consolidated financial data as of and for the six months ended August 3, 2018 and August 4, 2017 are unaudited, but include, in the opinion of our management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of such data.

The consolidated results of EMC are included in the Company’s consolidated results for Fiscal 2018, the portion of Fiscal 2017 subsequent to the closing of the EMC merger on September 7, 2016 and the six months ended August 3, 2018 and August 4, 2017. As a result of the EMC merger, the Company’s results of operations, comprehensive income (loss) and cash flows for periods subsequent to the closing of the EMC merger are not directly comparable to the results of operations, comprehensive income (loss) and cash flows for periods prior to the closing of the EMC merger, as the results of the acquired businesses are only included in the consolidated results of the Company from the date of acquisition.

As disclosed in the Company’s quarterly report on Form 10-Q for the quarterly period ended May 4, 2018, the Company adopted the new accounting standards for revenue recognition set forth in ASC 606, “Revenue From Contracts With Customers,” using the full retrospective method. On August 6, 2018, the Company filed a current report on Form 8-K to present the Company’s audited consolidated financial statements for the fiscal years ended February 2, 2018 and February 3, 2017 on a basis consistent with the new revenue standard. In addition, the consolidated statements of cash flows for the fiscal years ended February 2, 2018 and February 3, 2017 have been recast in accordance with the new accounting standards as set forth in ASC 230, “Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments” and “Statement of Cash Flows—Restricted Cash,” which the Company adopted during the three months ended May 4, 2018.

The summary historical consolidated financial data presented below are not necessarily indicative of the results to be expected for any future period. The summary historical consolidated financial data do not reflect the capital structure of the Company following the completion of the Class V transaction and are not indicative of results that would have been reported had the transactions contemplated by the merger agreement and the Class V transaction occurred as of the dates indicated.



 

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The summary historical consolidated financial data presented below should be read in conjunction with “Selected Historical Consolidated Financial Data” included elsewhere in this proxy statement/prospectus and the Company’s consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC, in each case incorporated by reference herein.

 

     Six Months Ended     Fiscal Year Ended  
     August 3,
2018
    August 4,
2017
    February 2,
2018
    February 3,
2017(a)
 
     (in millions, except per share data)  

Results of Operations and Cash Flow Data:

        

Net revenue

   $ 44,298     $ 37,521     $ 79,040     $ 62,164  

Gross margin

   $ 12,001     $ 9,425     $ 20,537     $ 13,649  

Operating expense

   $ 12,167     $ 11,362     $ 22,953     $ 16,039  

Operating loss

   $ (166   $ (1,937   $ (2,416   $ (2,390

Loss from continuing operations before income taxes

   $ (1,091   $ (3,054   $ (4,769   $ (4,494

Loss from continuing operations

   $ (999   $ (1,942   $ (2,926   $ (3,074

Cash flows from operating activities

   $ 3,792     $ 2,105     $ 6,843     $ 2,367  

Earnings (loss) per share attributable to Dell Technologies Inc.:

        

Continuing operations—Class V Common Stock—basic

   $ 3.97     $ 1.60     $ 1.63     $ 1.36  

Continuing operations—DHI Group—basic

   $ (3.39   $ (3.94   $ (5.61   $ (7.19

Continuing operations—Class V Common Stock—diluted

   $ 3.91     $ 1.59     $ 1.61     $ 1.35  

Continuing operations—DHI Group—diluted

   $ (3.40   $ (3.95   $ (5.62   $ (7.19

Number of weighted-average shares outstanding:

        

Class V Common Stock—basic

     199       205       203       217  

DHI Group—basic

     568       566       567       470  

Class V Common Stock—diluted

     199       205       203       217  

DHI Group—diluted

     568       566       567       470  


 

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     As of  
     August 3,
2018
     February 2,
2018
     February 3,
2017
 
     (in millions)  

Balance Sheet Data:

  

Cash and cash equivalents

   $ 15,312      $ 13,942      $ 9,474  

Total assets

   $ 123,381      $ 124,193      $ 119,672  

Short-term debt

   $ 9,144      $ 7,873      $ 6,329  

Long-term debt

   $ 40,414      $ 43,998      $ 43,061  

Total Dell Technologies Inc. stockholders’ equity

   $ 8,563      $ 11,719      $ 14,757  

Other Key Metrics:

        

Cash, cash equivalents and short-term investments

   $ 17,816      $ 16,129      $ 11,449  

Core debt(b):

        

Senior secured credit facilities and first lien notes(c)

   $ 30,459      $ 30,595      $ 31,638  

Unsecured notes and debentures(d)

   $ 1,952      $ 2,452      $ 2,453  

Senior notes(e)

   $ 3,250      $ 3,250      $ 3,250  

EMC notes(f)

   $ 3,000      $ 5,500      $ 5,500  

DFS allocated debt(g)

   $ (1,563)      $ (1,892    $ (1,675
  

 

 

    

 

 

    

 

 

 

Total core debt

   $ 37,098      $ 39,905      $ 41,166  

DFS related debt(h)

        

DFS debt(i)

   $ 5,586      $ 4,796      $ 3,464  

DFS allocated debt(g):

   $ 1,563      $ 1,892      $ 1,675  
  

 

 

    

 

 

    

 

 

 

Total DFS related debt

   $ 7,149      $ 6,688      $ 5,139  
  

 

 

    

 

 

    

 

 

 

Other debt(j)

   $ 2,057      $ 2,054      $ 4,051  

Unrestricted subsidiary debt(k)

   $ 4,000      $ 4,047        —    
  

 

 

    

 

 

    

 

 

 

Total debt, principal amount

   $ 50,304      $ 52,694      $ 50,356  
  

 

 

    

 

 

    

 

 

 

Total debt, principal amount excluding unrestricted subsidiary debt

   $ 46,304      $ 48,647      $ 50,356  

 

     Six Months Ended      Fiscal Year Ended  
     August 3,
2018
     August 4,
2017
     February 2,
2018
     February 3,
2017(a)
 
     (in millions)  

Other Financial Data:

           

Non-GAAP net revenue(l)

   $ 44,665      $ 38,211      $ 80,309      $ 63,316  

Non-GAAP gross margin(l)

   $ 13,985      $ 12,060      $ 25,668      $ 17,481  

Non-GAAP operating expenses(l)

   $ 9,851      $ 8,769      $ 17,896      $ 11,534  

Non-GAAP operating income(l)

   $ 4,134      $ 3,291      $ 7,772      $ 5,947  

Non-GAAP net income from continuing operations(l)

   $ 2,523      $ 1,873      $ 4,370      $ 3,322  

EBITDA(m)

   $ 3,679      $ 2,417      $ 6,218      $ 2,450  

Adjusted EBITDA(m)

   $ 4,842      $ 3,975      $ 9,134      $ 6,775  

Levered Free Cash Flow(n)

   $ 3,071      $ 1,357      $ 5,262      $ 1,461  

 

(a)

The fiscal year ended February 3, 2017 included 53 weeks.

(b)

Core debt consists of the total principal amount of our debt less (i) DFS related debt, (ii) other debt and (iii) unrestricted subsidiary debt.

(c)

Comprises debt under our senior secured credit facilities and our senior secured notes issued in connection with the EMC merger.



 

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(d)

Represents debt under the unsecured notes and debentures that were issued prior to the going-private transaction.

(e)

Represents the unsecured senior notes issued in connection with the EMC merger.

(f)

Represents the senior notes issued by EMC prior to the EMC merger.

(g)

We approximate the amount of our DFS allocated debt by applying a 7:1 debt to equity ratio to our financing receivables balance, based on the underlying credit quality of the assets.

(h)

See note 5 of the notes to the unaudited consolidated financial statements included in our quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 for more information about our DFS related debt.

(i)

DFS debt primarily represents debt from our securitization and structured financing programs. To fund expansion of the DFS business, we balance the use of our securitization and structured financing programs with other sources of liquidity.

(j)

As of August 3, 2018 and February 2, 2018, other debt primarily consisted of our $2.0 billion margin loan facility due April 2022. As of February 3, 2017, other debt primarily consisted of our $2.5 billion senior margin bridge facility due September 2017 and $1.5 billion senior secured note bridge facility due September 2017, each of which were repaid during Fiscal 2018.

(k)

Primarily represents the debt of VMware (including the VMware Notes), Pivotal and their respective subsidiaries, each of which is an unrestricted subsidiary for purposes of the existing debt of Dell Technologies. Neither Dell Technologies nor any of its subsidiaries, other than VMware, is obligated to make payment on the VMware Notes.

(l)

Non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP net income from continuing operations are not measurements of financial performance prepared in accordance with GAAP. See “About This Proxy Statement/Prospectus—Use of Non-GAAP Financial Measures” included elsewhere in this proxy statement/prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC, in each case incorporated by reference into this proxy statement/prospectus, for further discussion of the adjustments and information on the reasons why our management considers it useful to exclude certain items from our GAAP results, as well as limitations to the use of the non-GAAP financial measures presented in this proxy statement/prospectus.



 

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The following table presents a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP measure for the periods indicated:

 

     Six Months Ended      Fiscal Year Ended  
     August 3,
2018
     August 4,
2017
     February 2,
2018
     February 3,
2017(1)
 
     (in millions)  

Net revenue

   $ 44,298      $ 37,521      $ 79,040      $ 62,164  

Non-GAAP adjustment:

           

Impact of purchase accounting

     367        690        1,269        1,152  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-GAAP adjustments

     367        690        1,269        1,152  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net revenue

   $ 44,665      $ 38,211      $ 80,309      $ 63,316  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

   $ 12,001      $ 9,425      $ 20,537      $ 13,649  

Non-GAAP adjustments:

           

Amortization of intangibles

     1,428        1,870        3,694        1,653  

Impact of purchase accounting

     378        713        1,312        1,979  

Transaction-related expenses

     137        17        24        43  

Other corporate expenses

     41        35        101        157  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-GAAP adjustments

     1,984        2,635        5,131        3,832  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP gross margin

   $ 13,985      $ 12,060      $ 25,668      $ 17,481  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

   $ 12,167      $ 11,362      $ 22,953      $ 16,039  

Non-GAAP adjustments:

           

Amortization of intangibles

     (1,620      (1,646      (3,286      (2,028

Impact of purchase accounting

     (59      (116      (234      (287

Transaction-related expenses

     (133      (312      (478      (1,445

Other corporate expenses

     (504      (519      (1,059      (745
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-GAAP adjustments

     (2,316      (2,593      (5,057      (4,505
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP operating expenses

   $ 9,851      $ 8,769      $ 17,896      $ 11,534  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating loss

   $ (166    $ (1,937    $ (2,416    $ (2,390

Non-GAAP adjustments:

           

Amortization of intangibles

     3,048        3,516        6,980        3,681  

Impact of purchase accounting

     437        829        1,546        2,266  

Transaction-related expenses

     270        329        502        1,488  

Other corporate expenses

     545        554        1,160        902  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-GAAP adjustments

     4,300        5,228        10,188        8,337  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP operating income

   $ 4,134      $ 3,291      $ 7,772      $ 5,947  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss from continuing operations

   $ (999    $ (1,942    $ (2,926    $ (3,074

Non-GAAP adjustments:

           

Amortization of intangibles

     3,048        3,516        6,980        3,681  

Impact of purchase accounting

     437        829        1,546        2,266  

Transaction-related expenses

     270        329        502        1,485  

Other corporate expenses

     545        554        1,160        902  

Aggregate adjustment for income taxes

     (778      (1,413      (2,892      (1,938
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-GAAP adjustments

     3,522        3,815        7,296        6,396  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income from continuing operations

   $ 2,523      $ 1,873      $ 4,370      $ 3,322  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1)

The fiscal year ended February 3, 2017 included 53 weeks.



 

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(m)

EBITDA and Adjusted EBITDA are not measurements of financial performance prepared in accordance with GAAP. See “About This Proxy Statement/Prospectus—Use of Non-GAAP Financial Measures” included elsewhere in this proxy statement/prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC, in each case incorporated by reference into this proxy statement/prospectus, for further discussion of the adjustments and information on the reasons why our management considers it useful to exclude certain items from our GAAP results, as well as limitations to the use of the non-GAAP financial measures presented in this proxy statement/prospectus.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss from continuing operations for the periods indicated:

 

     Six Months Ended     Fiscal Year Ended  
     August 3,
2018
    August 4,
2017
    February 2,
2018
    February 3,
2017(1)
 
     (in millions)  

Net loss from continuing operations

   $ (999   $ (1,942   $ (2,926   $ (3,074

Adjustments:

        

Interest and other, net(2)

     925       1,117       2,353       2,104  

Income tax provision (benefit)

     (92     (1,112     (1,843     (1,420

Depreciation and amortization

     3,845       4,354       8,634       4,840  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 3,679     $ 2,417     $ 6,218     $ 2,450  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 3,679     $ 2,417     $ 6,218     $ 2,450  

Adjustments:

        

Stock-based compensation expense

     415       409     $ 835     $ 392  

Impact of purchase accounting(3)

     367       692       1,274       1,898  

Transaction-related expenses(4)

     251       329       502       1,525  

Other corporate expenses(5)

     130       128       305       510  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,842     $ 3,975     $ 9,134     $ 6,775  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1)

The fiscal year ended February 3, 2017 included 53 weeks.

  (2)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Interest and Other, Net” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC, in each case incorporated by reference into this proxy statement/prospectus for more information on the components of interest and other, net.

  (3)

This amount includes the non-cash purchase accounting adjustments related to the EMC merger and the going-private transaction.

  (4)

Transaction-related expenses consist of acquisition, integration and divestiture related costs.

  (5)

Consists of severance and facility action costs.

 

(n)

Levered Free Cash Flow is not a liquidity measure prepared in accordance with GAAP. See “About This Proxy Statement/Prospectus—Use of Non-GAAP Financial Measures” included elsewhere in this proxy statement/prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” included in the Company’s current report on Form 8-K filed with the SEC on August 6, 2018 and the Company’s quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 filed with the SEC, in each case incorporated by reference into this proxy statement/prospectus, for further discussion of the adjustments and information on the reasons why our management



 

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  considers it useful to exclude certain items from our GAAP results, as well as limitations to the use of the non-GAAP financial measures presented in this proxy statement/prospectus.

The following table presents a reconciliation of Levered Free Cash flow to cash flows from operating activities for the periods indicated:

 

     Six Months Ended      Fiscal Year Ended  
     August 3,
2018
     August 4,
2017
     February 2,
2018
    February 3,
2017(1)
 
     (in millions)  

Cash flows from operating activities

   $ 3,792      $ 2,105      $ 6,843     $ 2,367  

Adjustments:

          

Capital expenditures(2)

     (561      (561      (1,212     (699

Capitalized software development costs

     (160      (187      (369     (207
  

 

 

    

 

 

    

 

 

   

 

 

 

Levered Free Cash Flow

   $ 3,071      $ 1,357      $ 5,262     $ 1,461  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

  (1)

The fiscal year ended February 3, 2017 included 53 weeks.

  (2)

Includes capital expenditures for property, plant and equipment.



 

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The following tables present summary unaudited pro forma condensed consolidated financial data for the Company as of the dates and for the periods indicated. The unaudited pro forma condensed consolidated statements of loss for the six months ended August 3, 2018 and the fiscal year ended February 2, 2018 give effect to the transactions contemplated by the merger agreement and the Class V transaction as if they had occurred on February 4, 2017, the first day of the fiscal year ended February 2, 2018. The unaudited pro forma condensed consolidated statement of financial position gives effect to the transactions contemplated by the merger agreement and the Class V transaction as if they had occurred on August 3, 2018. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The summary unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The summary unaudited pro forma condensed consolidated financial information does not purport to represent what the Company’s results of operations or financial condition would have been had the transactions contemplated by the merger agreement and the Class V transaction actually occurred on the dates indicated, and does not purport to project the Company’s results of operations or financial condition for any future period or as of any future date. See “Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

     Six Months Ended August 3, 2018  
     Historical     Pro Forma—
Maximum Cash
Election (a)
    Pro
Forma—

No Cash
Election (b)
 
     (in millions, except per share amounts)  

Results of Operations Data:

  

Net loss

   $ (999   $ (1,082   $ (1,082

Net loss attributable to Dell Technologies Inc.

   $ (1,135   $ (1,202   $ (1,202

Pro forma earnings (loss) per share attributable to Dell Technologies Inc.—basic:

      

Class V Common Stock

   $ 3.97     $ —       $ —    

DHI Group

   $ (3.39   $ (1.65   $ (1.43

Pro forma earnings (loss) per share attributable to Dell Technologies Inc.—diluted:

      

Class V Common Stock

   $ 3.91     $ —       $ —    

DHI Group

   $ (3.40   $ (1.68   $ (1.46

Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc.—basic(c):

      

Class V Common Stock

     $ —       $ —    

DHI Group

     $ 2.86     $ 2.48  

Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc.—diluted(c):

      

Class V Common Stock

     $ —       $ —    

DHI Group

     $ 2.72     $ 2.37  

 

(a)

Assumes the holders of Class V Common Stock make cash elections for $9 billion or more in the Class V transaction.

(b)

Assumes all holders of Class V Common Stock elect to receive shares of Class C Common Stock in the Class V transaction.

(c)

Adjusted pro forma earnings (loss) per share amounts are only presented on pro forma amounts. See tables below for the adjusted pro forma numerator and denominator used in the computation of adjusted pro forma basic and diluted earnings (loss) per share. Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc. is not a measurement of financial performance prepared in accordance with GAAP. See “About This Proxy Statement/Prospectus—Use of Non-GAAP Financial Measures” included elsewhere in this proxy statement/prospectus for further discussion of the adjustments and information on the reasons why our management considers it useful to exclude certain items from our GAAP results, as well as limitations to the use of the non-GAAP financial measures presented in this proxy statement/prospectus.



 

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     As of August 3, 2018  
     Historical      Pro Forma—
Maximum Cash
Election (a)
     Pro
Forma—

No Cash
Election(b)
 
     (in millions, except per share amounts)  

Balance Sheet Data:

  

Cash and cash equivalents

   $ 15,312      $ 9,356      $ 18,356  

Short-term investments

   $ 2,504      $ —        $ —    

Total current assets

   $ 43,125      $ 34,665      $ 43,665  

Long-term investments

   $ 3,649      $ 1,026      $ 1,026  

Total assets

   $ 123,381      $ 112,298      $ 121,298  

Total stockholders’ equity

   $ 15,211      $ 4,128      $ 13,128  

 

(a)

Assumes the holders of Class V Common Stock make cash elections for $9 billion or more in the Class V transaction.

(b)

Assumes all holders of Class V Common Stock elect to receive shares of Class C Common Stock in the Class V transaction. In the event that holders of Class V Common Stock make cash elections in an aggregate amount of less than $9 billion, we plan to use such remaining cash (up to $9 billion) to repurchase shares of Class C Common Stock or pay down debt. The pro forma information presented above does not reflect any such use of cash, as it is not directly related to the Class V transaction.

 

     Fiscal Year Ended February 2, 2018  
     Historical     Pro Forma—
Maximum Cash
Election(a)
    Pro
Forma—

No Cash
Election(b)
 
     (in millions, except per share amounts)  

Results of Operations Data:

  

Net loss

   $ (2,926   $ (3,004   $ (3,004

Net loss attributable to Dell Technologies Inc.

