HP Tops Dell Bid for 3PAR Again, This Time by $200M

Hewlett-Packard's move to up the ante in its attempt to acquire 3PAR comes only about 5 hours after Dell bid $1.6 billion, topping HP's previous bid of $1.5 billion.

Hewlett-Packard Aug. 26 wasted little time in firing a serious monetary salvo across Dell's bow, increasing its bid by nearly $300 million to $1.8 billion-$200 million more than Dell's last offer-in the bidding war for utility storage maker 3PAR.

The move came only about 5 hours after Dell had bettered HP's second bid of $1.5 billion by more than $100 million, raising its own offer to about $1.6 billion.

HP's $27-per-share cash bid is the second time the company has overtaken Dell in pursuit of the relatively small, 600-person 3PAR, which is a hot storage property. HP tendered its $1.5 billion offer Aug. 23.

HP's new offer values 3PAR at 262 times the company's earnings before interest, taxes, depreciation and amortization during the past year, according to Bloomberg financial data. 3PAR's entire market cap is $1.63 billion.

3PAR, which went public in November 2007, saw its stock price drop 2.7 percent to $26.03 upon close of trading Aug. 26. In after-hours trading, the price increased to $27.73 by 6:30 p.m. EDT.

Until the bidding war began a few weeks ago with HP's original offer, 3PAR's stock had sold for under $10 for more than a year. The shares closed at $9.65 on Aug. 13, the last trading day before Dell's first agreement to purchase the company was made public Aug. 16. However, shares rocketed up 45 percent on Aug. 23, when HP announced its $1.5 billion bid.

3PAR Director of Media Relations John D'Avolio told eWEEK the company would have no comment on the bidding war at this time. HP's offers are unsolicited; Dell and 3PAR already have signed an agreement in principle to execute the deal.

Why is 3PAR so hot?

3PAR is now a prime asset primarily for two reasons: Firstly because its clustered, utility-type architecture is tailor-made for cloud systems that deliver software as a service, and cloud storage systems are in demand at this time.

Secondly, there aren't that many leading-edge storage companies left to be acquired. Young, progressive companies like EqualLogic, Data Domain, Storwize, Ocarina, Bycast, Mimosa Systems and Kazeon already have been scooped up by large systems providers EMC, IBM, NetApp and Dell and by cloud storage providers such as Iron Mountain Digital.

"We're clearly in a seller's market right now, with not many things to sell," Pat Gelsinger, EMC's president and COO of Information Infrastructure Products, told a group of journalists at a briefing in San Francisco Aug. 26.

EMC and Dell share about 155,000 customers worldwide, so EMC has more than a passing interest in whether its largest storage sales partner adds new products via acquisition that could compete with its own wares in the same marketplace.

"3PAR is a high-end, block-only solution. As a company, they've been fairly flat for several quarters with trivial profitability. They haven't been setting the world on fire. So why is there a war over them? Clearly, there aren't a lot of choices left," Gelsinger said.

"HP [already] relies on Hitachi for their high-end offering, so clearly they're saying, 'I need to have a better high-end offering,' while Dell is saying, "I need to be a more effective enterprise player.' Dell is thinking: higher-volume, lower-margin PCs and consumer products, or higher-margin, stickier-business high-end enterprise? They have to grow in the enterprise."

Gelsinger, who was one of the prime movers behind Intel's new multicore processors during his long career at the chip maker, said he fully expects Dell to continue to move up the stack-not just in storage, but in other areas, such as networking and data center management software and services.

Another reason why 3PAR attracted HP, Dell

Back in March, 3PAR began its own brand of autonomic storage tiering, called Adaptive Optimization. This, plus the current 3PAR catalog and its list of dedicated customers, is apparently what made Dell and HP act.

IBM championed the concept of autonomic computing for about a decade. Autonomic computing is a self-management mechanism for a system or systems that can make preprogrammed "decisions" to solve problems-and solve them very quickly-to keep the data center operational.

Optimally, the process actually prevents problems from happening in the first place through a combination of business and operational intelligence, gained by a constant collection of data. 3PAR's version anticipates data blockages and solves them before they happen, according to the company.

3PAR Adaptive Optimization follows this concept to enable high-end-type storage systems to achieve an efficient distribution of data over the application life cycle, without needing intervention by an administrator, the company says.

The software intelligently monitors subvolume level performance, then applies user-created policies that autonomically and nondisruptively rebalance a workload across tiers to continually and flexibly meet changing application demands, 3PAR Vice President of Marketing Craig Nunes told eWEEK.