HP Wastes No Time Upping Dell's Bid For 3PAR

HP, locked in a short but violent bidding war with Dell over the acquisition of storage virtualization vendor 3PAR, on Thursday afternoon upped the ante with an offer to acquire 3PAR for $27 per share.

HP's new offer comes just hours after Dell on Thursday increased its offer to acquire 3PAR for $24.30 per share.

Dell started the bidding Augusts 16 at $1.15 billion for storage virtualization vendor 3PAR, followed Monday by HP's $1.6 billion bid for 3PAR, has turned the pursuit for 3PAR into a full-fledged bidding war.

HP's newest bid, at $27 per share, represents a total offer for 3PAR of $1.8 billion, or about 11 percent greater than Dell's earlier offer.

3PAR is a Fremont, Calif.-based developer of enterprise-class storage arrays featuring such services as clustering, tiered storage, and thin provisioning, which allows applications to be configured with more storage capacity than is physically available.

Thin provisioning, when combined with those other services, allows storage customers to avoid purchasing excess storage capacity to meet unexpected future requirements, and is fast becoming a key storage feature as customers look to cut hardware acquisition costs as well as the power and cooling costs associated with hardware, as well as a key technology for building cloud infrastructures.

HP, in its newest offer to acquire 3PAR, said 3PAR would be a big part of HP's move to develop its converged infrastructure strategy of bringing storage, server, and networking solutions into a single architecture, and that high-performance storage systems will strengthen ability to deliver the highest levels of storage performance, efficiency and scalability.

The acquisition of 3PAR is important to both Dell and HP as both look for ways to beef up their enterprise storage offerings and look towards cloud computing, said Steve Bishop, CTO of VeriStor Systems, an Atlanta-based solution provider and partner to both vendors.

Next: Seeking More Control Of Enterprise Storage

Dell currently depends on a reseller relationship it has with EMC for enterprise-class storage, while HP depends on an OEM relationship it has with Hitachi for its enterprise-class XP storage appliances.

However, as IT vendors move to consolidate more and more parts of the enterprise computing stack into their hands, both HP and Dell seek greater control of enterprise storage, Bishop said.

For a major storage vendor looking to bring enterprise storage technology in-house, there currently is no alternative to 3PAR in high-performance, mission-critical, tier-one block storage environments, Bishop said.

"I don't believe there is a real alternative for someone looking to get an enterprise storage platform that from Day One they could sell against EMC's DMX, HP's XP or Hitachi's USP [in those environments]," he said.

And, unlike some acquisitions which get melted into the purchaser's other technology, 3PAR will be a core technology to the winner, Bishop said.

"Whoever buys 3PAR, it will become a core part of their technology," he said. "It won't be just another add-in."

Dhruv Gulati, executive vice president of Lilien Systems, a Larkspur, Calif.-based solution provider and HP partner, said he is glad to see HP pursuing 3PAR, not only because of the technology but to keep Dell from getting its hands on it.

"It's good news," Gulati said. "I like the 3PAR product. We looked at it early on, but it was too small at the time. So we added NetApp to our product line because it had a well-known brand name."

Next: Great Fit For HP, According To HP And Its VARs

While $1.6 billion or $1.8 billion may seem high for 3PAR to many observers, 3PAR has great technology, Gulati said. "Anyway, the market sets the price," he said.

3PAR is a great fit from a technology perspective for HP, said John Convery, executive vice president of vendor relations and marketing at Denali Advanced Integration, a Redmond, Wash.-based solution provider and HP partner.

The challenge with such an acquisition is the integration side, Convery said. However, he pointed to HP's acquisition of networking vendor 3Com as an example of how HP can make such integrations work.

"Look at how smooth the 3Com acquisition was," he said. "HP has a lot of smart people looking at how to bring these things together. HP's goal is to be number one. And this shows HP is serious."

Dave Donatelli, executive vice president and general manager for enterprise servers, storage, and networking at HP, said in a statement, ’Our revised proposal offers superior value to 3PAR’s shareholders, while maintaining our disciplined approach to only pursuing acquisitions that we believe will strengthen our portfolio and create long-term value for our shareholders. Not only is our offer superior to Dell’s proposal, HP remains uniquely positioned to execute on this combination given the number of synergies between the two companies.’

A Dell spokesperson said that the company's agreement with 3PAR gives it the right and a period of time to match any new offer. Dell will take some time to assess the situation and act in the best interests of its customers and shareholders, and make a comment regarding its next step at an "appropriate" time, the spokesperson said.