   $ (2,849   $ (2,912   $ (2,912

Pro forma earnings (loss) per share attributable to Dell Technologies Inc.—basic:

      

Class V Common Stock

   $ 1.63     $ —       $ —    

DHI Group

   $ (5.61   $ (4.01   $ (3.47

Pro forma earnings (loss) per share attributable to Dell Technologies Inc.—diluted:

      

Class V Common Stock

   $ 1.61     $ —       $ —    

DHI Group

   $ (5.62   $ (4.02   $ (3.48

Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc.—basic(c):

      

Class V Common Stock

     $ —       $ —    

DHI Group

     $ 5.35     $ 4.64  

Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc.—diluted(c):

      

Class V Common Stock

     $ —       $ —    

DHI Group

     $ 5.20     $ 4.52  

 

(a)

Assumes the holders of Class V Common Stock make cash elections for $9 billion or more in the Class V transaction.

(b)

Assumes all holders of Class V Common Stock elect to receive shares of Class C Common Stock in the Class V transaction.



 

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(c)

Adjusted pro forma earnings (loss) per share amounts are only presented on pro forma amounts. See tables below for the adjusted pro forma numerator and denominator used in the computation of adjusted pro forma basic and diluted earnings (loss) per share. Adjusted pro forma earnings (loss) per share attributable to Dell Technologies Inc. is not a measurement of financial performance prepared in accordance with GAAP. See “About This Proxy Statement/Prospectus—Use of Non-GAAP Financial Measures” included elsewhere in this proxy statement/prospectus for further discussion of the adjustments and information on the reasons why our management considers it useful to exclude certain items from our GAAP results, as well as limitations to the use of the non-GAAP financial measures presented in this proxy statement/prospectus.

The following table presents a reconciliation of pro forma net loss to adjusted pro forma net income attributable to Dell Technologies Inc. for each of the periods presented. The pro forma net loss and adjusted pro forma net income amounts are the same for both the maximum cash and no cash elections.

 

     Six Months Ended
August 3, 2018
    Fiscal Year Ended
February 2, 2018
 
     (in millions)  

Pro forma net loss

   $ (1,082   $ (3,004

Less: Pro forma net income (loss) attributable to non-controlling interests

   $ 120     $ (92
  

 

 

   

 

 

 

Pro forma net loss attributable to Dell Technologies Inc.

   $ (1,202   $ (2,912

Total Non-GAAP adjustments

   $ 3,522     $ 7,296  

Less: Total Non-GAAP adjustments attributable to non-controlling interests

   $ 235     $ 491  
  

 

 

   

 

 

 

Adjusted pro forma net income attributable to Dell Technologies Inc.

   $ 2,085     $ 3,893  
  

 

 

   

 

 

 

The following table sets forth the adjusted pro forma numerator and denominator used in the computation of adjusted pro forma basic and diluted earnings (loss) per share for each of the periods presented:

 

     Six Months Ended
August 3, 2018
    Fiscal Year Ended
February 2, 2018
 
     (in millions)  

Adjusted Pro Forma Numerator: Adjusted Pro Forma Net Income Attributable to Dell Technologies Inc.

    

Adjusted pro forma net income—maximum cash election—basic

   $ 2,085     $ 3,893  

Incremental dilution from VMware, Inc. attributable to Dell Technologies Inc.(a)

   $ (13   $ (27

Adjusted pro forma net income—maximum cash election—diluted

   $ 2,072     $ 3,866  

Adjusted Pro Forma Numerator: Adjusted Pro Forma Net Income Attributable to Dell Technologies Inc.

    

Adjusted pro forma net income—no cash election—basic

   $ 2,085     $ 3,893  

Incremental dilution from VMware, Inc. attributable to Dell Technologies Inc.(a)

   $ (13   $ (27

Adjusted pro forma net income—no cash election—diluted

   $ 2,072     $ 3,866  

Adjusted Pro Forma Denominator: Dell Technologies Inc. weighted-average shares outstanding:

    

Weighted-average shares outstanding—historical—basic(b)

     568       567  

New shares of Class C Common Stock—basic(c)

     160       160  

Weighted-average shares outstanding—maximum cash election—
basic

     728       727  

Incremental dilution from stock incentive plans(d)

     33       16  


 

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     Six Months Ended
August 3, 2018
     Fiscal Year Ended
February 2, 2018
 
     (in millions)  

Weighted-average shares outstanding—maximum cash election—diluted

     761        743  

Adjusted Pro Forma Denominator: Dell Technologies Inc. weighted-average shares outstanding:

     

Weighted-average shares outstanding—historical—basic(b)

     568        567  

New shares of Class C Common Stock—basic(c)

     272        272  

Weighted-average shares outstanding—no cash election—basic

     840        839  

Incremental dilution from stock incentive plans(d)

     33        16  

Weighted-average shares outstanding—no cash election—diluted

     873        855  

 

(a)

The incremental dilution from VMware represents the impact of VMware’s dilutive securities on the diluted earnings (loss) per share of the Company’s common stock and is calculated by multiplying the difference between VMware’s basic and diluted earnings (loss) per share by the number of shares of VMware common stock held by the Company.

(b)

Reflects shares of Class A Common Stock, shares of Class B Common Stock and shares of Class C Common Stock that were outstanding before giving effect to the transactions contemplated by the merger agreement and the Class V transaction.

(c)

See “Unaudited Pro Forma Condensed Consolidated Financial Statements” for the calculation of new shares of Class C Common Stock to be issued in the Class V transaction.

(d)

The incremental dilution from stock incentive plans represents the impact of the potentially dilutive securities outstanding during the period, as calculated using the treasury stock method.



 

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Class V Transaction Summary

The Companies (See page 99)

Dell Technologies Inc.

Dell Technologies Inc. is a leading global end-to-end technology provider, with a comprehensive portfolio of complementary IT hardware, software and service solutions spanning both traditional infrastructure and emerging, multi-cloud technologies that enable our customers to meet the business needs of tomorrow. We operate eight complementary businesses: our Infrastructure Solutions Group and our Client Solutions Group, as well as VMware, Pivotal, SecureWorks, RSA Security, Virtustream and Boomi. Dell Technologies conducts its business operations through Dell Inc. and its direct and indirect subsidiaries.

Teton Merger Sub Inc.

Teton Merger Sub Inc. is a Delaware corporation and a wholly owned subsidiary of Dell Technologies. Merger Sub was incorporated on June 29, 2018 solely for the purpose of effecting the merger pursuant to which the Class V transaction will be completed. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

The Class V Transaction and the Merger Agreement (See pages 140 and 230)

The Class V Transaction (See page 140)

Dell Technologies is offering the Class V stockholders the option to elect to receive for each share of Class V Common Stock either (1) 1.3665 shares of Class C Common Stock or (2) $109 in cash, without interest, subject to proration. If a holder fails to properly elect which form of consideration to receive, such holder will be deemed to have made a share election and will receive solely shares of Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock).

The aggregate amount of cash consideration to be received by Class V stockholders in the Class V transaction may not exceed $9 billion. If holders of Class V Common Stock making cash elections elect in the aggregate to receive more than $9 billion in cash, such cash elections will be subject to proration, and a portion of the consideration such holders requested in cash will instead be received in the form of shares of Class C Common Stock. For additional information about proration, see “The Merger Agreement—Transaction Consideration and Elections and Election to Receive Class C Common Stock or Cash Consideration—Proration of Aggregate Cash Consideration.

The Company expects to issue between approximately 272,420,782 shares of Class C Common Stock (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) and 159,590,507 shares of Class C Common Stock (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash). Following the Class V transaction, the Class V Common Stock will be delisted from the NYSE and cease to be publicly traded, and the Class C Common Stock will be listed on the NYSE under the symbol “DELL.”

The Class C Common Stock will be entitled to one vote per share with respect to matters to be voted upon by the stockholders of the Company and will represent an interest in Dell Technologies’ entire business and, unlike the Class V Common Stock, will not track the performance of any distinct assets or business.

The Merger Agreement (See page 230)

The Class V transaction will be implemented through the merger agreement, pursuant to which, upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the DGCL, Merger



 

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Sub will merge with and into Dell Technologies at the effective time of the merger. As a result of the merger, the separate corporate existence of Merger Sub will cease and Dell Technologies will continue as the surviving corporation of the merger.

Upon the closing of the merger, each share of Class V Common Stock that is issued and outstanding immediately prior to the effective time of the merger shall be cancelled and converted into the right to receive, at the holder’s election, (1) 1.3665 shares of Class C Common Stock or (2) $109 in cash, without interest, subject to proration as described elsewhere in this proxy statement/prospectus.

A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus and a copy of the amended and restated Company certificate, which is part of the merger agreement, is attached as Exhibit A to the merger agreement. You are urged to read the merger agreement (including the amended and restated Company certificate) in its entirety because it is the legal document that governs the merger. For more information on the merger and the merger agreement, see “Proposal 1—Adoption of the Merger Agreement” and “The Merger Agreement.”

The Class V transaction will not be completed without the adoption of both the merger agreement and the amended and restated Company certificate by Dell Technologies stockholders. If the merger agreement and the amended and restated Company certificate are each adopted by our stockholders at the special meeting, we expect to complete the merger, pursuant to which the Class V transaction will be effected, promptly after the other conditions to the completion of the merger are satisfied or (to the extent legally permitted) waived in accordance with the merger agreement. As of the date of this proxy statement/prospectus, we expect to complete the merger and the Class V transaction during the fourth quarter of calendar year 2018. For additional information about the conditions that must be satisfied (or to the extent legally permitted) waived in accordance with the merger agreement prior to the completion of the merger, see “The Merger Agreement—Conditions to the Merger.”

Each share of Class A Common Stock, Class B Common Stock and Class C Common Stock that is issued and outstanding immediately prior to the effective time of the merger will remain unaffected by the merger and will continue to be an issued and outstanding shares of Class A Common Stock, Class B Common Stock or Class C Common Stock, respectively.

Recommendation of the Special Committee (See page 167)

After consideration and consultation with its advisors, the Special Committee, which was established to act solely on behalf of, and solely in the interests of, the holders of Class V Common Stock, has unanimously determined that the merger is advisable and in the best interest of the holders of Class V Common Stock, and has unanimously approved the merger agreement and transactions contemplated thereby, including the Class V transaction, the merger and the amended and restated Company certificate.

The Special Committee unanimously recommends that all holders of the Class V Common Stock entitled to vote thereon vote “FOR” the adoption of the merger agreement and “FOR” the adoption of the amended and restated Company certificate, which proposes certain changes to the corporate governance structure of the Company in connection with the Class V transaction. For the factors considered by the Special Committee in reaching this decision and a more detailed discussion of the recommendation, see “Proposal 1—Adoption of the Merger Agreement—Recommendation of the Special Committee.

Recommendation of the Board of Directors (See page 171)

After consideration and consultation with its advisors, the Dell Technologies board of directors has unanimously determined that the merger is advisable and in the best interests of the Company and its



 

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stockholders, and has unanimously approved the merger agreement and transactions contemplated thereby, including the Class V transaction, the merger and the amended and restated Company certificate.

The Dell Technologies board of directors unanimously recommends that all stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adoption of the amended and restated Company certificate, which proposes certain changes to the corporate governance structure of the Company in connection with the Class V transaction, “FOR” the approval of the transaction-related compensation proposal and “FOR” the approval of the adjournment proposal. For the factors considered by the board of directors in reaching this decision and a more detailed discussion of the recommendation, see “Proposal 1—Adoption of the Merger Agreement—Recommendation of the Board of Directors.

Opinion of Evercore Group L.L.C. (See page 175)

At a meeting of the Special Committee held on July 1, 2018, Evercore rendered its oral opinion to the Special Committee, which opinion was subsequently confirmed by delivery of a written opinion dated July 1, 2018, that, as of the date thereof, and based upon and subject to the factors, procedures, assumptions, qualifications, limitations and conditions set forth in its written opinion, the transaction consideration was fair, from a financial point of view, to the Class V stockholders (other than Dell Technologies and its affiliates).

The full text of Evercore’s written opinion, dated July 1, 2018, which sets forth, among other things, the factors considered, procedures followed, assumptions made and qualifications and limitations on the scope of review undertaken by Evercore in rendering its opinion, is attached as Annex C to this proxy statement/prospectus and is incorporated by reference in its entirety. Evercore’s opinion was addressed to, and for the information and benefit of, the Special Committee in connection with its evaluation of the Class V transaction. Evercore’s opinion did not address the relative merits or timing of the Class V transaction as compared to other business or financial strategies that might be available to Dell Technologies or the Special Committee, nor did it address the underlying business decision of Dell Technologies or the Special Committee to engage in the Class V transaction or the price at which any shares of Dell Technologies, VMware or any other entity will trade at any time, including following the announcement or completion of the Class V transaction. Evercore’s opinion did not constitute a recommendation to the board of directors, the Special Committee or any other persons in respect of the Class V transaction, including as to how any Class V stockholder should vote or act in respect of the Class V transaction.

Opinion of Goldman Sachs & Co. LLC (See page 188)

Goldman Sachs delivered its opinion to Dell Technologies’ board of directors that, as of July 1, 2018 and based upon and subject to the factors and assumptions set forth therein, the aggregate consideration to be paid by Dell Technologies in the Class V transaction for all of the shares of Class V Common Stock pursuant to the merger agreement was fair from a financial point of view to Dell Technologies.

The full text of the written opinion of Goldman Sachs, dated July 1, 2018, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this proxy statement/prospectus. Goldman Sachs provided advisory services and its opinion for the information and assistance of Dell Technologies’ board of directors in connection with its consideration of the Class V transaction. The Goldman Sachs opinion is not a recommendation as to how any holder of Class V Common Stock or any other class of Dell Technologies common stock should vote with respect to the Class V transaction or any other matter. Pursuant to an engagement letter between Dell Technologies and Goldman Sachs, Dell Technologies has agreed to pay Goldman Sachs a transaction fee of $70 million, all of which is contingent upon consummation of the Class V transaction.



 

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Special Cash Dividend by VMware (See page 201)

In connection with the merger agreement and the VMware Agreement, the board of directors of VMware declared a conditional $11 billion one-time special cash dividend pro rata to holders of VMware common stock. Immediately prior to the completion of the Class V transaction, subject to approval and the satisfaction of other conditions of the Class V transaction, as well as certain other conditions described below, VMware will pay the special cash dividend to its stockholders. Approximately $8.92 billion of the VMware cash dividend will be received by Dell Technologies and used to fund all or substantially all of the cash consideration paid to holders of the Class V Common Stock in the Class V transaction. Dell Technologies will fund any remaining cash consideration, which is not expected to be material, from cash on hand.

The payment of the VMware special dividend is conditioned on the satisfaction of a number of conditions, including, among others, that (1) the stockholders of the Company adopt the merger agreement on or prior to January 18, 2019, (2) the Company deliver an officer’s certificate stating, among other things, that all conditions to closing the merger set forth in the merger agreement and described in greater detail under “The Merger Agreement—Conditions to the Merger” (including stockholder adoption of the merger agreement and the amended and restated Company certificate) other than the payment of the VMware special dividend have been satisfied or (to the extent permitted by the merger agreement) irrevocably waived, (3) the board of directors of VMware and the VMware special committee have received an updated opinion from a nationally recognized expert addressing certain matters described in greater detail under “Proposal 1—Adoption of the Merger Agreement—Special Cash Dividend by VMware—Conditions to Payment” and (4) the board of directors of VMware and the VMware special committee have determined that VMware (on a consolidated basis) has sufficient surplus under the DGCL for the payment of the VMware special dividend and meets certain solvency standards and all of VMware’s subsidiaries that must distribute cash or otherwise pass proceeds to VMware in order to enable VMware to pay the VMware special dividend meet all solvency and legal adequacy requirements to dividend, distribute, loan or otherwise transfer such cash amounts. See “Proposal 1—Adoption of the Merger Agreement—Special Cash Dividend by VMware—Conditions to Payment.

Conditions to the Merger (See page 243)

The respective obligations of each party to effect the merger are subject to the satisfaction or (to the extent permitted by law) waiver by Dell Technologies and Merger Sub on or prior to the date closing occurs of the following conditions:

 

   

the adoption of the merger agreement and transactions contemplated thereby and the adoption of the amended and restated Company certificate, in each case, by the required vote of the Dell Technologies stockholders;

 

   

no injunction or other legal restraint prohibiting the merger is in effect, and no law has been adopted, enacted, issued, enforced, entered or promulgated that prohibits the merger;

 

   

as of the VMware special dividend payment date, the governing body of each Dell Technologies subsidiary through which proceeds of the VMware special dividend will pass to Dell Technologies must have determined that such subsidiary of Dell Technologies meets all solvency and legal requirements to dividend, distribute, loan or otherwise transfer the proceeds that it will receive in accordance with the plan of distribution established by Dell Technologies, and the VMware special dividend must have been paid to Dell Technologies’ subsidiaries that are the holders of record of VMware common stock as of the VMware special dividend record date;

 

   

the registration statement of which this proxy statement/prospectus forms a part must have become effective under the Securities Act and must not be the subject of any stop order or proceedings seeking a stop order;



 

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the shares of Class C Common Stock must have been approved for listing on the NYSE, subject only to official notice of issuance;

 

   

the representations and warranties of each of Dell Technologies and Merger Sub contained in the merger agreement must, in each case, be true and correct in all material respects as of the date of the merger agreement and as of the closing date of the merger as though made on the closing date of the merger (unless expressly relating to any earlier date) and Dell Technologies must have delivered to the Special Committee a certificate signed on behalf of Dell Technologies by an executive officer of Dell Technologies to such effect;

 

   

Dell Technologies must have performed in all material respects all obligations required to be performed by it under the merger agreement and Dell Technologies must have delivered to the Special Committee a certificate signed on behalf of Dell Technologies by an executive officer of Dell Technologies to such effect;

 

   

since February 2, 2018, Dell Technologies must not have suffered an event or change that has had or would reasonably be expected to have a material adverse effect on Dell Technologies; and

 

   

since February 2, 2018, VMware must not have suffered an event or change that has had or would reasonably be expected to have a material adverse effect on VMware.

Termination of the Merger Agreement (See page 244)

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after receipt of the required stockholder approvals, under any of the following circumstances:

 

   

by mutual written consent of Dell Technologies (after receipt of the approval of the Special Committee) and Merger Sub;

 

   

by Dell Technologies (either at the direction of the Special Committee or at the direction of the Dell Technologies board of directors):

 

   

if the merger has not been consummated on or before January 31, 2019, subject to certain exceptions;

 

   

if any governmental entity has deemed applicable to the merger any law that prohibits or makes permanently illegal the consummation of the merger or issued a final nonappealable order permanently enjoining or otherwise prohibiting the merger, subject to certain exceptions;

 

   

if any required stockholder approval has not been obtained; or

 

   

if, prior to receipt of the stockholder approvals, the Special Committee has changed its recommendation with respect to the adoption of the merger agreement; or

 

   

by Dell Technologies (at the direction of the Special Committee):

 

   

if, prior to receipt of the required stockholder approvals, the Dell Technologies board of directors has changed its recommendation with respect to the adoption of the merger agreement; or

 

   

if Dell Technologies has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform would give rise to the failure of a condition to Merger Sub’s obligations to effect the merger and is incapable of being cured by Dell Technologies at least three business days prior to January 31, 2019, or, if capable of being so cured, is not cured by the earlier of (x) three business days prior to January 31, 2019, and (y) within 30 calendar days following receipt of written notice of such breach or failure to perform from the Special Committee.



 

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In the event of termination of the merger agreement, the merger agreement will become void and have no effect, without any liability or obligation on the part of Dell Technologies or Merger Sub under the merger agreement, except that certain provisions of the merger agreement, including those relating to the effects of termination, no recourse against third parties, governing law, jurisdiction, waiver of jury trial and specific performance, will survive such termination indefinitely.

