HP Wins 3PAR Bidding War, Gets Set For Storage Market Push

HP's winning bid in its brief but expensive bidding war with Dell over enterprise storage vendor 3PAR has HP's solution providers looking forward to the next round of competition in the storage and converged networking markets.

HP on Thursday bid $33 per share, or a total of about $2.4 billion, for 3PAR, causing Dell to officially give up on its bid for the company.

Dell's surprise $1.15 billion bid on August 16 for 3PAR, followed shortly by HP's $1.6 billion offer, has turned the pursuit for 3PAR into a full-fledged bidding war.

3PAR represents an important prize for Dell and HP as both look for ways to beef up their enterprise storage offerings and look towards cloud computing.

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3PAR is a Fremont, Calif.-based developer of enterprise-class storage arrays featuring such services as clustering, tiered storage, and thin provisioning, which allow 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 cost associated with hardware, as well as a key technology for building cloud infrastructures.

Mark Gonzalez, president of Nth Generation, a San Diego-based solution provider and HP partner, said his first impression about HP's final bid was that it overpaid for a company with no real profits to date.

"I guess time will tell whether it was worth it," Gonzalez said. "As I predicted early on, HP was in this to win."

One of HP's challenges with 3PAR will be in its overall storage messaging, Gonzalez said. HP already has a lot of individual point products in the primary storage space, including its MSA, EVA, LeftHand, Windows-based NAS Servers, IBRIX-based NAS products, and XP, and now it is adding 3PAR.

"That's a lot of products, but I don't see a real good overarching cohesive storage strategy like, for example, NetApp's Unified Storage that incorporates the entire portfolio of products," he said.

Next: HP Still Faces Storage Challenges

However, while anyone listening to an HP storage pitch will hear it as part of HP's converged infrastructure message, that pitch is quiet when it comes to HP's midrange EVA line and its enterprise-class XP line, the latter of which is OEMed from Hitachi, Gonzalez said.

"Yet those two products represent the vast majority of HP’s storage revenues," he said. "That silence makes it very difficult to retain the existing EVA installed base, let alone win new customers to those two platforms."

HP's storage challenge is maintaining its current revenue and margin requirements while waiting for its converged infrastructure storage products to gain enough traction to make a difference in market share and the bottom line, Gonzalez said.

As an analogy, Gonzalez said it is like Dave Donatelli, HP's executive vice president and general manager for enterprise servers, storage, and networking, trying to change all four tires on a car as it’s going down the highway at 65 miles per hour in the middle of a sand storm caused by the economy.

"The good news is that he has the four tires," he said. "The trick is how to change them without the car ending up in the ditch."

3PAR will bring to HP a good storage and cloud solution, as well as products which are very competitive, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution provider and HP partner.

HP has had a strategy of acquiring the best technology, and 3PAR is no exception, Butler said. The challenge now is to integrate it with its other storage offerings.

"HP is buying technology and integrating it into its overall strategy, and has done a good job of showing where it fits in customer deployments," Butler said. "As an HP partner, there's always a question of when to lead with EVA, XP, LeftHand, and so on. HP has been doing a great job about making it clear."

Next: Integrating 3PAR Into HP

Butler compared HP's eventual integration of 3PAR to that of its acquisition of networking vendor 3Com.

"We recently saw a presentation from HP's networking team showing its competitive strategy against Cisco," he said. "They showed how, before the acquisition of 3Com, that HP could only fill in about 20 percent of the blocks in a comparison with Cisco, but after the acquisition could fill every slot against Cisco."

The acquisition of 3PAR by HP is good for both vendors and for the channel, said John Murphy, executive vice president of Advanced Systems Group, a Denver-based solution provider and HP partner.

Murphy said his company sold 3PAR products a few years ago. "It had good technology, but it didn't have a channel model," he said. "We still have our 3PAR reseller plaque in storage somewhere. I'll have to dust it off."

As part of HP, however, 3PAR now has a better chance to take its technology to market, Murphy said.

"With the channel and the strength of HP behind it, it will get a lot more at-bats in front of the customers," he said. "A lot of doors were closed to 3PAR because of its size, but not any more."

With its win, HP now takes over stewardship of the technology developed by 3PAR, 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 employees of 3PAR put a lot of investment, a lot of sweat, into developing its technology," Convery said. "Who best to keep it going besides HP?"

HP has been on a very aggressive acquisition streak, but one blended its R&D commitment, Convery said. For instance, when HP acquired networking product developer 3Com, it was quick to integrate its executives and people into HP.

"HP is committed to solutions, and will bring 3PAR as part of its converged networking solutions," he said. "I'm one happy HP partner."

Next: What's Next For Dell?

Acquiring 3PAR doesn't necessarily remove all the challenges faced by HP in the storage market, some solution providers said.

Jamie Shepard, executive vice president of technology solutions at ICI, a Marlborough, Mass.-based solution provider and partner to HP rivals EMC and Cisco, called the acquisition a good move for HP and its customers.

The acquisition takes the competition between HP and EMC to a whole new level, Shepard said. EMC is working with Cisco and VMware as part of the VCE coalition developing a unified storage strategy.

"HP is piecing together an integrated stack, while EMC is bringing together best-of-breed solutions," Shepard said. "We'll have a six-month leg-up on HP as long as the EMC-VMware alliance continues to grow."

By engaging in the 3PAR bidding war, