Archrivals HP & Dell lock horns over 3Par

by Abhinna Shreshtha    Aug 25, 2010

HP Dell lock horns over 3ParDell seemed on track to acquire enterprise storage provider - 3Par last week, but HP had other ideas. By putting in a $1.6 billion counteroffer for 3Par, HP could have triggered off one of the most interesting takeover sagas for some time. In fact, analysts at Ovum feel that it won’t be too surprising to see another player enter the fray.

A problem, however, could be that the two companies might end up paying much more than what 3Par is actually worth. “Both Dell and HP believe that the acquisition of 3PAR’s scalable storage systems will allow them to significantly increase the value proposition for their cloud offerings, and 3Par’s scarcity value means that both the companies are more than keen to pay higher than what the company appears to be worth on paper,” said Nishant Singh, managing analyst (infrastructure technologies) of Ovum.

The reason why 3Par has such a high value is the expertise it has, which will become even more relevant as data management becomes critical and cloud computing becomes more mainstream. 3Par is considered a pioneer of thin provisioning and as data continues to explode globally, its expertise in enterprise storage solutions will help whichever company acquires it. Also, both HP and Dell could leverage 3Par’s knowledge and experience with thin provisioning to create more compelling storage solutions for enterprises as they move to the cloud. Whoever manages to acquire 3Par will definitely gain an edge over the competition.

A lot of 3Par’s appeal, says Singh, lies in the fact that its technology is well-known and accepted in the industry. “A failure to acquire 3Par will no doubt dent the failed bidder’s cloud strategy as they will have to look for alternatives and at the moment there don’t seem to be many available. Even for the winning bidder however, there will be the question of getting their money’s worth on the price paid. If the bidding prices continue their upward spiral, this will be a real concern,” he said.

In April, Forbes had placed 3Par fourth in its ’25 fastest growing technology companies’ list. In the quarter ended June 30, 2010, the company reported revenues of $54.3 million, an increase of 22% over the same period last year, and an increase of 1% as compared to $53.7 million in the prior quarter.

Over the years, both HP and Dell have been broadening their product and services portfolio through acquisitions. HP has already made two high profile acquisitions this year – that of Palm and 3Com. The 3com acquisition was not without its own controversy resulting in Cisco ending its longterm relation with HP. Dell’s last big acquisition was of IT service provider – Perot Systems last year.

3Par has reportedly given Dell three days to come back with a better offer and if Dell does counter bid, and it seems likely that it will, we could have a protracted bidding war in the making. The matter could become even more complicated if another party enters the picture, though there is no indication as of now that any of the other IT giants are ready to do this.