Listing of Shares of Class C Common Stock and Delisting and Deregistration of Class V Common Stock (See page 223)

The merger agreement requires as a condition to closing that the Class C Common Stock be approved for listing on the NYSE upon the effective time of the merger, subject only to official notice of issuance. Accordingly, we have applied to have the shares of Class C Common Stock approved for listing on the NYSE under the symbol “DELL.”

If the Class V transaction is completed, there will no longer be outstanding any shares of Class V Common Stock, which are currently listed on the NYSE under the ticker symbol “DVMT.” Accordingly, the Class V Common Stock will be delisted from the NYSE and will be deregistered under the Exchange Act. Our other series of common stock that will be outstanding after the Class V transaction, consisting of our Class A Common Stock and the Class B Common Stock, will not be publicly traded. See “Proposal 1— Adoption of the Merger Agreement—Listing of Shares of Class C Common Stock and Delisting and Deregistration of Class V Common Stock.

Other Agreements (See page 248)

Voting and Support Agreement

In connection with the execution of the merger agreement, the Company entered into a Voting and Support Agreement with the MSD Partners stockholders, the MD stockholders and the SLP stockholders. Subject to certain terms and conditions, these stockholders have agreed, among other things, to vote the shares of the Company’s common stock over which they have voting power in favor of the merger, the adoption of the merger agreement, the adoption of the amended and restated Company certificate and each of the other transactions contemplated by the merger agreement. Such stockholders collectively hold a majority of the outstanding Class A Common Stock and all of the outstanding Class B Common Stock, as well as a majority of the voting power of all series of common stock voting together as a single class. Holders of the Class C Common Stock are not entitled under the DGCL or the Company certificate to vote as a separate class on any of the Proposals. As a result, we expect both Proposal 1 and Proposal 2 to be adopted if they receive the required vote of the holders of outstanding shares of the Class V Common Stock (excluding shares held by affiliates of the Company) voting as a separate class.

Stockholders Agreements and Registration Rights Agreement

The MSD Partners stockholders, the MD stockholders and the SLP stockholders and the Company have agreed to amend, conditioned on and effective upon the consummation of the merger, certain existing stockholders agreements and the Registration Rights Agreement and to enter into the new MSD Partners Stockholders Agreement. The effect of these actions will be, among other matters, to (1) prohibit the MSD Partners stockholders, the MD stockholders and the SLP stockholders and other holders of the Class A Common Stock, Class B Common Stock and Class C Common Stock from transferring such shares for 180 days after the consummation of the merger, subject to certain exceptions, and (2) terminate, as of the consummation of the merger, the contractual consent rights that the MD stockholders and the SLP stockholders have over certain corporate actions related to the Company and its subsidiaries. In addition, the MD stockholders and the SLP



 

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stockholders have agreed to cause the Company to terminate its existing employee liquidity program at the closing of the merger and to modify the transfer restrictions applicable to employees such that, following the 180-day period after the completion of the Class V transaction, employees will be permitted to sell shares of the Company’s common stock on the open market, subject to certain volume limitations for 18 months.

Accounting Treatment (See page 220)

The merger and associated Class V transaction will be accounted for as an equity transaction involving the repurchase of outstanding common stock, with the consideration accounted for as the cost of treasury shares. Under this method of accounting and within the terms of the Class V transaction, each share of Class V Common Stock will be cancelled and converted into the right to receive shares of Class C Common Stock or $109 in cash, dependent on each holder’s election and subject to proration of the aggregate cash consideration. Financial statements of the Company issued after the merger will reflect such consideration at fair value. See “Proposal 1— Adoption of the Merger Agreement—Accounting Treatment.”

Interests of Certain Directors and Officers (See page 212)

In considering the recommendation of the board of directors that you vote to adopt the merger agreement and the amended and restated Company certificate, you should be aware that the directors and executive officers of Dell Technologies have interests in the Class V transaction that may be different from, or in addition to, interests of other stockholders of Dell Technologies generally.

The members of the Special Committee negotiated and approved the merger agreement and evaluated whether the Class V transaction is in the best interests of the holders of Class V Common Stock. The members of the Special Committee were aware of the potential differing interests of the directors and executive officers of Dell Technologies and considered them, among other matters, in evaluating the Class V transaction and recommending that Class V stockholders vote to adopt the merger agreement and the amended and restated Company certificate. These interests include, among others:

 

   

Mr. Michael Dell, who is Chairman of the Board and Chief Executive Officer of the Company, and his wife’s trust together beneficially owned common stock representing approximately 66.2% of the total voting power of our outstanding common stock as of August 31, 2018, through ownership of Class A Common Stock and Class C Common Stock.

 

   

Mr. Egon Durban is a director of the Company and managing partner and managing director of Silver Lake Partners, and Mr. Simon Patterson is a director of the Company and a managing director of Silver Lake Partners. The investment funds affiliated with Silver Lake Partners beneficially owned common stock representing approximately 24.1% of the total voting power of our outstanding common stock as of August 31, 2018, through ownership of Class B Common Stock.

 

   

The Company’s directors and executive officers that hold shares of Class V Common Stock at the effective time of the merger will be entitled to receive the transaction consideration.

 

   

In connection with the Class V transaction, vesting provisions will be amended with respect to certain outstanding performance-based stock option awards for Class C Common Stock that were issued to employees under the Management Equity Plan. These awards become exercisable only if a prescribed level of return is achieved on the initial Dell Technologies equity investment of Mr. Dell and the SLP stockholders in connection with the going-private transaction. We expect that the return on equity implied by a value per share of $79.77 will cause all unvested performance-based stock options held by our executive officers to vest as of the measurement date.



 

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The Management Stockholders Agreement will be amended effective upon the consummation of the merger to eliminate certain call and drag-along rights, remove certain clawback and forfeiture obligations and relax in various respects certain existing restrictions on transfer of equity-based awards granted to our executive officers under the Management Equity Plan and other securities held by executive officers.

 

   

Any outstanding stock options, restricted stock units and deferred stock units covering shares of Class V Common Stock held by our independent directors at the time the Class V transaction is completed will be converted into similar awards covering shares of Class C Common Stock at the effective time of the merger at the same exchange ratio of 1.3665.

See “Proposal 1—Adoption of the Merger Agreement—Interests of Certain Directors and Officers” for more information about the interests of certain directors and executive officers.

Amended and Restated Company Certificate (See page 256)

In connection with the Class V transaction, stockholders are being asked to consider and vote on the adoption of the amended and restated Company certificate. If the amended and restated Company certificate is adopted by the stockholders of the Company (and certain other conditions are met, including adoption of the merger agreement by the stockholders of the Company), the existing Company certificate will be amended and restated as a result of the merger, in the form attached as Exhibit A to the merger agreement that is attached as Annex A to this proxy statement/prospectus, effective as of the effective time of the merger. Because the amended and restated Company certificate is part of the merger agreement, stockholder adoption of the amended and restated Company certificate is a condition to the completion of the merger and the Class V transaction.

The proposed amendments to the existing Company certificate are primarily intended to align aspects of the Company’s governance structure more closely with customary features of corporate governance for public companies and will, among other things, (1) change the board structure and size so that (a) directors will belong to a single class, elected annually by the Company’s common stockholders voting together as a single class with each director to have one vote on the board of directors, and (b) the maximum authorized number of directors will be increased from seven directors to 20 directors, (2) terminate certain consent rights of the holders of Class A Common Stock and (3) remove or correct obsolete provisions and make other technical and administrative changes to the existing Company certificate.

The form of the amended and restated Company certificate marked to reflect the proposed changes to the existing Company certificate is attached as Annex B to this proxy statement/prospectus and we encourage you to read it carefully.

If the amended and restated Company certificate is not adopted by the Company’s stockholders, then the closing conditions in the merger agreement will not be satisfied and the merger and the Class V transaction will not be completed.

Management of Dell Technologies After the Class V Transaction (See page 115)

The business and affairs of Dell Technologies are managed under the direction of the Dell Technologies board of directors. Pursuant to the amended and restated Company certificate, the Amended Sponsor Stockholders Agreement described under “The Merger Agreement—Stockholders Agreements—Sponsor Stockholders Agreement” and amendments to the other existing stockholder agreements in connection with the completion of the Class V transaction, the Dell Technologies board of directors may consist of no fewer than three directors or more than 20 directors following the Class V transaction. The number of authorized directors



 

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from time to time will be determined by the board of directors. As of the record date for the special meeting, the board of directors is composed of six members, consisting of Michael S. Dell, David W. Dorman, Egon Durban, William D. Green, Ellen J. Kullman and Simon Patterson. Immediately after the Class V transaction, these individuals are currently expected to continue to serve as directors and to constitute the entire board of directors.

Under the amended and restated Company certificate, all members of the board of directors will belong to a single class of directors elected annually by holders of our Class A Common Stock, Class B Common Stock and Class C Common Stock voting together as a single class. Under the amended and restated Company certificate, each member of the board of directors will be entitled to one vote on any matter submitted to a vote of the board.

Based on their beneficial ownership of our common stock as of the record date, immediately following the completion of the Class V transaction, the MD stockholders will beneficially own common stock representing approximately [    ]% of the total voting power of our outstanding common stock (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or approximately [    ]% of the total voting power (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash). Because the MD stockholders will continue to beneficially own common stock representing a majority of the total voting power of our outstanding common stock, the MD stockholders have the ability to approve any matter submitted to the vote of all of the outstanding shares of our common stock voting together as a single class, including the election of directors.

Under the Amended Sponsor Stockholders Agreement, each of the MD stockholders and the SLP stockholders will have the right to nominate a number of individuals for election as directors which is equal to the percentage of the total voting power for the regular election of directors of the Company beneficially owned by the MD stockholders or by the SLP stockholders, as the case may be, multiplied by the number of directors then on the board of directors who are not members of the audit committee, rounded up to the nearest whole number. Further, so long as the MD stockholders or the SLP stockholders each beneficially own at least 5% of all outstanding shares of the Company’s common stock entitled to vote generally in the election of directors, each of the MD stockholders or the SLP stockholders, as applicable, will be entitled to nominate at least one individual for election to the board of directors. The Amended Sponsor Stockholders Agreement will also provide that, so long as the MD stockholders and the MSD Partners stockholders in the aggregate beneficially own common stock representing a majority of the total voting power of our outstanding common stock, the MD stockholders and the SLP stockholders will use their reasonable best efforts to expand the size of the board of directors to up to 20 directors at the request of the MD stockholders.

Under the MSD Partners Stockholders Agreement, the MSD Partners stockholders will be required to vote all of their common stock in favor of the election of each director who is included as part of the slate of directors set forth in any Company proxy statement and whose election the board of directors has recommended.

As of the record date, after giving pro forma effect to the completion of the Class V transaction and assuming the Board was composed of six members, three of whom sit on the audit committee, the MD stockholders would have been entitled to nominate two individuals for election as directors and the SLP stockholders would have been entitled to nominate one individual for election as a director. Immediately following the completion of the Class V transaction, the MD stockholders intend to designate Michael Dell and Simon Patterson as their nominees and the SLP stockholders intend to designate Egon Durban as their nominee. The Company currently does not expect any changes to the composition of the Board. All of the current directors of the Company serve on the board of directors pursuant to the existing Sponsor Stockholders Agreement.

The Company is currently a “controlled company” under the rules of the NYSE and upon the completion of the Class V transaction will continue to be a “controlled company.” As a result, the Company qualifies for exemptions from, and has elected not to comply with, certain corporate governance requirements under NYSE



 

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rules, including the requirements that the Company have a board that is composed of a majority of “independent directors,” as defined under NYSE rules, and a compensation committee and a nominating and corporate governance committee that are composed entirely of independent directors. For additional information concerning the corporate governance exemptions for which the Company qualifies as a “controlled company” under the rules of the NYSE, see “Management of Dell Technologies After the Class V Transaction—Board of Directors—Controlled Company Status.”

Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock (See page 216)

It is intended that the exchange by a U.S. Holder of shares of Class V Common Stock for shares of Class C Common Stock pursuant to the Class V transaction constitute a recapitalization pursuant to Section 368(a)(1)(E) of the Internal Revenue Code.

A U.S. Holder (as defined under “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock”) of shares of Class V Common Stock that exchanges all of such holder’s shares of Class V Common Stock solely for Class C Common Stock (other than cash received in lieu of a fractional share of Class C Common Stock) generally should not recognize any gain or loss. A U.S. Holder that receives solely cash in exchange for all of such holder’s shares of Class V Common Stock in the Class V transaction generally should recognize gain or loss equal to the difference between the amount of cash received and the aggregate tax basis in the shares of Class V Common Stock surrendered.

A U.S. Holder that exchanges all of such holder’s shares of Class V Common Stock for a combination of shares of Class C Common Stock and cash (excluding any cash received in lieu of a fractional share of Class C Common Stock) in the Class V transaction generally should recognize gain (but not loss) in an amount equal to the lesser of (1) the amount of such cash received in the Class V transaction and (2) the U.S. Holder’s gain realized (i.e., the excess, if any, of the sum of the amount of such cash and the fair market value of the shares of Class C Common Stock received in the Class V transaction over the U.S. Holder’s aggregate tax basis in its shares of Class V Common Stock surrendered in exchange therefor).

While we believe the Class V Common Stock should be treated as Dell Technologies common stock for U.S. federal income tax purposes and the discussion of the U.S. federal income tax consequences of the Class V transaction assumes such treatment, there are currently no Internal Revenue Code provisions, Treasury regulations, court decisions or published Internal Revenue Service rulings directly addressing the characterization of stock with characteristics similar to those of the Class V Common Stock. Consequently, we cannot give any assurance that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth herein. If the Class V Common Stock were to fail to be treated as stock of Dell Technologies or the Class V transaction were to fail to qualify as a “recapitalization” within the meaning of Section 368(a)(l)(E) of the Internal Revenue Code, U.S. federal income tax consequences of the exchange to U.S. holders of Class V Common Stock would differ from those described above. See “Risk Factors—Risks Relating to the Class V Transaction—There is a lack of certainty regarding the U.S. federal income tax treatment of the Class V transaction” and “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock —U.S. Federal Income Tax Consequences of Alternative Treatment of the Class V Transaction.”

For additional information regarding the material U.S. federal income tax consequences of the Class V transaction to U.S. holders of the Class V Common Stock (including the treatment of any cash received in the Class V transaction), see “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock.”



 

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Holders of Class V Common Stock are strongly urged to consult their tax advisors as to the specific consequences to them of the Class V transaction, including the application of federal, state, local and foreign income and other tax laws to their particular circumstances.

Capital Structure After the Class V Transaction (See page 275)

Generally (See page 275)

Under the amended and restated Company certificate, the Company’s authorized capital stock will consist of 9,143,025,308 shares of common stock and 1,000,000 shares of preferred stock. As of the completion of the Class V transaction, there will be five series of authorized Company common stock, as follows:

 

   

one series of common stock designated as Class A Common Stock consisting of 600,000,000 shares;

 

   

one series of common stock designated as Class B Common Stock consisting of 200,000,000 shares;

 

   

one series of common stock designated as Class C Common Stock consisting of 7,900,000,000 shares;

 

   

one series of common stock designated as Class D Common Stock consisting of 100,000,000 shares; and

 

   

one series of Class V Common Stock consisting of 343,025,308 shares, although the amended and restated Company certificate will provide that, as of its effective date, the Company may not issue any shares of Class V Common Stock.

Because the Company will be prohibited from issuing shares of Class V Common Stock, the Company will effectively be authorized to issue up to 8,800,000,000 shares of its common stock upon the completion of the Class V transaction, even though the amended and restated Company certificate will authorize 9,143,025,308 shares of common stock.

As of August 31, 2018, there were 768,062,001 shares of Company common stock issued and outstanding consisting of 409,538,423 shares of Class A Common Stock, 136,986,858 shares of Class B Common Stock, 22,180,129 shares of Class C Common Stock and 199,356,591 shares of Class V Common Stock. Upon the completion of the Class V transaction, we will have zero shares of Class V Common Stock outstanding. If all holders of Class V Common Stock elect to receive shares of Class C Common Stock, we would expect to issue approximately 272,420,782 new shares of Class C Common Stock in the Class V transaction. If holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash, we would expect to issue approximately 159,590,507 new shares of Class C Common Stock in the Class V transaction.

Dividends (See page 281)

The Company’s board of directors will have the authority and discretion to declare and pay (or to refrain from declaring and paying) dividends on the Company’s common stock. The amended and restated Company certificate will provide that, subject to the provisions of any resolutions of the Company’s board of directors providing for the creation of any series of preferred stock, the holders of Class A Common Stock, the holders of Class B Common Stock, the holders of Class C Common Stock and the holders of Class D Common Stock shall be entitled to share equally, on a per share basis, in dividends and other distributions of cash, property or shares of stock of the Company that may be declared by the Company, except that in the event that any such dividend is paid in the form of shares of the Company’s common stock or securities convertible, exchangeable or exercisable for shares of the Company’s common stock, holders of each series of the Company’s outstanding common stock would receive shares of such series of common stock or securities convertible, exchangeable or exercisable for shares of such series of common stock, as the case may be.



 

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Voting Rights (See page 282)

Each holder of record of: (1) Class A Common Stock is entitled to 10 votes per share of Class A Common Stock; (2) Class B Common Stock is entitled to 10 votes per share of Class B Common Stock; (3) Class C Common Stock is entitled to one vote per share of Class C Common Stock; and (4) Class D Common Stock is not entitled to any vote on any matter except to the extent required by provisions of Delaware law (in which case such holder is entitled to one vote per share of Class D Common Stock), in the case of each of (1) through (4), which is outstanding in such holder’s name on the books of the Company and which is entitled to vote.

The holders of shares of all series of common stock outstanding will vote as one class with respect to the election of all Group I Directors (which, following the completion of the Class V transaction, will be the only remaining class of directors) and with respect to all other matters to be voted on by stockholders of the Company.

As of August 31, 2018, after giving pro forma effect to the completion of the Class V transaction, the number of votes to which holders of Class A Common Stock would be entitled would have represented approximately 71.1% (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or 72.5% (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash) of the total number of votes to which all holders of common stock would be entitled, the number of votes to which holders of Class B Common Stock would be entitled would have represented approximately 23.8% (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or 24.3% (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash) of the total number of votes to which all holders of common stock would be entitled and the number of votes to which holders of Class C Common Stock would be entitled would have represented approximately 5.1% (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or 3.2% (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash) of the total number of votes to which all holders of common stock would be entitled.

Conversion of Class A Common Stock, Class B Common Stock and Class D Common Stock (See page 278)

At any time and from time to time, any holder of Class A Common Stock, Class B Common Stock or Class D Common Stock will have the right by written election to the Company to convert all or any of the shares of such series, as applicable, held by such holder into shares of Class C Common Stock on a one-to-one basis, subject, in the case of any holder of Class D Common Stock, to any legal requirements applicable to such holder.

Liquidation and Dissolution (See page 279)

In the event of a liquidation, dissolution or winding-up of the Company, after payment or provision for payment of the debts and liabilities of the Company and payment or provision for payment of any preferential amount due to the holders of any other class or series of stock, the holders of shares of the common stock will be entitled to receive their proportionate interests in the assets of the Company remaining for distribution to holders of common stock.

Comparison of Rights of Class V Stockholders and Class C Stockholders (See page 298)

Holders of Class V Common Stock that make share elections or cash elections to which proration is applied will receive shares of Class C Common Stock in exchange for their shares of Class V Common Stock. The rights of holders of Class V Common Stock prior to completion of the merger and the rights of holders of Class C Common Stock that will be in effect upon the completion of the merger and the effectiveness of the amended and restated Company certificate are different. In particular, the Class C Common Stock will represent an interest in



 

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all of Dell Technologies’ businesses, assets, properties, liabilities and preferred stock, unlike the Class V Common Stock, which tracks the economic performance of Dell Technologies’ economic interest in the Class V Group (other than the DHI Group’s retained interest in the Class V Group). See “Comparison of Rights of Class V Stockholders and Class C Stockholders” for a description of the differences.

