Dell Mulls Latest Obstacle to 3PAR: HP's $2B

Dell has a couple of days to make the next move in the rapidly escalating bidding war for the small scale-out storage maker.

Dell - which wants to get better at serving high-end storage customers was busy considering its options Aug. 30 in its prolonged bidding war with Hewlett-Packard over utility storage maker 3PAR. HP on Aug. 27 increased its offer to just under $2 billion, and 3PAR's board later that evening accepted it. Thus, Dell, which apparently has more to lose in this bidding war than HP, is left to make the next move. It has an agreement that allows it to automatically match any competing offer for 3PAR, so the deal's not done yet. But it looks like a resolution is at hand.

3PAR executives are pushing Dell to make a decision, and are doing so in highly public fashion. In a statement released Aug. 27, the company said that its board of directors felt that the HP bid represented a "superior proposal" to the last one made by Dell.

In addition, 3PAR officials said that the board also notified Dell that it intends to immediately terminate the merger proposal with Dell after the three business days laid out in the merger plan. Essentially the company is giving Dell those three days to come up with a suitable counter offer, or 3PAR will opt out of the agreement with Dell and move forward with merger plans with HP.

So now Dell has those three business days to respond to the $2 billion question. When and how it answers the challenge is up to founder and CEO Michael Dell and his board of directors.

"We will make a decision in the best interest of our customers and shareholders and make that known when it becomes appropriate," Dell Corporate Communications Director David Frink told Reuters. HP isn't talking at this time, preferring to let its current standing bid to speak for itself.

"We have an existing agreement with 3PAR that gives us the right to match any competitive offer. We are assessing it at this time," Frink said.

$2 billion is a lot of money, even for a company such as Dell, which has $7.7 billion in the bank. Both companies realize the value of 3PAR's intellectual property, its strong management team, its consistent execution, its loyal list of customers and its only-modest profitability.

They also realize that 3PAR hasn't been able to take its message or its products to the next level, because they don't have the sales force and international rep that HP and Dell both have earned over years of work. In that regard, either of the two companies could provide exactly what 3PAR cannot do on its own.

With all due respect to all three of the aforementioned corporate entities, 3PAR isn't the only vendor that offers second-generation-type storage. Isilon, Compellent, Xiotech, Pivot3 and Infortrend are five of at least a dozen established companies that offer high-end utility-type storage for enterprises large and small.

"That may be true, but there are very few other companies available for purchase," Dell storage and cloud guru Praveen Asthana told eWEEK.

For further information and analysis, see these eWEEK articles:

Why is 3PAR such a hot property?

Dell explains why 3PAR is strategic to its needs

HP's motives in the bidding war