Rights of Appraisal of Holders of Class A Common Stock, Class B Common Stock and Class C Common Stock (See page 223)

Holders of shares of our Class V Common Stock are not entitled to statutory appraisal rights under Delaware law by reason of the Class V transaction because the Class V Common Stock is currently listed on the NYSE and the Class V stockholders will not be required in the merger to receive anything except the Class C Common Stock, which will be listed on the NYSE.

However, holders of record of shares of our Class A Common Stock, our Class B Common Stock or our Class C Common Stock that (1) do not vote in favor of the adoption of the merger agreement, (2) properly demand appraisal of their shares and (3) otherwise comply exactly with the requirements of Section 262 of the DGCL, referred to herein as Section 262, will be entitled to appraisal rights in connection with the merger under Section 262. To exercise and perfect appraisal rights, the holder of shares of Class A Common Stock, Class B Common Stock or Class C Common Stock must, in order to exercise those rights:

 

   

deliver to the Company, before the vote on the proposal to adopt the merger agreement at the special meeting, a written demand for the appraisal of the stockholder’s shares;

 

   

NOT vote in favor of the proposal to adopt the merger agreement;

 

   

hold the shares of record on the date the written demand for appraisal is made and continue to hold the shares of record through the effective time of the merger; and

 

   

comply with other procedures under Section 262 of the DGCL.

Failure to comply exactly with the procedures set forth in Section 262 of the DGCL may result in the loss of a stockholder’s statutory appraisal rights. A person having a beneficial interest in shares of Class A Common Stock, Class B Common Stock or Class C Common Stock held of record in the name of another person, such as a bank, brokerage firm or other nominee, must act promptly to cause the record holder to follow the steps summarized herein properly and in a timely manner to perfect appraisal rights. See Proposal 1—Adoption of the Merger Agreement—Rights of Appraisal of Holders of Class A Common Stock, Class B Common Stock and Class C Common Stock” and the text of Section 262 of the DGCL reproduced in its entirety as Annex E to this proxy statement/prospectus for further information.

Special Meeting of Stockholders (See page 126)

General (See page 126)

The date, time and place of the special meeting are set forth below:

 

Date:

  

[        ], 2018

Time:

  

[        ], Central Time

Place:

   Dell Technologies’ facility at Dell Round Rock Campus, 501 Dell Way (Building 2-East), Round Rock, Texas 78682

At the special meeting, stockholders will be asked to consider and vote on the following proposals:

 

   

Proposal 1, to adopt the merger agreement, which is attached as Annex A to this proxy statement/prospectus;



 

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Proposal 2, to adopt the amended and restated Company certificate, which is attached as Exhibit A to the merger agreement that is attached as Annex A to this proxy statement/prospectus and which proposes certain changes to the corporate governance structure of the Company in connection with the merger and the Class V transaction;

 

   

Proposal 3, to approve, on a non-binding, advisory basis, compensation arrangements with respect to the named executive officers of the Company related to the Class V transaction; and

 

   

Proposal 4, to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement or adopt the amended and restated Company certificate.

The adoption of the amended and restated Company certificate as set forth in the merger agreement is a condition to the closing of the merger. Accordingly, a vote against or abstaining from voting on Proposal 2 with respect to the adoption of the amended and restated Company certificate will have the same effect as a vote “AGAINST” adoption of the merger agreement.

Record Date; Outstanding Shares; Stockholders Entitled to Vote (See page 127)

The Dell Technologies board of directors has fixed the close of business on [            ], 2018 as the record date for the special meeting. At the special meeting:

 

   

holders of Class V Common Stock are entitled to one vote per share;

 

   

holders of Class A Common Stock are entitled to ten votes per share;

 

   

holders of Class B Common Stock are entitled to ten votes per share; and

 

   

holders of Class C Common Stock are entitled to one vote per share.

As of the record date, there was outstanding and entitled to be voted at the special meeting:

 

   

[            ] shares of Class V Common Stock, representing a total of [            ] votes, held by approximately [            ] holders of record;

 

   

[            ] shares of Class A Common Stock, representing a total of [            ] votes, held by approximately [            ] holders of record;

 

   

[            ] shares of Class B Common Stock, representing a total of [            ] votes, held by approximately [            ] holders of record; and

 

   

[            ] shares of Class C Common Stock, representing a total of [            ] votes, held by approximately [            ] holders of record.

Quorum (See page 128)

For each proposal to be considered at the special meeting, there must be a quorum present. For a quorum at the special meeting, there must be present in person or represented by proxy:

 

   

holders of record of issued and outstanding shares of common stock representing a majority of the voting power of the outstanding shares of common stock entitled to vote thereat; and

 

   

for each additional vote of holders of a series of common stock, voting as a separate class, required to adopt the merger agreement or adopt the amended and restated Company certificate, holders of record of outstanding shares of common stock of such series representing a majority of the voting power of the outstanding shares of such series.



 

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Required Vote (See page 128)

The required number of votes for the matters to be voted upon at the special meeting depends on the particular proposal to be voted on. Assuming a quorum is present, the following are the vote requirements:

 

Proposal

       

        Required Vote(1)         

Proposal 1    Adoption of the Merger Agreement(2)   

Adoption of the merger agreement requires:

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class V Common Stock (excluding shares held by affiliates of Dell Technologies), voting as a separate class; and

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class A Common Stock, voting as a separate class; and

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class B Common Stock, voting as a separate class; and

 

•  the affirmative vote of holders of record of outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock representing a majority of the voting power of the outstanding shares of all such series of common stock, voting together as a single class.

Proposal 2    Adoption of the Amended and Restated Company Certificate(2)   

Adoption of the amended and restated Company certificate requires:

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class V Common Stock (excluding shares held by affiliates of Dell Technologies), voting as a separate class; and

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class A Common Stock, voting as a separate class; and

 

•  the affirmative vote of holders of record of a majority of the outstanding shares of Class B Common Stock, voting as a separate class; and

 

•  the affirmative vote of holders of record of outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock representing a majority of the voting power of the outstanding shares of all such series of common stock, voting together as a single class.

 

Proposal 3    Non-binding, Advisory Vote on Compensation of Named Executive Officers    Approval, on a non-binding, advisory basis, of the transaction-related compensation proposal requires the affirmative vote of the holders of record of a majority of the voting power of the outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock present in person or by proxy at the meeting and entitled to vote thereon, voting together as a single class.


 

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Proposal

       

        Required Vote(1)         

Proposal 4    Adjournment of Special Meeting of Stockholders    Approval of the adjournment proposal requires the affirmative vote of the holders of record of a majority of the voting power of the outstanding shares of Class V Common Stock, Class A Common Stock, Class B Common Stock and Class C Common Stock present in person or by proxy at the meeting and entitled to vote thereon, voting together as a single class.

 

(1)

Under the rules of the NYSE, if you hold your shares of common stock in street name, your bank, brokerage firm or other nominee may not vote your shares without instructions from you on non-routine matters. Therefore, without your voting instructions, your nominee may not vote your shares on Proposal 1, 2, 3 or 4. Because none of the proposals to be voted on at the special meeting is a routine matter for which brokers may have discretionary authority to vote without instruction from the beneficial owner of the shares, the Company does not expect any broker non-votes at the special meeting. As a result, failure to provide instructions to your bank, brokerage firm or other nominee on how to vote can result in your shares not being counted as present at the meeting and therefore will have the same effect as a vote “AGAINST” Proposal 1 and “AGAINST” Proposal 2. Such failure to provide instructions will have no effect on the outcome of the voting for Proposal 3 and Proposal 4 because such shares will not be present at the meeting and entitled to vote on such matters. In the event there are broker non-votes, such broker non-votes also will have the same effect as a vote “AGAINST” Proposal 1 and “AGAINST” Proposal 2 but will have no effect on Proposal 3 and Proposal 4. Abstentions from voting will have the same effect as a vote “AGAINST” Proposal 1, “AGAINST” Proposal 2, “AGAINST” Proposal 3 and “AGAINST” Proposal 4. If you submit your proxy without indicating how to vote your shares on any particular proposal, the common stock represented by your proxy will be voted in accordance with the recommendation of the board of directors concerning that proposal. The board of directors has recommended that such proxies be voted “FOR” Proposal 1, “FOR” Proposal 2, “FOR” Proposal 3 and “FOR” Proposal 4.

(2)

For purposes of the votes of holders of Class V Common Stock on Proposals 1 and 2 that exclude votes of the Company’s affiliates, all outstanding shares of Class V Common Stock held by our affiliates, including our directors and executive officers, will not be counted either as shares entitled to vote or as shares voted. As of the record date for the special meeting, our directors, executive officers and other affiliates held approximately [    ]% of all outstanding shares of Class V Common Stock.

Voting by Directors and Executive Officers (See page 129)

As of the record date for the special meeting, the Company’s directors and executive officers beneficially owned, in the aggregate:

 

   

approximately [    ]% of the outstanding shares of Class V Common Stock;

 

   

approximately [    ]% of the outstanding shares of Class A Common Stock;

 

   

none of the outstanding shares of Class B Common Stock; and

 

   

outstanding shares of our Class V Common Stock, Class A Common Stock and Class C Common Stock representing approximately [    ]% of the total voting power of the outstanding shares of all series of our common stock.

As noted above, shares of Class V Common Stock held by our directors and executive officers will not be counted in the Class V stockholder class vote on the adoption of the merger agreement or the adoption of the amended and restated Company certificate.



 

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Voting by Other Affiliates

In connection with the execution of the merger agreement, the Company entered into a Voting and Support Agreement with Michael Dell and his affiliated investment entities and the funds affiliated with Silver Lake Partners that have investments in the Company. Subject to certain terms and conditions, these stockholders have agreed, among other things, to vote the shares of the Company’s common stock over which they have voting power in favor of the merger, the adoption of the merger agreement, the adoption of the amended and restated Company certificate and the other transactions contemplated by the merger agreement. Such stockholders collectively hold a majority of the outstanding Class A Common Stock and all of the outstanding Class B Common Stock, as well as a majority of the voting power of all series of common stock voting together as a single class. Holders of the Class C Common Stock are not entitled under the DGCL or the Company certificate to vote as a separate class on any of the Proposals. As a result, we expect both Proposal 1 and Proposal 2 to be adopted if they receive the required vote of the holders of outstanding shares of the Class V Common Stock (excluding shares held by affiliates of the Company) voting as a separate class.

Risk Factors (See page 58)

In evaluating the Class V transaction, you are urged to read the section of this proxy statement/prospectus titled “Risk Factors” carefully and in its entirety. You also should read and carefully consider the risk factors that are contained in the documents that are incorporated by reference into this proxy statement/prospectus.



 

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RISK FACTORS

In deciding whether to vote for the adoption of the merger agreement and the amended and restated Company certificate and for the approval of the other special meeting proposals, stockholders should carefully consider the following risk factors and all of the information contained in or incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” for information on how to obtain copies of the incorporated documents or view them via the internet.

Risks Relating to the Class V Transaction

Because the exchange ratio is fixed and there is no current trading market for the Class C Common Stock, the value of the Class C Common Stock that holders of Class V Common Stock will receive in the Class V transaction is uncertain.

The exchange ratio of 1.3665 shares of Class C Common Stock for each share of Class V Common Stock is fixed and there is no current trading market for, or market price of, the Class C Common Stock. As a result, the value of the Class C Common Stock to be received by holders of Class V Common Stock as part of the transaction consideration is uncertain. Although we have applied to list our Class C Common Stock on the NYSE, market reaction to newly listed stocks is unpredictable. The opening price of the Class C Common Stock upon listing on the NYSE and its trading price thereafter will depend on various factors, including, among others, the factors identified under “—Risks Relating to Ownership of Class C Common StockThe price of our Class C Common Stock may be volatile, which could cause the value of your investment to decline.” Many of these factors are not within our control. We cannot assure you that the Class C Common Stock will trade at any particular price.

The prices at which Class C Common Stock will trade after the Class V transaction may differ from the value used to determine the exchange ratio in the Class V transaction.

The valuation of Dell Technologies and the exchange ratio of 1.3665 shares of Class C Common Stock for each share of Class V Common Stock were based on the analysis of each of Dell Technologies and the Special Committee and their related negotiations with respect thereto, with Goldman Sachs acting as financial advisor to Dell Technologies and Evercore acting as financial advisor to the Special Committee. It is not possible to predict the prices at which the Class C Common Stock will trade after the Class V transaction relative to the trading prices of shares of Class V Common Stock before the Class V transaction or the trading prices of shares of VMware Class A common stock. Trading prices of the Class C Common Stock may be less than the valuation of Dell Technologies that was used to determine the exchange ratio in the Class V transaction. In addition, the exchange ratio is fixed and will not be adjusted before the effective time of the merger based on the trading prices of the Class V Common Stock or VMware Class A common stock or any other factor, and therefore the actual and perceived market value of the Class C Common Stock to be received at the closing of the Class V transaction may be higher or lower than the actual and perceived value of those shares on earlier dates.

Holders of Class V Common Stock are urged to obtain current market quotations for shares of Class V Common Stock.

Holders of Class V Common Stock may not receive as much cash in the Class V transaction as they have elected.

The merger agreement provides that no more than $9 billion of cash, in the aggregate, will be paid to holders of Class V Common Stock in connection with the Class V transaction. If holders of Class V Common Stock making cash elections elect in the aggregate to receive more than $9 billion in cash, such cash elections will be subject to proration, and a portion of the consideration such holders requested in cash will instead be received in the form of Class C Common Stock. For additional information about proration, see “The Merger

 

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AgreementTransaction Consideration and Elections.” The value of the shares of Class C Common Stock at the time of the closing of the Class V transaction that are received by holders whose cash elections are prorated may be lower than the value of the cash consideration that such holders otherwise would have received in the absence of such proration.

Holders of Class V Common Stock will not be able to revoke or change their election after the election deadline.

Holders of Class V Common Stock are required to make their election with respect to the consideration to be received by such holder by the business day before the special meeting, and such election cannot be revoked or changed after the election deadline. Holders who do not make an election will be deemed to have elected to receive shares of Class C Common Stock. A substantial amount of time might elapse between the election deadline and the time the Class V transaction is completed and, accordingly, the actual and perceived value of the Class C Common Stock at the time of the completion of the Class V transaction may not be the same as the value at the time holders make their election.

The completion of the Class V transaction is subject to payment by VMware of the conditional special cash dividend declared by its board of directors.

We will fund all or substantially all of the cash consideration to be paid in the Class V transaction from our portion of the proceeds of the conditional special cash dividend declared by VMware’s board of directors on July 1, 2018 (with any remaining balance, which is not expected to be material, to be funded from cash on hand). Our obligation to complete the merger and the Class V transaction is conditioned on VMware’s payment of such dividend, which, under applicable solvency and legal requirements, VMware is obligated to pay only upon the satisfaction of certain specified conditions, including the sufficiency of VMware’s surplus under Delaware law and the solvency of VMware, the ability of VMware’s subsidiaries through which payments of the proceeds of the special dividend will pass to dividend, distribute, loan or otherwise transfer the proceeds of such payment to VMware, and the receipt of an officer’s certificate of Dell Technologies that each subsidiary of Dell Technologies meets all solvency and legal requirements to distribute the proceeds of the special dividend received to Dell Technologies. Some of these conditions are not within our control or VMware’s control, and we are unable to predict when or if these conditions will be satisfied. For additional information about closing conditions, see “The Merger AgreementConditions to the Merger.”

The completion of the Class V transaction is subject to a number of conditions, which, if not fulfilled or not fulfilled in a timely manner, may result in termination of the merger agreement and abandonment of the Class V transaction.

In addition to VMware’s payment of the special cash dividend and the ability of the Company’s subsidiaries to transfer the proceeds of such payment to the Company, the merger agreement contains a number of conditions to our obligation to complete the merger, including, among others:

 

   

adoption by our stockholders (including the holders of Class V Common Stock) of the merger agreement and the amended and restated Company certificate, which is part of the merger agreement;

 

   

the effectiveness of the registration statement of which this proxy statement/prospectus forms a part;

 

   

the approval of the Class C Common Stock for listing on the NYSE, subject only to official notice of issuance;

 

   

the absence of any law, order or injunction of a court or governmental entity of competent jurisdiction that prohibits or makes illegal the consummation of the merger; and

 

   

the absence of a material adverse effect (as defined in the merger agreement) with respect to both Dell Technologies and VMware since February 2, 2018.

 

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For a more complete summary of the conditions that must be satisfied or waived prior to the completion of the Class V transaction, see “Merger Agreement—Conditions to the Merger.”

Many of the conditions to the closing of the merger and the Class V transaction are not within our control, and we are unable to predict when or if these conditions will be satisfied. The merger agreement provides for an outside date of January 31, 2019 for the completion of the merger, after which we may terminate the merger agreement. Although we have agreed in the merger agreement to use our reasonable best efforts, subject to certain limitations, to complete the merger as promptly as practicable, these and other conditions to the completion of the merger and Class V transaction may fail to be satisfied. In addition, satisfying the conditions to and completing the merger and Class V transaction may take longer, and could cost more, than we expect.

Because the merger is subject to the adoption of the merger agreement by our stockholders, including our Class V stockholders (other than affiliates of the Company), failure to obtain approval for such adoption would prevent the completion of the Class V transaction.

Before the merger and Class V transaction can be completed, Dell Technologies stockholders, including our Class V stockholders (other than affiliates of the Company) voting as a separate class, must adopt the merger agreement and the amended and restated Company certificate, which is part of the merger agreement. There can be no assurance that this approval will be obtained. Failure to obtain the required approval within the expected time period, or the implementation of significant changes to the structure, terms or conditions of the Class V transaction to obtain such approval, may result in a material delay in, or the abandonment of, the Class V transaction.

The market price of our Class C Common Stock may be affected by factors different from those currently affecting the price of our Class V Common Stock.

The Class V Common Stock is intended to track the economic performance of approximately 61.1% of Dell Technologies’ economic interest in the Class V Group as of August 31, 2018. The Class V Group consisted solely of approximately 331 million shares of VMware common stock as of August 31, 2018. Unlike the Class V Common Stock, the Class C Common Stock does not and will not track the economic performance of any distinct assets or business of Dell Technologies and will instead reflect the direct and indirect interests of Dell Technologies in all of its business, assets, properties and liabilities. Although holders of Class V Common Stock are common stockholders of Dell Technologies as a whole and, as such, are subject to certain risks associated with an investment in Dell Technologies and all of Dell Technologies’ businesses, assets, properties and liabilities, the assets and liabilities that are attributable to the Class V Common Stock prior to the completion of the Class V transaction are different from the assets and liabilities that will be attributable to the Class C Common Stock following the completion of the Class V transaction. Therefore, the earnings and earnings per share attributable to, as well as the market price of, the Class C Common Stock likely will be affected by factors different from those currently affecting the Class V Common Stock. For a discussion of the differences between the Class V Common Stock and the Class C Common Stock, see “Comparison of Rights of Class V Stockholders and Class C Stockholders.”

If the Class V transaction is completed, the Class V stockholders will no longer directly benefit from increases in the value of VMware common stock.

The Class V Common Stock is a “tracking stock” and is intended to track the economic performance of approximately 61.1% of Dell Technologies’ economic interest in the Class V Group, which consisted solely of approximately 331 million shares of VMware common stock as of August 31, 2018. The trading price of a tracking stock is generally expected to fluctuate depending upon the economic performance of the underlying asset (which is the VMware common stock, in the case of the Class V Common Stock). If the Class V transaction is completed, Class V stockholders will no longer hold shares of Class V Common Stock and will instead hold shares of Class C Common Stock and/or cash. Unlike the Class V Common Stock, the Class C Common Stock

 

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will reflect the performance of the entire business of Dell Technologies and will not track the performance of the Class V Group or any distinct assets or business. Therefore, if the Class V transaction is completed, Class V stockholders will not directly benefit from any sale of control of VMware, any improvement in VMware’s economic performance or increase in trading price of VMware common stock (whether through an increase in the trading price of Class V Common Stock or otherwise), but will instead indirectly benefit together with all other holders of Dell Technologies common stock, from such sale of control, improvement or increase, if any, through its ownership of Class C Common Stock of Dell Technologies which owns 80.9% of the outstanding VMware common stock as of August 31, 2018.

Lawsuits may be filed challenging the Class V transaction, and an adverse ruling in any such lawsuit may delay the Class V transaction or prevent the Class V transaction from being completed.

Lawsuits may be filed challenging the Class V transaction, which could prevent the merger and the Class V transaction from being completed, or could result in a material delay in, or the abandonment of, the merger and the Class V transaction.

One of the conditions to the completion of the merger is the absence of any law, order or injunction of a court or governmental entity of competent jurisdiction prohibiting the consummation of the merger or the other transactions contemplated by the merger agreement. Accordingly, if a plaintiff is successful in obtaining such an order or injunction, the order or injunction may prevent the merger and the Class V transaction from being completed, or from being completed within the expected time period.

Our directors and executive officers may have interests in the Class V transaction that are different from, or in addition to, the interests of our stockholders generally.

Certain of our directors and executive officers may have interests in the Class V transaction that are different from, or in addition to, the interests of our stockholders generally. These interests include, among others:

 

   

the interests of Mr. Dell, the Chairman of the Board and Chief Executive Officer of the Company, who together with his wife’s trust beneficially owned common stock representing approximately 66.2% of the total voting power of our outstanding common stock as of August 31, 2018, through ownership of Class A Common Stock and Class C Common Stock;

 

   

the interests of Mr. Egon Durban, who is a director of the Company and managing partner and managing director of Silver Lake Partners, and Mr. Simon Patterson, who is a director of the Company and a managing director of Silver Lake Partners. The investment funds affiliated with Silver Lake Partners beneficially owned common stock representing approximately 24.1% of the total voting power of our outstanding common stock as of August 31, 2018, through ownership of Class B Common Stock;

 

   

the interests of our independent directors in the conversion of outstanding stock options, restricted stock units and deferred stock units covering shares of Class V Common Stock held by them into similar awards covering shares of Class C Common Stock at the effective time of the merger;

 

   

the interests of our executive officers in the modification of the corporate performance measurement in connection with the determination of vesting of performance-based stock options held by them, which will result in the vesting of all such unvested stock options as of the next applicable measurement date after the completion of the Class V transaction;

 

   

the interests of our executive officers in the elimination of the rights of Mr. Dell and certain of the rights of the Company to repurchase the shares of Class C Common Stock owned by such officers upon the termination of their employment with the Company under the Management Stockholders Agreement and equity award agreements with our executive officers; and

 

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the interests of our executive officers in the elimination of certain call and drag-along rights, clawback and forfeiture obligations and transfer restrictions on the shares of Class C Common Stock owned by them.

These interests may cause our directors and executive officers to view the proposals relating to the Class V transaction differently than our stockholders may view them. For further information, see “Proposal 1—Adoption of the Merger Agreement—Interests of Certain Directors and Officers.

The fairness opinions obtained by the Special Committee and our board of directors from their financial advisors will not reflect changes, circumstances, developments or events that may have occurred or may occur after the date of the opinions.

The Special Committee obtained from its financial advisor, Evercore, an opinion that the transaction consideration was fair, from a financial point of view, to the Class V stockholders (other than Dell Technologies and its affiliates) that was rendered on July 1, 2018, the date that the merger agreement was entered into. Our board of directors obtained from its financial advisor, Goldman Sachs, an opinion as to the fairness, from a financial point of view, to Dell Technologies of the aggregate consideration to be paid by Dell Technologies in the Class V transaction for all of the shares of Class V Common Stock pursuant to the merger agreement that was also rendered on July 1, 2018. The opinions of Evercore and Goldman Sachs do not speak as of the time at which the merger or Class V transaction will be completed or as of any date other than the date of the opinions. Changes in financial, economic, market and other conditions on which the opinions of Evercore and Goldman Sachs were based may significantly alter the values of Dell Technologies or the Class V Common Stock prior to the completion of the merger or Class V transaction.

The opinions of Evercore and Goldman Sachs are attached as Annex C and Annex D, respectively, to this proxy statement/prospectus. For a description of the opinions that the Special Committee and our board of directors received from Evercore and Goldman Sachs, respectively, and a summary of the material financial analyses they provided to the Special Committee and the board of directors in connection with rendering such opinions, see Proposal 1—Adoption of the Merger Agreement—Opinion of Evercore Group L.L.C.” and Opinion of Goldman Sachs & Co. LLC.

Failure to complete the Class V transaction could negatively affect the trading price of our Class V Common Stock and expose us to litigation, and would require us to pay significant expenses without having realized any benefit from the proposed Class V transaction.

If the Class V transaction is not completed for any reason, including as a result of a failure of our stockholders to adopt the merger agreement or the amended and restated Company certificate, we would be subject to a number of risks, including the following:

 

   

we may experience negative reactions from the financial markets, which could have a negative impact on the market price of the Class V Common Stock;

 

   

we may become subject to litigation relating to any failure to complete the Class V transaction or relating to any proceeding commenced against us seeking to compel us to perform our obligations under the merger agreement; and

 

   

we would be required to pay significant expenses relating to the Class V transaction, including financial advisory, legal and accounting fees, even if the Class V transaction is not completed.

Further, matters relating to the Class V transaction may require substantial commitments of time and resources by our management, which otherwise could have been devoted to other opportunities that may have been beneficial to us.

 

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There is a lack of certainty regarding the U.S. federal income tax treatment of the Class V transaction.

The U.S. federal income tax consequences of the Class V transaction described herein assume the Class V Common Stock is characterized as stock of Dell Technologies for U.S. federal income tax purposes. There are currently no Internal Revenue Code provisions, U.S. federal income tax regulations, court decisions or published Internal Revenue Service rulings directly addressing the characterization of stock with characteristics similar to those of the Class V Common Stock. We do not intend to request any ruling from the Internal Revenue Service as to the U.S. federal income tax consequences of the Class V transaction to holders of Class V Common Stock. Consequently, we cannot give any assurance that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth under “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock.

If the Class V Common Stock were to fail to be treated as stock of Dell Technologies or the Class V transaction were to fail to qualify as a “recapitalization” within the meaning of Section 368(a)(l)(E) of the Internal Revenue Code, a holder of Class V Common Stock generally would recognize gain or loss based on the difference between (1) the cash and fair market value of the Class C Common Stock received by such holder in exchange for such holder’s Class V Common Stock, and (2) such holder’s tax basis for the shares of Class V Common Stock exchanged in the transaction. If such holder’s holding period for such shares of Class V Common Stock is more than one year before the effective date of the exchange, such gain or loss generally would constitute long-term capital gain or loss.

For additional information regarding the material U.S. federal income tax consequences of the Class V transaction to U.S. holders of the Class V Common Stock, see “Proposal 1—Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences to U.S. Holders of Class V Common Stock.”

Risks Relating to Ownership of Class C Common Stock

An active trading market for the Class C Common Stock may never develop or be sustained.

Prior to the closing of the Class V transaction, there has not been a public trading market for shares of our Class C Common Stock. Although we have applied to list our Class C Common Stock on the NYSE, we cannot assure you that an active trading market for the Class C Common Stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that you will be able to sell your shares of Class C Common Stock when you wish to do so, the prices that you may be able to obtain for your shares, or the liquidity of any trading market.

The price of our Class C Common Stock may be volatile, which could cause the value of your investment to decline.

The trading prices of the securities of technology companies historically have experienced high levels of volatility. The trading price of our Class C Common Stock may fluctuate substantially as a result of the following factors, among others:

 

   

announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

 

   

changes in how customers perceive the effectiveness of our products, services or technologies;

 

   

actual or anticipated variations in our quarterly or annual results of operations;

 

   

changes in our financial guidance or estimates by securities analysts;

 

   

price and volume fluctuations in the overall stock market from time to time;

 

   

significant volatility in the market price and trading volume of technology companies in general and of companies in the information technology industry in particular;

 

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actual or anticipated changes in the expectations of investors or securities analysts;

 

   

fluctuations in the trading volume of our shares or the size of the trading market for our shares held by non-affiliates;

 

   

litigation involving us, our industry, or both, including disputes or other developments relating to our ability to obtain patent protection for our processes and technologies and protect our other proprietary rights;

 

   

regulatory developments in the United States and other jurisdictions in which we operate;

 

   

general economic and political factors, including market conditions in our industry or the industries of our clients;

 

   

major catastrophic events;

 

   

sales of large blocks of the Class C Common Stock; and

 

   

additions or departures of key employees.

In addition, if the market for stock of companies in the technology industry or the stock market in general experiences a loss of investor confidence, the trading price of the Class C Common Stock could decline for reasons unrelated to our business, results of operations or financial condition. The market price of the Class C Common Stock also might decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation often has been brought against that company. If our stock price is volatile, we may become the target of securities litigation, which could cause us to incur substantial costs and divert our management’s attention and resources from our business.

The listing of our Class C Common Stock on the NYSE will not benefit from the process undertaken in connection with an underwritten initial public offering.

We have applied to list our shares of Class C Common Stock for trading on the NYSE upon the completion of the Class V transaction. Unlike an underwritten initial public offering of the shares, the initial trading of the shares of Class C Common Stock will not benefit from the following:

 

   

the book-building process undertaken by underwriters that helps to inform efficient price discovery with respect to opening trades of newly listed shares; and

 

   

underwriter support to help stabilize, maintain or affect the public price of the new issue immediately after listing.

The lack of such a process in connection with our listing could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for the shares during the period immediately following the listing.

If securities or industry analysts publish inaccurate or unfavorable research reports or cease to publish research reports about us, our business or prospects, the market price of our Class C Common Stock and trading volume could decline.

The trading market for the Class C Common Stock will depend in part on the research and reports that securities or industry analysts publish about us, our business or our prospects. We do not have any control over these analysts. If one or more of the analysts covering us downgrades our shares, expresses an adverse change of opinion regarding our shares or publishes inaccurate research about us, the market price of the Class C Common

 

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Stock could decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us on a regular basis, we could lose visibility in the financial markets, which could cause the market price or trading volume of the Class C Common Stock to decline.

Our multi-class common stock structure with different voting rights may adversely affect the trading price of the Class C Common Stock.

Each share of our Class A Common Stock and each share of our Class B Common Stock has ten votes, while each share of our Class C Common Stock has one vote. Based on their ownership of our common stock as of August 31, 2018, because of these disparate voting rights, immediately following the completion of the Class V transaction, the MD stockholders, the MSD Partners stockholders and the SLP stockholders will collectively hold common stock representing approximately 94.3% of the total voting power of our outstanding common stock (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or approximately 96.2% of the total voting power (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash). The limited ability of holders of our Class C Common Stock to influence matters requiring stockholder approval may adversely affect the market price of our Class C Common Stock.

In addition, in 2017, FTSE Russell, S&P Dow Jones and MSCI announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices to exclude companies with multiple classes of shares of common stock from being added to such indices. FTSE Russell announced plans to require new, and beginning in September 2022, existing constituents of its indices to have at least 5% of their voting rights in the hands of public stockholders, whereas S&P Dow Jones announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. MSCI also opened public consultations on their treatment of no-vote and multi-class structures and has temporarily barred new multi-class listings from its ACWI Investable Market Index and U.S. Investable Market 2500 Index. Other stock indices might take a similar approach in the future. Under the announced policies, our multi-class capital structure would make us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not invest in our Class C Common Stock. These policies are new and it is unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices. It is possible that such policies may depress the valuations of public companies excluded from these indices compared to valuations of companies that are included.

Future sales, or the perception of future sales, of a substantial amount of shares of our Class C Common Stock could depress the trading price of the Class C Common Stock.

Sales of a substantial number of shares of our Class C Common Stock in the public market, or the perception that these sales may occur, could adversely affect the market price of the Class C Common Stock, which could make it more difficult for investors to sell their shares of Class C Common Stock at a time and price that they consider appropriate. These sales, or the possibility that these sales may occur, also could impair our ability to sell equity securities in the future at a time and at a price we deem appropriate, and our ability to use Class C Common Stock as consideration for acquisitions of other businesses, investments or other corporate purposes. Immediately following the completion of the Class V transaction, we will have a total of approximately 294,600,911 shares of our Class C Common Stock outstanding (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or approximately 181,770,636 shares of our Class C Common Stock outstanding (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash).

As of August 31, 2018, the 406,290,710 outstanding shares of Class A Common Stock held by the MD stockholders and the MSD Partners stockholders and the 136,986,858 outstanding shares of Class B Common Stock held by the SLP stockholders are convertible into shares of Class C Common Stock at any time on a

 

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one-to-one basis. Although the MD stockholders, the MSD Partners stockholders and SLP stockholders are generally subject to transfer restrictions that prevent their sale or other transfer of common stock for 180 days following the completion of the Class V transaction, upon the expiration or waiver of such lock-up period, such shares, upon any conversion into shares of Class C Common Stock, will be eligible for resale in the public market pursuant to Rule 144 under the Securities Act, subject to volume, manner of sale and other limitations under Rule 144.

In addition, as of August 31, 2018, we have entered into a registration rights agreement with holders of 406,483,978 outstanding shares of Class A Common Stock (which are convertible into shares of Class C Common Stock), holders of all of the 136,986,858 outstanding shares of Class B Common Stock (which are convertible into shares of Class C Common Stock) and holders of 22,162,197 outstanding shares of Class C Common Stock, pursuant to which we have granted such holders and their permitted transferees shelf, demand and/or piggyback registration rights with respect to such shares. Registration of those shares under the Securities Act would permit such holders to sell the shares into the public market.

Further, as of August 31, 2018 and after giving pro forma effect to the conversion of stock options, restricted stock units and deferred units covering shares of Class V Common Stock into similar awards covering shares of Class C Common Stock upon the completion of the Class V transaction, we would have had (i) 35,254,520 shares of Class C Common Stock that may be issued upon the exercise, vesting or settlement, as applicable, of outstanding stock options, restricted stock units or deferred stock units under our stock incentive plans, all of which would have been, upon issuance, eligible for sale in the public market, subject to expiration or waiver of applicable contractual transfer restrictions that, subject to certain exceptions, are scheduled to expire beginning 181 days after the completion of the Class V transaction, and to terminate 18 months thereafter, and (ii) an additional 32,033,535 shares of Class C Common Stock that have been authorized and reserved for issuance in relation to potential future awards under our stock incentive plans. We also may issue additional options in the future which may be exercised for additional shares of Class C Common Stock and additional restricted stock units or deferred stock units which may vest, all of which we expect will be registered under one or more registration statements on Form S-8 under the Securities Act and available for sale in the open market.

Our issuance of additional Class C Common Stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.

The Company certificate authorizes us to issue up to 7,900,000,000 shares of Class C Common Stock, and up to 1,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable law, we may issue our shares of Class C Common Stock or securities convertible into our Class C Common Stock from time to time in connection with a financing, acquisition, investment, our stock incentive plans or otherwise. We may issue additional shares of Class C Common Stock from time to time at a discount to the market price of our Class C Common Stock at the time of issuance. Any issuance of Class C Common Stock could result in substantial dilution to our existing stockholders and cause the market price of the Class C Common Stock to decline.

We do not presently intend to pay any dividends on our Class C Common Stock.

We do not presently intend to pay cash dividends on our Class C Common Stock. Accordingly, investors may have to rely on sales of the Class C Common Stock after price appreciation, which may never occur, as the only way to realize any gains on their investment in our Class C Common Stock.

Dell Technologies’ operations are conducted almost entirely through its subsidiaries and its ability to generate cash to make future dividend payments, if any, is highly dependent on the cash flows and the receipt of funds from its subsidiaries via dividends or intercompany loans. To the extent that Dell Technologies determines in the future to pay dividends on the Class C Common Stock, the terms of existing and future agreements governing Dell Technologies’ or its subsidiaries’ indebtedness, including the existing credit facilities of, and

 

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existing senior notes issued by, subsidiaries of Dell Technologies, may significantly restrict the ability of Dell Technologies’ subsidiaries to pay dividends or otherwise make distributions or transfer assets to Dell Technologies, as well as the ability of Dell Technologies to pay dividends to holders of its common stock. In addition, Delaware law imposes requirements that may restrict Dell Technologies’ ability to pay dividends to holders of its common stock.

Provisions of our organizational documents and Delaware law may make it difficult for a third party to acquire Dell Technologies even if doing so may be beneficial to our stockholders.

Certain provisions of the amended and restated Company certificate and the Company bylaws may discourage, delay, or prevent a change in control of Dell Technologies that a stockholder may consider favorable. These provisions include:

 

   

limitations on who may call special meetings of stockholders;

 

   

advance notice requirements for nominations of candidates for election to the board of directors and for proposals for other businesses;

 

   

the existence of authorized and unissued stock, including “blank check” preferred stock, which could be issued by the board of directors without approval of the holders of Company common stock to persons friendly to Dell Technologies’ management, thereby protecting the continuity of Dell Technologies’ management, or which could be used to dilute the stock ownership of persons seeking to obtain control of Dell Technologies;

 

   

the requirement that any stockholder written consent be signed by holders of a majority of our common stock beneficially owned by the MD stockholders and holders of a majority of our common stock beneficially owned by the SLP stockholders; and

 

   

the requirement that (1) the holders of the Class A Common Stock, voting separately as a class, (2) the holders of the Class B Common Stock, voting separately as a class, and (3) the MD stockholders and SLP stockholders, in each case, so long as they own any common stock, approve amendments to certain provisions of the Company certificate, including provisions related to authorized capital stock and the size and structure of the board of directors.

Further, as a Delaware corporation, Dell Technologies is subject to provisions of Delaware law that may deter a takeover attempt that its stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay, or prevent a transaction involving a change in control of Dell Technologies, including actions that its stockholders may deem advantageous, or negatively affect the trading price of its common stock, including the Class C Common Stock. These provisions also could discourage proxy contests and make it more difficult for Dell Technologies’ stockholders to elect directors of their choosing and to cause Dell Technologies to take other corporate actions that may be supported by its stockholders.

Our board of directors is authorized to issue and designate shares of preferred stock in additional series without stockholder approval.

The Company certificate authorizes our board of directors, without the approval of our stockholders, to issue up to 1,000,000 shares of “blank check” preferred stock, subject to limitations prescribed by applicable law, rules, and regulations and the provisions of the Company certificate, as shares of preferred stock in series, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences, and rights of the shares of each such series and the qualifications, limitations, or restrictions thereof. The powers, preferences, and rights of these additional series of preferred stock may be senior to or on parity with Dell Technologies’ series of common stock, including the Class C Common Stock, which may reduce the value of the Class C Common Stock.

 

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Dell Technologies is controlled by the MD stockholders, and the MD stockholders, the MSD Partners stockholders and the SLP stockholders collectively own a substantial majority of its common stock.

By reason of their ownership of Class A Common Stock possessing a majority of the aggregate votes entitled to be cast by holders of all outstanding shares of the Company’s common stock voting together as a single class, the MD stockholders have the ability to approve any matter submitted to the vote of all of the outstanding shares of the Company’s common stock voting together as a single class.

Through their control of Dell Technologies, the MD stockholders are, and after the completion of the Class V transaction will be, able to control actions to be taken by Dell Technologies, including actions related to the election of directors of Dell Technologies and its subsidiaries (including VMware and its subsidiaries), amendments to Dell Technologies’ organizational documents and the approval of significant corporate transactions, including mergers, sales of substantially all of Dell Technologies’ assets, distributions of Dell Technologies’ assets, the incurrence of indebtedness and any incurrence of liens on Dell Technologies’ assets.

Further, as of August 31, 2018, after giving pro forma effect to the completion of the Class V transaction, the MD stockholders, the MSD Partners stockholders and the SLP stockholders will collectively beneficially own 65.1% (assuming all holders of Class V Common Stock elect to receive shares of Class C Common Stock) or 75.0% (assuming the holders of Class V Common Stock elect in the aggregate to receive $9 billion or more in cash) of our outstanding common stock. This concentration of ownership together with the disparate voting rights of our common stock may delay or deter possible changes in control of the Company, which may reduce the value of an investment in our Class C Common Stock. So long as the MD stockholders, the MSD Partners stockholders and the SLP stockholders continue to own common stock representing a significant amount of the combined voting power of our outstanding common stock, even if such amount is, individually or in the aggregate, less than 50%, such stockholders will continue to be able to strongly influence our decisions. Further, after the completion of the Class V transaction, the MD stockholders and the SLP stockholders, respectively, will have the right to nominate such number of directors for election to our board of directors as is in proportion to their beneficial ownership of the total voting power of all of our outstanding common stock, and will each have the right to nominate at least one individual so long as the MD stockholders or the SLP stockholders, as the case may be, beneficially own at least 5% of our outstanding common stock.

The MD stockholders, the MSD Partners stockholders and the SLP stockholders and their respective affiliates may have interests that conflict with the interests of other stockholders or those of Dell Technologies.

In the ordinary course of their business activities, the MD stockholders, the MSD Partners stockholders and the SLP stockholders and their respective affiliates may engage in activities where their interests conflict with interests of other stockholders or those of the Company. The Company certificate provides that none of the MD stockholders, MSD Partners, L.P., the MSD Partners stockholders, Silver Lake Partners III, L.P. and the SLP stockholders, any of their respective affiliates or any director or officer of the Company who is also a director, officer, employee, managing director or other affiliate of MSD Partners, L.P. or Silver Lake Partners III, L.P. (other than Michael Dell) have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which Dell Technologies operates. The MD stockholders, the MSD Partners stockholders, and the SLP stockholders also may pursue acquisition opportunities that may be complementary to Dell Technologies’ business and, as a result, those acquisition opportunities may not be available to Dell Technologies. In addition, such stockholders may have an interest in pursuing acquisitions, divestitures, and other transactions that, in their judgment, could enhance the value of their investment in Dell Technologies, even though such transactions might involve risks to other stockholders.

 

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Because Dell Technologies is a “controlled company” within the meaning of NYSE rules and, as a result, qualifies for, and relies on, exemptions from certain corporate governance requirements, holders of Class C Common Stock will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Dell Technologies is a “controlled company” within the meaning of NYSE rules because the MD stockholders hold common stock representing more than 50% of the voting power in the election of directors. As a controlled company, Dell Technologies may elect not to comply with certain corporate governance requirements under NYSE rules, including the requirements that:

 

   

Dell Technologies have a board that is composed of a majority of “independent directors,” as defined under NYSE rules;

 

   

Dell Technologies have a compensation committee that is composed entirely of independent directors; and

 

   

Dell Technologies have a nominating and corporate governance committee that is composed entirely of independent directors.

Dell Technologies is utilizing these exemptions and expects to continue to utilize the exemptions following the listing of the Class C Common Stock. As a result, a majority of the directors on the board of directors are not independent directors as defined under NYSE rules and none of the committees of the board of directors consists entirely of independent directors, other than the audit committee and, until the completion of the Class V transaction, the Capital Stock Committee. Accordingly, holders of Class C Common Stock will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE’s corporate governance requirements.

The Dell Technologies board of directors has formed an executive committee of the board consisting entirely of directors designated by the MD stockholders and the SLP stockholders, and has delegated a substantial portion of the power and authority of the board of directors to the executive committee.

The board of directors has formed an executive committee of the board consisting entirely of directors designated by the MD stockholders and the SLP stockholders (none of whom have been affirmatively determined by the board of directors to be independent directors), and has delegated a substantial portion of the power and authority of the board of directors to the executive committee. Among other matters, the executive committee has been delegated the board’s power and authority, subject to specified limits, to review and approve, with respect to Dell Technologies and its subsidiaries, acquisitions and dispositions, the annual budget and business plan, the incurrence of indebtedness, entry into material commercial agreements, joint ventures and strategic alliances, and the commencement and settlement of material litigation. In addition, the executive committee acts as the compensation committee of the board of directors. The interests of the MD stockholders and the SLP stockholders may differ materially from the interests of the holders of Class C Common Stock.

The Company certificate designates a state court of the State of Delaware or the federal district court for the District of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Dell Technologies’ stockholders, which could limit the ability of the holders of Class C Common Stock to obtain a favorable judicial forum for disputes with Dell Technologies or with directors, officers, or the controlling stockholders of Dell Technologies.

Under the Company certificate, unless Dell Technologies consents in writing to the selection of an alternative forum, the sole and exclusive forum will be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) for:

 

   

any derivative action or proceeding brought on behalf of Dell Technologies;

 

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any action asserting a claim of breach of a fiduciary duty owed by any director or officer or stockholder of Dell Technologies to Dell Technologies or Dell Technologies’ stockholders;

 

   

any action asserting a claim against Dell Technologies or any director or officer or stockholder of Dell Technologies arising pursuant to any provision of the DGCL or of the Company certificate or Company bylaws; or

 

   

any action asserting a claim against Dell Technologies or any director or officer or stockholder of Dell Technologies governed by the internal affairs doctrine.

These provisions of the Company certificate could limit the ability of the holders of the Class C Common Stock to obtain a favorable judicial forum for disputes with Dell Technologies or with directors, officers, or the controlling stockholders of Dell Technologies, which may discourage such lawsuits against Dell Technologies and its directors, officers, and stockholders. Alternatively, if a court were to find these provisions of its organizational documents inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, Dell Technologies may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition, and results of operations. The exclusive forum provisions of the Company certificate is not intended to apply to claims under the federal securities laws.

Dell Technologies is obligated to develop and maintain proper and effective internal control over financial reporting and any failure to do so may adversely affect investor confidence in Dell Technologies and, as a result, the value of the Class C Common Stock.

Dell Technologies is required by Section 404 of the Sarbanes-Oxley Act of 2002 to furnish an annual report by management on, among other matters, its assessment of the effectiveness of its internal control over financial reporting. The assessment must include disclosure of any material weaknesses identified by Dell Technologies’ management in its report. Dell Technologies also is required to disclose significant changes made in its internal control over financial reporting. In addition, Dell Technologies’ independent registered public accounting firm is required to express an opinion each year as to the effectiveness of Dell Technologies’ internal control over financial reporting. The process of designing, implementing and testing internal control over financial reporting is time-consuming, costly and complicated.

During the evaluation and testing process of its internal controls, if Dell Technologies identifies one or more material weaknesses in its internal control over financial reporting, Dell Technologies will be unable to assert that its internal control over financial reporting is effective. Dell Technologies may experience material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit Dell Technologies’ ability to issue accurate reports of its financial condition or results of operations. If Dell Technologies is unable to conclude that its internal control over financial reporting is effective, or if Dell Technologies’ independent registered public accounting firm determines that Dell Technologies has a material weakness or significant deficiencies in its internal control over financial reporting, investors could lose confidence in the accuracy and completeness of Dell Technologies’ financial reports, the market price of the Class C Common Stock could decline and Dell Technologies could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in its internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, also could restrict future access to the capital markets by Dell Technologies or its subsidiaries.

Risks Relating to our Business and our Industry

Competitive pressures may adversely affect Dell Technologies’ industry unit share position, revenue, and profitability.

Dell Technologies operates in an industry in which there are rapid technological advances in hardware, software, and services offerings. As a result, Dell Technologies faces aggressive product and price competition

 

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from both branded and generic competitors. Dell Technologies competes based on its ability to offer to its customers competitive integrated solutions that provide the most current and desired product and services features. There is a risk that Dell Technologies’ competitors may provide products that are less costly, perform better or include additional features that are not available with Dell Technologies’ products. There also is a risk that Dell Technologies’ product portfolios may quickly become outdated or that Dell Technologies’ market share may quickly erode. Further, efforts to balance the mix of products and services in order to optimize profitability, liquidity, and growth may put pressure on Dell Technologies’ industry position.

As the technology industry continues to expand globally, there may be new and increased competition in different geographic regions. The generally low barriers to entry in the technology industry increase the potential for challenges from new industry competitors. There also may be increased competition from new types of products as the options for mobile and cloud computing solutions increase. In addition, companies with which Dell Technologies has strategic alliances may become competitors in other product areas or current competitors may enter into new strategic relationships with new or existing competitors, all of which may further increase the competitive pressures on Dell Technologies.

Reliance on vendors for products and components, many of which are single-source or limited-source suppliers, could harm Dell Technologies’ business by adversely affecting product availability, delivery, reliability and cost.

Dell Technologies maintains several single-source or limited-source supplier relationships, including relationships with third-party software providers, either because multiple sources are not readily available or because the relationships are advantageous due to performance, quality, support, delivery, capacity or price considerations. A delay in the supply of a critical single- or limited-source product or component may prevent the timely shipment of the related product in desired quantities or configurations. In addition, Dell Technologies may not be able to replace the functionality provided by third-party software currently offered with its products if that software becomes obsolete, defective, or incompatible with future product versions or is not adequately maintained or updated. Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could harm Dell Technologies’ operating results.

Dell Technologies obtains many of its products and all of its components from third-party vendors, many of which are located outside of the United States. In addition, significant portions of Dell Technologies’ products are assembled by contract manufacturers, primarily in various locations in Asia. A significant concentration of such outsourced manufacturing is currently performed by only a few of Dell Technologies’ contract manufacturers, often in single locations. Dell Technologies sells components to these contract manufacturers and generates large non-trade accounts receivables, an arrangement that would present a risk of uncollectibility if the financial condition of a contract manufacturer should deteriorate.

Although these relationships generate cost efficiencies, they limit Dell Technologies’ direct control over production. The increasing reliance on vendors subjects Dell Technologies to a greater risk of shortages and reduced control over delivery schedules of components and products, as well as a greater risk of increases in product and component costs. Because Dell Technologies maintains minimal levels of component and product inventories, a disruption in component or product availability could harm Dell Technologies’ ability to satisfy customer needs. In addition, defective parts and products from these vendors could reduce product reliability and harm Dell Technologies’ reputation.

If Dell Technologies fails to achieve favorable pricing from vendors, its profitability could be adversely affected.

Dell Technologies’ profitability is affected by its ability to achieve favorable pricing from vendors and contract manufacturers, including through negotiations for vendor rebates, marketing funds, and other vendor

 

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funding received in the normal course of business. Because these supplier negotiations are continuous and reflect the evolving competitive environment, the variability in timing and amount of incremental vendor discounts and rebates can affect Dell Technologies’ profitability. The vendor programs may change periodically, potentially resulting in adverse profitability trends if Dell Technologies cannot adjust pricing or variable costs. An inability to establish a cost and product advantage, or determine alternative means to deliver value to customers, may adversely affect Dell Technologies’ revenue and profitability.

Adverse global economic conditions and instability in financial markets may harm Dell Technologies’ business and result in reduced net revenue and profitability.

As a global company with customers operating in a broad range of businesses and industries, Dell Technologies’ performance is affected by global economic conditions. Adverse economic conditions may negatively affect customer demand for Dell Technologies’ products and services. Such economic conditions could result in postponed or decreased spending amid customer concerns over unemployment, reduced asset values, volatile energy costs, geopolitical issues, the availability and cost of credit, and the stability and solvency of financial institutions, financial markets, businesses, local and state governments and sovereign nations. Weak or unstable global economic conditions, including due to international trade protection measures, also could harm Dell Technologies’ business by contributing to product shortages or delays, insolvency of key suppliers, customer and counterparty insolvencies, increased product costs and associated price increases, reduced global sales and increased challenges in managing Dell Technologies’ treasury operations. Any such effects could have a negative impact on Dell Technologies’ net revenue and profitability.

Dell Technologies’ results of operations may be adversely affected if it fails to successfully execute its growth strategy.

Dell Technologies’ growth strategy involves reaching more customers through direct sales, new distribution channels, expanding relationships with resellers, and augmenting select business areas through targeted acquisitions and other commercial arrangements. As more customers are reached through new distribution channels and expanded reseller relationships, Dell Technologies may fail to manage effectively the increasingly difficult tasks of inventory management and demand forecasting. The ability to implement this growth strategy depends on a successful transitioning of sales capabilities, the successful addition to the breadth of Dell Technologies’ solutions capabilities through selective acquisitions of other businesses, and the effective management of the consequences of these strategic initiatives. If Dell Technologies is unable to meet these challenges, its results of operations could be adversely affected.

Dell Technologies faces risks and challenges in connection with its goal of becoming the leading and essential infrastructure solutions provider and its business strategy.

Dell Technologies expects it will take more time and investment to become the leading and essential infrastructure solutions provider, and the investments it must make are likely to result in lower gross margins and raise its operating expenses and capital expenditures.

For Fiscal 2018, Dell Technologies’ Client Solutions business generated approximately 50% of Dell Technologies’ net revenue, and largely relied on PC sales. Revenue from Client Solutions absorbs Dell Technologies’ significant overhead costs and allows for scaled procurement. As a result, Client Solutions remains an important component in Dell Technologies’ ongoing growth strategy. While Dell Technologies continues to rely on Client Solutions as a critical element of its business, Dell Technologies also anticipates an increasingly challenging demand environment in Client Solutions and intensifying market competition. Current challenges in Client Solutions stem from fundamental changes in the PC market, including a decline in worldwide revenues for desktop and laptop PCs, and lower shipment forecasts for PC products due to a general lengthening of the replacement cycle for PC products and increasing interest in alternative mobile solutions. PC shipments worldwide declined during calendar year 2017, and further deterioration in the PC market may occur.

 

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Other challenges include declining margins as demand for PC products shifts from higher-margin premium products to lower-cost and lower-margin products, particularly in emerging markets, and significant and increasing competition from efficient and low-cost manufacturers and from manufacturers of innovative and higher-margin PC products.

The challenges Dell Technologies faces include low operating margins for the Infrastructure Solutions Group and, although Client Solutions drives pull-through revenue and cross-selling of ISG solutions, the potential for further margin erosion remains due to intense competition, including emerging competitive pressure from cloud services. Improving the integration of Dell Technologies’ product and service offerings as well as its ability to cross-sell remain a work in progress, as Dell Technologies is in the early stages of integrating its products into solutions and thus far has limited overlap in the base of large customers for the Client Solutions business and the ISG business. In addition, returns from Dell Technologies’ prior acquisitions have been mixed and will require additional investments to reposition the business for growth. As a result of the foregoing challenges, Dell Technologies’ business, financial condition, and results of operations may be adversely affected.

Dell Technologies may not successfully implement its acquisition strategy, which could result in unforeseen operating difficulties and increased costs.

Dell Technologies makes strategic acquisitions of other companies as part of its growth strategy. Dell Technologies could experience unforeseen operating difficulties in assimilating or integrating the businesses, technologies, services, products, personnel, or operations of acquired companies, especially if Dell Technologies is unable to retain the key personnel of an acquired company. Further, future acquisitions may result in a delay or reduction of sales for both Dell Technologies and the acquired company because of customer uncertainty about the continuity and effectiveness of solutions offered by either company and may disrupt Dell Technologies’ existing business by diverting resources and significant management attention that otherwise would be focused on development of the existing business. Acquisitions also may negatively affect Dell Technologies’ relationships with strategic partners if the acquisitions are seen as bringing Dell Technologies into competition with such partners.

To complete an acquisition, Dell Technologies may be required to use substantial amounts of cash, engage in equity or debt financings, or enter into credit agreements to secure additional funds. Such debt financings could involve restrictive covenants that might limit Dell Technologies’ capital-raising activities and operating flexibility. Further, an acquisition may negatively affect Dell Technologies’ results of operations because it may expose Dell Technologies to unexpected liabilities, require the incurrence of charges and substantial indebtedness or other liabilities, have adverse tax consequences, result in acquired in-process research and development expenses, or in the future require the amortization, write-down or impairment of amounts related to deferred compensation, goodwill and other intangible assets, or fail to generate a financial return sufficient to offset acquisition costs.

In addition, Dell Technologies periodically divests businesses, including businesses that are no longer a part of its strategic plan. These divestitures similarly require significant investment of time and resources, may disrupt Dell Technologies’ business and distract management from other responsibilities, and may result in losses on disposition or continued financial involvement in the divested business, including through indemnification or other financial arrangements, for a period following the transaction, which could adversely affect Dell Technologies’ financial results.

If its cost efficiency measures are not successful, Dell Technologies may become less competitive.

Dell Technologies continues to focus on minimizing operating expenses through cost improvements and simplification of its corporate structure. Certain factors may prevent the achievement of these goals, which may negatively affect Dell Technologies’ competitive position. For example, Dell Technologies may experience delays or unanticipated costs in implementing its cost efficiency plans, which could prevent the timely or full achievement of expected cost efficiencies.

 

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Dell Technologies’ inability to manage solutions and product and services transitions in an effective manner could reduce the demand for Dell Technologies’ solutions, products, and services, and the profitability of Dell Technologies’ operations.

Continuing improvements in technology result in the frequent introduction of new solutions, products, and services, improvements in product performance characteristics, and short product life cycles. If Dell Technologies fails to manage in an effective manner transitions to new solutions and offerings, the products and services associated with such offerings and customer demand for Dell Technologies’ solutions, products and services could diminish, and Dell Technologies’ profitability could suffer.

Dell Technologies is increasingly sourcing new products and transitioning existing products through its contract manufacturers and manufacturing outsourcing relationships in order to generate cost efficiencies and better serve its customers. The success of product transitions depends on a number of factors, including the availability of sufficient quantities of components at attractive costs. Product transitions also present execution challenges and risks, including the risk that new or upgraded products may have quality issues or other defects.

Failure to deliver high-quality hardware, software, and services could lead to loss of customers and diminished profitability.

Dell Technologies must identify and address quality issues associated with its hardware, software, and services, many of which include third-party components. Although quality testing is performed regularly to detect quality problems and implement required solutions, failure to identify and correct significant product quality issues before the sale of such products to customers could result in lower sales, increased warranty or replacement expenses and reduced customer confidence, which could harm Dell Technologies’ operating results.

Dell Technologies’ ability to generate substantial non-U.S. net revenue is subject to additional risks and uncertainties.

Sales outside the United States accounted for approximately 51% of Dell Technologies’ consolidated net revenue for Fiscal 2018. Dell Technologies’ future growth rates and success are substantially dependent on the continued growth of Dell Technologies’ business outside of the United States. Dell Technologies’ international operations face many risks and uncertainties, including varied local economic and labor conditions; political instability; changes in the U.S. and international regulatory environments; the impacts of trade protection measures, including increases in tariffs and trade barriers due to the current geopolitical climate and changes and instability in government policies and international trade arrangements, which could adversely affect our ability to conduct business in non-U.S. markets; tax laws (including U.S. taxes on foreign operations); copyright levies; and foreign currency exchange rates. Any of these factors could negatively affect Dell Technologies’ international business results and prospects for growth.

Dell Technologies’ profitability may be adversely affected by product, customer, and geographic sales mix, and seasonal sales trends.

Dell Technologies’ overall profitability for any period may be adversely affected by changes in the mix of products, customers, and geographic markets reflected in sales for that period, and by seasonal trends. Profit margins vary among products, services, customers, and geographic markets. For instance, services offerings generally have a higher profit margin than consumer products. In addition, parts of Dell Technologies’ business are subject to seasonal sales trends. Among the trends with the most significant impact on Dell Technologies’ operating results, sales to government customers (particularly the U.S. federal government) are typically stronger in Dell Technologies’ third fiscal quarter, sales in Europe, the Middle East and Africa are often weaker in Dell Technologies’ third fiscal quarter, and sales to consumers are typically strongest during Dell Technologies’ fourth fiscal quarter.

 

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Dell Technologies may lose revenue opportunities and experience gross margin pressure if sales channel participants fail to perform as expected.

Dell Technologies relies on third-party value-added resellers, system integrators, distributors, retailers, and other sales channels to complement its direct sales organization in order to reach more end-users globally. Future operating results depend on the performance of sales channel participants and on Dell Technologies’ success in maintaining and developing these relationships. Revenue and gross margins could be negatively affected if the financial condition or operations of channel participants weaken as a result of adverse economic conditions or other business challenges, or if uncertainty regarding the demand for Dell Technologies’ products causes channel participants to reduce their orders for these products. Further, some channel participants may consider the expansion of Dell Technologies’ direct sales initiatives to conflict with their business interests as distributors or resellers of Dell Technologies’ products, which could lead them to reduce their investment in the distribution and sale of such products, or to cease all sales of Dell Technologies’ products.

Dell Technologies’ financial performance could suffer from reduced access to the capital markets by Dell Technologies or some of its customers.

Dell Technologies may access debt and capital sources to provide financing for customers and to obtain funds for general corporate purposes, including working capital, acquisitions, capital expenditures, and funding of customer receivables. In addition, Dell Technologies maintains customer financing relationships with some companies that rely on access to the debt and capital markets to meet significant funding needs. Any inability of these companies to access such markets could compel Dell Technologies to self-fund transactions with such companies or to forgo customer financing opportunities, which could harm Dell Technologies’ financial performance. The debt and capital markets may experience extreme volatility and disruption from time to time in the future, which could result in higher credit spreads in such markets and higher funding costs for Dell Technologies. Deterioration in Dell Technologies’ business performance, a credit rating downgrade, volatility in the securitization markets, changes in financial services regulation, or adverse changes in the economy could lead to reductions in the availability of debt financing. In addition, these events could limit Dell Technologies’ ability to continue asset securitizations or other forms of financing from debt or capital sources, reduce the amount of financing receivables that Dell Technologies originates, or negatively affect the costs or terms on which Dell Technologies may be able to obtain capital. Any of these developments could adversely affect Dell Technologies’ net revenue, profitability and cash flows.

Weak economic conditions and additional regulation could harm Dell Technologies’ financial services activities.

Dell Technologies’ financial services activities are negatively affected by adverse economic conditions that contribute to loan delinquencies and defaults. An increase in loan delinquencies and defaults would result in greater net credit losses, which may require Dell Technologies to increase its reserves for customer receivables. In addition, the implementation of new financial services regulation, or the application of existing financial services regulation in countries where Dell Technologies expands its financial services and related supporting activities, could unfavorably affect the profitability and cash flows of Dell Technologies’ consumer financing activities.

Dell Technologies is subject to counterparty default risks.

Dell Technologies has numerous arrangements with financial institutions that include cash and investment deposits, interest rate swap contracts, foreign currency option contracts and forward contracts. As a result, Dell Technologies is subject to the risk that the counterparty to one or more of these arrangements will default, either voluntarily or involuntarily, on its performance under the terms of the arrangement. In times of market distress, a counterparty may default rapidly and without notice, and Dell Technologies may be unable to take action to cover its exposure, either because of lack of contractual ability to do so or because market conditions make it

 

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difficult to take effective action. If one of Dell Technologies’ counterparties becomes insolvent or files for bankruptcy, Dell Technologies’ ability eventually to recover any losses suffered as a result of that counterparty’s default may be limited by the liquidity of the counterparty or the applicable legal regime governing the bankruptcy proceeding. In the event of such a default, Dell Technologies could incur significant losses, which could harm Dell Technologies’ business and adversely affect its results of operations and financial condition.

The exercise by customers of certain rights under their services contracts with Dell Technologies, or Dell Technologies’ failure to perform as it anticipates at the time it enters into services contracts, could adversely affect Dell Technologies’ revenue and profitability.

Many of Dell Technologies’ services contracts allow customers to take actions that may adversely affect Dell Technologies’ revenue and profitability. These actions include terminating a contract if Dell Technologies’ performance does not meet specified service levels, requesting rate reductions or contract termination, reducing the use of Dell Technologies’ services or terminating a contract early upon payment of agreed fees. In addition, Dell Technologies estimates the costs of delivering the services at the outset of the contract. If Dell Technologies fails to estimate such costs accurately and actual costs significantly exceed estimates, Dell Technologies may incur losses on the services contracts.

Loss of government contracts could harm Dell Technologies’ business.

Contracts with U.S. federal, state, and local governments and with foreign governments are subject to future funding that may affect the extension or termination of programs and to the right of such governments to terminate contracts for convenience or non-appropriation. There is pressure on governments, both domestically and internationally, to reduce spending. Funding reductions or delays could adversely affect public sector demand for Dell Technologies’ products and services. In addition, if Dell Technologies violates legal or regulatory requirements, the applicable government could suspend or disbar Dell Technologies as a contractor, which would unfavorably affect Dell Technologies’ net revenue and profitability.

Dell Technologies’ business could suffer if Dell Technologies does not develop and protect its proprietary intellectual property or obtain or protect licenses to intellectual property developed by others on commercially reasonable and competitive terms.

If Dell Technologies or its suppliers are unable to develop or protect desirable technology or technology licenses, Dell Technologies may be prevented from marketing products, may have to market products without desirable features, or may incur substantial costs to redesign products. Dell Technologies also may have to defend or enforce legal actions or pay damages if Dell Technologies is found to have violated the intellectual property of other parties. Although Dell Technologies’ suppliers might be contractually obligated to obtain or protect such licenses and indemnify Dell Technologies against related expenses, those suppliers could be unable to meet their obligations. Although Dell Technologies invests in research and development and obtains additional intellectual property through acquisitions, those activities do not guarantee that Dell Technologies will develop or obtain intellectual property necessary for profitable operations. Costs involved in developing and protecting rights in intellectual property may have a negative impact on Dell Technologies’ business. In addition, Dell Technologies’ operating costs could increase because of copyright levies or similar fees by rights holders and collection agencies in European and other countries.

Infrastructure disruptions could harm Dell Technologies’ business.

Dell Technologies depends on its information technology and manufacturing infrastructure to achieve its business objectives. Natural disasters, manufacturing failures, telecommunications system failures, or defective or improperly installed new or upgraded business management systems could lead to disruptions in this infrastructure. Portions of Dell Technologies’ IT infrastructure also may experience interruptions, delays or cessations of service, or produce errors in connection with systems integration or migration work. Such

 

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disruptions may adversely affect Dell Technologies’ ability to receive or process orders, manufacture and ship products in a timely manner or otherwise conduct business in the normal course. Further, portions of Dell Technologies’ services business involve the processing, storage and transmission of data, which also would be negatively affected by such an event. Disruptions in Dell Technologies’ infrastructure could lead to loss of customers and revenue, particularly during a period of heavy demand for Dell Technologies’ products and services. Dell Technologies also could incur significant expense in repairing system damage and taking other remedial measures.

Cyber attacks or other data security incidents that disrupt Dell Technologies’ operations or result in the breach or other compromise of proprietary or confidential information about Dell Technologies or Dell Technologies’ workforce, customers or other third parties could disrupt Dell Technologies’ business, harm its reputation, cause Dell Technologies to lose clients and expose Dell Technologies to costly regulatory enforcement and litigation.

Dell Technologies manages, stores and otherwise processes various proprietary information and sensitive or confidential data relating to its operations. In addition, Dell Technologies’ cloud computing businesses routinely process, store and transmit large amounts of data, including sensitive and personally identifiable information, for Dell Technologies’ customers. Dell Technologies may experience breaches or other compromise of the information technology systems it uses for these purposes, as criminal or other actors may be able to penetrate Dell Technologies’ network security and misappropriate or compromise Dell Technologies’ confidential information or that of third parties, create system disruptions or cause shutdowns. Further, hardware and operating system software and applications that Dell Technologies produces or procures from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of such systems.

The costs to address the foregoing security problems and security vulnerabilities before or after a cyber incident could be significant. Remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of existing or potential customers that may impede Dell Technologies’ sales, manufacturing, distribution or other critical functions. Dell Technologies could lose existing or potential customers for outsourcing services or other information technology solutions in connection with any actual or perceived security vulnerabilities in Dell Technologies’ products. In addition, breaches of Dell Technologies’ security measures and the unapproved dissemination of proprietary information or sensitive or confidential data about Dell Technologies or its customers or other third parties could expose Dell Technologies, its customers or other third parties affected to a risk of loss or misuse of this information, result in regulatory enforcement, litigation and potential liability for Dell Technologies, damage Dell Technologies’ brand and reputation or otherwise harm Dell Technologies’ business. Further, Dell Technologies relies in certain limited capacities on third-party data management providers and other vendors whose possible security problems and security vulnerabilities may have similar effects on Dell Technologies.

Dell Technologies is subject to laws, rules and regulations in the United States and other countries relating to the collection, use and security of user and other data. Dell Technologies’ ability to execute transactions and to possess and use personal information and data in conducting its business subjects it to legislative and regulatory burdens that may require Dell Technologies to notify regulators and customers, employees, or other individuals of a data security breach, including in the European Union under the EU General Data Protection Regulation, which took effect in May 2018. Dell Technologies has incurred, and will continue to incur, significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations, but despite such expenditures may face regulatory and other legal actions in the event of a data breach or perceived or actual non-compliance with such requirements.

 

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Failure to hedge effectively Dell Technologies’ exposure to fluctuations in foreign currency exchange rates and interest rates could adversely affect Dell Technologies’ financial condition and results of operations.

Dell Technologies utilizes derivative instruments to hedge its exposure to fluctuations in foreign currency exchange rates and interest rates. Some of these instruments and contracts may involve elements of market and credit risk in excess of the amounts recognized in Dell Technologies’ financial statements. If Dell Technologies is not successful in monitoring its foreign exchange exposures and conducting an effective hedging program, Dell Technologies’ foreign currency hedging activities may not offset the impact of fluctuations in currency exchange rates on its future results of operations and financial position.

The expiration of tax holidays or favorable tax rate structures, unfavorable outcomes in tax audits and other tax compliance matters, or adverse legislative or regulatory tax changes could result in an increase in Dell Technologies’ tax expense or Dell Technologies’ effective income tax rate.

Portions of Dell Technologies’ operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part from time to time. Many of these holidays may be extended when certain conditions are met, or may be terminated if certain conditions are not met. If the tax holidays are not extended, or if Dell Technologies fails to satisfy the conditions of the reduced tax rate, its effective tax rate would be impacted. Dell Technologies’ effective tax rate also could be impacted if Dell Technologies’ geographic sales mix changes. In addition, any actions by Dell Technologies to repatriate non-U.S. earnings for which it has not previously provided for U.S. taxes may affect the effective tax rate.

The application of tax laws to Dell Technologies’ operations and past transactions involves some inherent uncertainty. Dell Technologies is continually under audit in various tax jurisdictions. Although Dell Technologies believes its tax positions are appropriate, Dell Technologies may not be successful in resolving potential tax claims that arise from these audits. An unfavorable outcome in certain of these matters could result in a substantial increase in Dell Technologies’ tax expense. In addition, Dell Technologies’ provision for income taxes could be affected by changes in the valuation of deferred tax assets.

Changes in tax laws (including any future Treasury notices or regulations related to the Tax Cuts and Jobs Act that was signed into law on December 22, 2017) could adversely affect Dell Technologies’ operations and profitability. In recent years, numerous legislative, judicial and administrative changes have been made to tax laws applicable to Dell Technologies and companies similar to Dell Technologies. Additional changes to tax laws are likely to occur, and such changes may adversely affect Dell Technologies’ tax liability.

Dell Technologies’ profitability could suffer from any impairment of its portfolio investments.

Dell Technologies invests a significant portion of its available funds in a portfolio consisting primarily of debt securities of various types and maturities pending the deployment of these funds in Dell Technologies’ business. Dell Technologies’ earnings performance could suffer from any impairment of its investments. Dell Technologies’ portfolio securities generally are classified as available-for-sale and are recorded in Dell Technologies’ financial statements at fair value. If any such investments experience declines in market price and it is determined that such declines are other than temporary, Dell Technologies may have to recognize in earnings the decline in the fair market value of such investments below their cost or carrying value.

Unfavorable results of legal proceedings could harm Dell Technologies’ business and result in substantial costs.

Dell Technologies is involved in various claims, suits, investigations and legal proceedings that arise from time to time in the ordinary course of business, as well as those that arose in connection with Dell’s going-private transaction and the EMC merger, including those described elsewhere in this proxy statement/prospectus. Additional legal claims or regulatory matters may arise in the future and could involve stockholder, consumer,

 

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regulatory, compliance, intellectual property, antitrust, tax and other issues on a global basis. Litigation is inherently unpredictable. Regardless of the merits of the claims, litigation may be both time-consuming and disruptive to Dell Technologies’ business. Dell Technologies could incur judgments or enter into settlements of claims that could adversely affect its operating results or cash flows in a particular period. In addition, Dell Technologies’ business, operating results, and financial condition could be adversely affected if any infringement or other intellectual property claim made against it by any third party is successful, or if Dell Technologies fails to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions.

Dell Technologies is incurring increased costs and is subject to additional regulations and requirements as a public company, and Dell Technologies’ management is required to devote substantial time to compliance matters, which could lower Dell Technologies’ profits or make it more difficult to run its business.

Since it became a public company in June 2016, Dell Technologies has been incurring significant legal, accounting, and other expenses that it had not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. Dell Technologies also is incurring costs associated with the Sarbanes-Oxley Act of 2002 and related rules implemented by the SEC and the NYSE. The expenses incurred by public companies generally for financial reporting and corporate governance purposes have been increasing. The increased Dell Technologies’ legal and financial compliance costs have made some activities more time-consuming and costly. Dell Technologies’ management has to devote substantial time to ensuring that it complies with all of these requirements. Laws and regulations affecting public company directors and executive officers could make it more difficult for Dell Technologies to attract and retain qualified persons to serve on its board of directors or its board committees or as its executive officers. Further, if Dell Technologies is unable to satisfy its obligations as a public company, the Class C Common Stock could be subject to delisting from the NYSE and Dell Technologies could be subject to fines, sanctions and other regulatory action and potentially civil litigation.

Compliance requirements of current or future environmental and safety laws, or other laws, may increase costs, expose Dell Technologies to potential liability and otherwise harm Dell Technologies’ business.

Dell Technologies’ operations are subject to environmental and safety regulations in all areas in which Dell Technologies conducts business. Product design and procurement operations must comply with new and future requirements relating to climate change laws and regulations, materials composition, sourcing, energy efficiency and collection, recycling, treatment, transportation and disposal of electronics products, including restrictions on mercury, lead, cadmium, lithium metal, lithium ion and other substances. If Dell Technologies fails to comply with applicable rules and regulations regarding the transportation, source, use and sale of such regulated substances, Dell Technologies could be subject to liability. The costs and timing of costs under environmental and safety laws are difficult to predict, but could have an adverse impact on Dell Technologies’ business.

In addition, Dell Technologies and its subsidiaries are subject to various anti-corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business, and are also subject to export controls, customs and economic sanctions laws and embargoes imposed by the U.S. government. Violations of the Foreign Corrupt Practices Act or other anti-corruption laws or export control, customs or economic sanctions laws may result in severe criminal or civil sanctions and penalties, and Dell Technologies and its subsidiaries may be subject to other liabilities which could have a material adverse effect on their business, results of operations and financial condition.

Dell Technologies also is subject to provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act intended to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo or adjoining countries. Dell Technologies will incur costs to comply with the disclosure requirements of this law and may realize other costs relating to the sourcing and availability of minerals used in Dell Technologies’ products. Further, Dell

 

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Technologies may face reputational harm if its customers or other Dell Technologies stakeholders conclude that Dell Technologies is unable to sufficiently verify the origins of the minerals used in its products.

Armed hostilities, terrorism, natural disasters, or public health issues could harm Dell Technologies’ business.

Armed hostilities, terrorism, natural disasters or public health issues, whether in the United States or abroad, could cause damage or disruption to Dell Technologies or Dell Technologies’ suppliers and customers, or could create political or economic instability, any of which could harm Dell Technologies’ business. For example, the earthquake and tsunami in Japan and severe flooding in Thailand which occurred during fiscal year 2012 caused damage to infrastructure and factories that disrupted the supply chain for a variety of components used in Dell’s products. Any such future events could cause a decrease in demand for Dell Technologies’ products, make it difficult or impossible to deliver products or for suppliers to deliver components, and create delays and inefficiencies in Dell Technologies’ supply chain.

Dell Technologies is highly dependent on the services of Michael S. Dell, its Chief Executive Officer, and its success depends on the ability to attract, retain, and motivate key employees.

Dell Technologies is highly dependent on the services of Michael S. Dell, its Chief Executive Officer and largest stockholder. If Dell Technologies loses the services of Mr. Dell, Dell Technologies may not be able to locate a suitable or qualified replacement, and Dell Technologies may incur additional expenses to recruit a replacement, which could severely disrupt Dell Technologies’ business and growth. Further, Dell Technologies relies on key personnel, including other members of its executive leadership team, to support its business and increasingly complex product and services offerings. Dell Technologies may not be able to attract, retain and motivate the key professional, technical, marketing and staff resources needed.

Dell Technologies’ substantial level of indebtedness could adversely affect its financial condition.

Dell Technologies and its subsidiaries have a substantial amount of indebtedness, which require significant interest and other debt service payments. As of August 3, 2018, Dell Technologies and its subsidiaries had approximately $50.3 billion aggregate principal amount of indebtedness. As of the same date, Dell Technologies and its subsidiaries also had an additional $4.9 billion available for borrowing under its revolving credit facilities.

Dell Technologies’ substantial level of indebtedness could have important consequences, including the following:

 

   

Dell Technologies must use a substantial portion of its cash flow from operations to pay interest and principal on its senior credit facilities, its senior secured and senior unsecured notes, and its other indebtedness, which reduces funds available to Dell Technologies for other purposes such as working capital, capital expenditures, other general corporate purposes and potential acquisitions;

 

   

Dell Technologies’ ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes may be impaired;

 

   

Dell Technologies is exposed to fluctuations in interest rates because Dell Technologies’ senior credit facilities have variable rates of interest;

 

   

Dell Technologies’ leverage may be greater than that of some of its competitors, which may put Dell Technologies at a competitive disadvantage and reduce Dell Technologies’ flexibility in responding to current and changing industry and financial market conditions; and

 

   

Dell Technologies may be unable to comply with financial and other restrictive covenants in its senior credit facilities, the notes, and other indebtedness that limit Dell Technologies’ ability to incur additional debt, make investments and sell assets, which could result in an event of default that, if not cured or waived, would have an adverse effect on Dell Technologies’ business and prospects and could force it into bankruptcy or liquidation.

 

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Dell Technologies and its subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in Dell Technologies’ and its subsidiaries’ credit facilities and the indentures that govern the notes. If new indebtedness is added to the debt levels of Dell Technologies and its subsidiaries, the related risks that Dell Technologies now faces could intensify. Dell Technologies’ ability to access additional funding under its revolving credit facilities will depend upon, among other factors, the absence of a default under either such facility, including any default arising from a failure to comply with the related covenants. If Dell Technologies is unable to comply with its covenants under its revolving credit facilities, Dell Technologies’ liquidity may be adversely affected.

From time to time, when it believes it is advantageous to do so, Dell Technologies may seek to reduce its leverage by repaying certain of its indebtedness before the maturity dates of such indebtedness. Dell Technologies may be unable to generate operating cash flows and other cash necessary to achieve a level of debt reduction that will significantly enhance its credit quality and reduce the risks associated with its substantial indebtedness.

As of February 2, 2018, approximately $12.6 billion of Dell Technologies’ debt was variable-rate debt and a 100 basis point increase in interest rates would have resulted in an increase of approximately $126 million in annual interest expense on such debt. Dell Technologies’ ability to meet its expenses, to remain in compliance with its covenants under its debt instruments and to make future principal and interest payments in respect of its debt depends on, among other factors, Dell Technologies’ operating performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business, economic, and other factors. Dell Technologies is not able to control many of these factors. Given current industry and economic conditions, Dell Technologies’ cash flow may not be sufficient to allow Dell Technologies to pay principal and interest on its debt and meet its other obligations.

The financial performance of Dell Technologies is affected by the financial performance of VMware.

Because Dell Technologies consolidates the financial results of VMware in its results of operations, its financial performance is affected by the financial performance of VMware, which may be affected by a number of factors, including, but not limited to:

 

   

fluctuations in demand, adoption rates, sales cycles (which have been increasing in length), and pricing levels for VMware’s products and services;

 

   

changes in customers’ budgets for information technology purchases and in the timing of its purchasing decisions;

 

   

the timing of recognizing revenues in any given quarter, which can be affected by a number of factors, including product announcements, beta programs and product promotions that can cause revenue recognition of certain orders to be deferred until future products to which customers are entitled become available;

 

   

the timing of announcements or releases of new or upgraded products and services by VMware or by its competitors;

 

   

the timing and size of business realignment plans and restructuring charges;

 

   

VMware’s ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions;

 

   

VMware’s ability to control costs, including its operating expenses;

 

   

credit risks of VMware’s distributors, who account for a significant portion of VMware’s product revenues and accounts receivable;

 

   

VMware’s ability to process sales at the end of the quarter;

 

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seasonal factors, such as the end of fiscal period budget expenditures by VMware’s customers and the timing of holiday and vacation periods;

 

   

renewal rates and the amounts of the renewals for enterprise agreements, as the original terms of such agreements expire;

 

   

the timing and amount of software development costs that may be capitalized;

 

   

unplanned events that could affect market perception of the quality or cost-effectiveness of VMware’s products and solutions; and

 

   

VMware’s ability to predict accurately the degree to which customers will elect to purchase its subscription-based offerings in place of licenses to its on-premises offerings.

Dell Technologies’ pension plan assets are subject to market volatility.

Through the EMC merger, Dell Technologies assumed a noncontributory defined pension plan, which was originally part of the EMC legacy acquisition of Data General. The plan’s assets are invested in common stocks, bonds and cash. As of February 2, 2018 the expected long-term rate of return on the plan’s assets was 6.5%, which represented the average of the expected long-term rates of return weighted by the plan’s assets as of February 2, 2018. As market conditions permit, Dell Technologies expects to continue to shift the asset allocation to lower the percentage of investments in equities and increase the percentage of investments in long-duration fixed-income securities. The effect of such a change could result in a reduction in the long-term rate of return on plan assets and an increase in future pension expense. As of February 2, 2018, the ten-year historical rate of return on plan assets was 7.38%, and the inception-to-date return on plan assets was 9.74%. Should Dell Technologies not achieve the expected rate of return on the plan’s assets or if the plan experiences a decline in the fair value of its assets, Dell Technologies may be required to contribute assets to the plan, which could materially adversely affect its results of operations or financial condition.

Risks Relating to Class V Common Stock and our Tracking Stock Structure

The Class V Common Stock and our existing tracking stock structure are subject to the risks set forth below. For a discussion of the differences between the Class V Common Stock and the Class C Common Stock, see “Comparison of Rights of Class V Stockholders and Class C Stockholders.”

Holders of Class V Common Stock are common stockholders of Dell Technologies and, therefore, are subject to risks associated with an investment in Dell Technologies as a whole.

Even though Dell Technologies attributes, for financial reporting purposes, all of Dell Technologies’ consolidated assets, liabilities, revenue and expenses to either the DHI Group or the Class V Group in order to determine the DHI Group and Class V Common Stock earnings and earnings per share and to prepare the unaudited financial information for the Class V Group, Dell Technologies retains legal title to all of Dell Technologies’ assets, and Dell Technologies’ tracking stock capitalization does not limit Dell Technologies’ legal responsibility, or that of Dell Technologies’ subsidiaries, for their debts and liabilities. The DHI Group generally refers to the direct and indirect interest of Dell Technologies in all of Dell Technologies’ business, assets, properties, liabilities and preferred stock other than those attributable to the Class V Group, as well as the DHI Group’s retained interest in the Class V Group equal to approximately 38.9% of Dell Technologies’ economic interest in the Class V Group as of August 31, 2018. The Class V Common Stock is intended to track the economic performance of approximately 61.1% of Dell Technologies’ economic interest in the Class V Group as of August 31, 2018. The Class V Group consists solely of VMware common stock held by Dell Technologies. As of August 31, 2018, the Class V Group consisted of approximately 331 million shares of VMware common stock.

Although Dell Technologies’ tracking stock policy provides that reallocations of assets between groups may result in the creation of inter-group debt or an increase or decrease of the DHI Group’s inter-group interest in the

 

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Class V Group or in an offsetting reallocation of cash or other assets, Dell Technologies’ creditors are not limited by Dell Technologies’ tracking stock capitalization from proceeding against any assets against which they could have proceeded if Dell Technologies did not have a tracking stock capitalization. The DHI Group and the Class V Group are not separate legal entities and cannot own assets, and, as a result, holders of Class V Common Stock do not have special legal rights related to specific assets attributed to the Class V Group and, in any liquidation, holders of DHI Group common stock and holders of Class V Common Stock will be entitled to their proportionate interests in assets of Dell Technologies after payment or provision for payment of the debts and liabilities of Dell Technologies and payment or provision for payment of any preferential amount due to the holders of any other class or series of stock based on their respective numbers of liquidation units.

The Dell Technologies board of directors may not reallocate assets and liabilities between the DHI Group and the Class V Group without the approval of the Capital Stock Committee, which currently consists solely of independent directors, but any such reallocation of assets and liabilities may make it difficult to assess the future prospects of either group based on its past performance.

The board of directors may not allocate or reallocate assets and liabilities to one group or the other without the approval of the Capital Stock Committee, which must consist of a majority of independent directors who meet stock exchange requirements for audit committee service, and which currently consists solely of independent directors who meet such independence requirements of the NYSE. Any such allocation or reallocation may be made without the approval of any of Dell Technologies’ stockholders in accordance with the Dell Technologies tracking stock policy and the Company certificate. Any such reallocation made by the board of directors, as well as the existence of the right in and of itself to effect a reallocation, may affect the ability of investors to assess the future prospects of either group, including its liquidity and capital resource needs, based on its past performance. Stockholders also may have difficulty evaluating the liquidity and capital resources of each group based on past performance, as the board of directors may use one group’s liquidity to fund the other group’s liquidity and capital expenditure requirements through the use of inter-group loans or other inter-group arrangements.

In addition, any allocation or reallocation of assets and liabilities to one group or the other that results in the Class V Common Stock ceasing to track the performance of the VMware Class A common stock could result in the delisting of the Class V Common Stock from the NYSE, as discussed below, which would materially adversely affect the liquidity and value of the Class V Common Stock.

The listing standards of the NYSE include certain requirements to maintain the listing of an Equity Investment Tracking Stock, and if the Class V Common Stock were delisted because of the failure to meet any of such requirements, the liquidity and value of the Class V Common Stock would be materially adversely affected.

The NYSE has listing standards for a tracking stock, which the NYSE refers to as an “Equity Investment Tracking Stock,” that tracks the performance of an investment by the issuer in the common equity of another company listed on the NYSE, such as VMware. These listing standards provide that the Class V Common Stock could be delisted from the NYSE if:

 

   

the VMware Class A common stock ceases to be listed on the NYSE;

 

   

Dell Technologies ceases to own, directly or indirectly, at least 50% of either the economic interest or the voting power of all of the outstanding classes of common equity of VMware; or

 

   

the Class V Common Stock ceases to track the performance of the VMware Class A common stock.

If any of the foregoing conditions were no longer met at any time, the NYSE would determine whether the Class V Common Stock could meet any other applicable initial listing standard in place at that time. If the Class V Common Stock did not qualify for initial listing at that time under another applicable listing standard,

 

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the NYSE would commence delisting proceedings. Further, if trading in the VMware Class A common stock were suspended or delisting proceedings were commenced with respect to such VMware Class A common stock, trading in the Class V Common Stock would be suspended or delisting proceedings would be commenced with respect to the Class V Common Stock at the same time. Any delisting of the Class V Common Stock would materially adversely affect the liquidity and value of the Class V Common Stock.

The market price of Class V Common Stock may not reflect the performance of the Class V Group as Dell Technologies intends.

The market price of the Class V Common Stock may not reflect the performance of Dell Technologies’ interest in VMware and any other businesses, assets and liabilities that may be attributed to the Class V Group at any time. Holders of Class V Common Stock are common stockholders of Dell Technologies as a whole and, as such, are subject to all risks associated with an investment in Dell Technologies and all of Dell Technologies’ businesses, assets and liabilities, including the approximately $50.3 billion of aggregate principal amount of indebtedness that Dell Technologies had outstanding as of August 3, 2018. In addition, investors may discount the value of the Class V Common Stock because it is part of a common enterprise rather than of a stand-alone entity. As a result of the characteristics of tracking stocks, tracking stocks often trade at a discount to the estimated value of the assets or businesses they are intended to track. Since its original issuance at the closing of the EMC merger, the Class V Common Stock has traded at a discount to the market price of the VMware Class A common stock.

The market price of Class V Common Stock has been, and may continue to be volatile and affected by factors that do not affect traditional common stock.

The market price of Class V Common Stock may be materially affected by, among other factors:

 

   

actual or anticipated fluctuations in VMware’s operating results or in the operating results of any other businesses attributable to the Class V Group from time to time;

 

   

potential acquisition activity by Dell Technologies or the companies in which Dell Technologies invests;

 

   

adverse changes in the credit rating or credit quality of Dell Technologies and its subsidiaries;

 

   

issuances of additional debt or equity securities to raise capital by Dell Technologies or the companies in which Dell Technologies invests and the manner in which that debt or the proceeds of an equity issuance are attributed to each of the groups;

 

   

changes in financial estimates by securities analysts regarding Class V Common Stock or the companies attributable to either of Dell Technologies’ groups;

 

   

changes in market valuations of other companies engaged in similar lines of business;

 

   

the complex nature and the potential difficulties investors may have in understanding the terms of the Class V Common Stock, as well as concerns regarding the possible effect of certain of those terms on an investment in Dell Technologies’ stock; and

 

   

general market conditions.

The market price of Class V Common Stock has fluctuated significantly, and may fluctuate significantly in the future, as a result of these and other factors. The market price of the Class V Common Stock may decline from time to time and you may not be able to sell your shares of Class V Common Stock at an attractive price or at all.

Dell Technologies may not pay dividends equally or at all on the Class V Common Stock.

Except for the conditional special cash dividend it has declared in connection with the Class V transaction, VMware does not currently pay dividends on its common stock, and any decisions regarding dividends on the

 

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VMware common stock would be a decision of VMware’s board of directors. Dell Technologies does not presently intend to pay cash dividends on the Class V Common Stock. If VMware were to pay a dividend on the VMware common stock owned by Dell Technologies that is attributable to the Class V Group, Dell Technologies could, but would not be required to, distribute some or all of that amount to the holders of Class V Common Stock. Dell Technologies has the right to pay dividends on the shares of common stock of each group in equal or unequal amounts, and Dell Technologies may pay dividends on the shares of common stock of one group and not pay dividends on shares of common stock of the other group. In addition, any dividends or distributions on, or repurchases of, shares relating to either group will reduce Dell Technologies’ assets legally available to be paid as dividends on the shares relating to the other group.

Dell Technologies’ tracking stock capital structure could create conflicts of interest, and the board of directors might make decisions that could adversely affect only some holders of Dell Technologies common stock.

Dell Technologies’ tracking stock capital structure could give rise to circumstances in which the interests of holders of stock of one group might diverge or appear to diverge from the interests of holders of stock of the other group. In addition, given the nature of their businesses, there may be inherent conflicts of interests between the DHI Group and the Class V Group. Dell Technologies’ groups are not separate entities and thus holders of DHI Group common stock and Class V Common Stock do not have the right to elect separate boards of directors. As a result, Dell Technologies’ officers and directors owe fiduciary duties to Dell Technologies as a whole and all of Dell Technologies’ stockholders as opposed to only holders of a particular group. Decisions deemed to be in the best interest of Dell Technologies and all of Dell Technologies’ stockholders may not be in the best interest of a particular group when considered independently, such as:

 

   

decisions as to the terms of any business relationships that may be created between the DHI Group and the Class V Group or the terms of any reallocations of assets between the groups;

 

   

decisions as to the allocation of corporate opportunities between the groups, especially where the opportunities might meet the strategic business objectives of both groups;

 

   

decisions as to operational and financial matters that could be considered detrimental to one group but beneficial to the other;

 

   

decisions as to the conversion of Class V Common Stock into Class C Common Stock, which the board of directors may make in its sole discretion, so long as the Class C Common Stock is then traded on a U.S. securities exchange;

 

   

decisions regarding the increase or decrease of the inter-group interest that the DHI Group may own in the Class V Group from time to time;

 

   

decisions as to the internal or external financing attributable to businesses or assets attributed to either of Dell Technologies’ groups;

 

   

decisions as to the dispositions of assets of either of Dell Technologies’ groups; and

 

   

decisions as to the payment of dividends on the stock relating to either of Dell Technologies’ groups.

Ownership of DHI Group common stock and Class V Common Stock by Dell Technologies’ directors or officers may create or appear to create conflicts of interest.

With the exception of the Company’s three independent directors (whose equity compensation by Dell Technologies must be approximately half in the form of Class V Common Stock or options to acquire Class V Common Stock based on value at the time of grant), it is expected that all or substantially all of the direct and indirect equity ownership in Dell Technologies of Dell Technologies’ directors and officers will continue to consist of DHI Group common stock. Such ownership of DHI Group common stock by Dell Technologies’ directors and officers could create or appear to create conflicts of interest when they are faced with decisions that could have different implications for the holders of DHI Group common stock or Class V Common Stock.

 

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The Dell Technologies board of directors may not change the Dell Technologies tracking stock policy without the approval of the Capital Stock Committee, which currently consists solely of independent directors, but any such change may be made to the detriment of either group without stockholder approval.

The board of directors has adopted the Dell Technologies tracking stock policy, a copy of which is filed as Exhibit 99.2 to the Company’s annual report on Form 10-K for Fiscal 2018, to serve as guidelines in making decisions regarding the relationships between the DHI Group and the Class V Group with respect to matters such as tax liabilities and benefits, inter-group debt, inter-group interests, allocation and reallocation of assets, financing alternatives, corporate opportunities, payment of dividends and similar items. These policies also set forth the initial allocation of Dell Technologies’ businesses, assets and liabilities between the groups. These policies are not included in the Company certificate. The board of directors may not change or make exceptions to these policies without the approval of the Capital Stock Committee, which must consist of a majority of independent directors who meet stock exchange requirements for audit committee service, and which currently consists solely of directors who meet such independence requirements of the NYSE. Because these policies relate to matters concerning the day-to-day management of Dell Technologies as opposed to significant corporate actions, such as a merger involving Dell Technologies or a sale of substantially all of Dell Technologies’ assets, no stockholder approval is required with respect to their adoption or amendment. A decision to change, or make exceptions to, these policies or adopt additional policies could disadvantage one group while conferring an advantage on the other.

Holders of shares of stock relating to a particular group may not have any remedies if any action by Dell Technologies’ directors or officers has an adverse effect on only that stock.

Principles of Delaware law and the provisions of the Company certificate may protect decisions of the board of directors that have a disparate impact upon holders of shares of stock relating to a particular group. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all stockholders. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that, subject to any applicable provisions of the corporation’s certificate of incorporation, a board of directors owes an equal duty to all stockholders and does not have separate or additional duties to holders of any class or series of stock. Judicial opinions in Delaware involving tracking stocks have established that decisions by directors or officers involving differing treatment of holders of tracking stocks may be judged under the business judgment rule. In some circumstances, Dell Technologies’ directors or officers may be required to make a decision that is viewed as adverse to the holders of shares relating to a particular group. Under the principles of Delaware law and the business judgment rule referred to above, Dell Technologies stockholders may not be able to successfully challenge decisions they believe have a disparate impact upon the stockholders of one of Dell Technologies’ groups if a majority of the board of directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken, and acts in good faith and in the honest belief that the board of directors is acting in the best interests of Dell Technologies and all of Dell Technologies’ stockholders.

Dell Technologies may dispose of assets of the Class V Group without the approval of holders of the Class V Common Stock.

Delaware law requires stockholder approval only for a sale or other disposition of all or substantially all of the assets of Dell Technologies taken as a whole, and the Company certificate does not require a separate class vote in the case of a sale of a significant amount of assets attributed to any of Dell Technologies’ groups. As long as the assets attributed to the Class V Group proposed to be disposed of represent less than substantially all of Dell Technologies’ assets, Dell Technologies may approve sales and other dispositions of any amount of the assets attributed to such group without any stockholder approval.

If Dell Technologies disposes of all or substantially all of the assets attributed to the Class V Group (which means, for this purpose, assets representing 80% of the fair value of the total assets of the Class V Group as of

 

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such date, as determined by the board of directors), Dell Technologies would be required, if the disposition is not an excluded transaction under the terms of the Company certificate, to choose one or more of the following three alternatives:

 

   

declare and pay a dividend on the Class V Common Stock;

 

   

redeem shares of the Class V Common Stock in exchange for cash, securities, or other property; or

 

   

so long as the Class C Common Stock is then traded on a U.S. securities exchange, convert all or a portion of the outstanding Class V Common Stock into Class C Common Stock.

In this type of a transaction, holders of the Class V Common Stock may receive less value than the value that a third-party buyer might pay for all or substantially all of the assets of the Class V Group.

The board of directors will decide, in its sole discretion, how to proceed and is not required to select the option that would result in the highest value to holders of any group of common stock.

Holders of Class V Common Stock may receive less consideration upon a sale of the assets attributed to the Class V Group than if such group were a separate company.

If the Class V Group were a separate, independent company and its shares were acquired by another person, certain costs of that sale, including corporate level taxes, might not be payable in connection with that acquisition. As a result, stockholders of a separate, independent company with the same assets might receive a greater amount of proceeds than the holders of Class V Common Stock would receive upon a sale of all or substantially all of the assets of the Class V Group. In addition, in the event of such a sale, the per share consideration to be paid to holders of Class V Common Stock may n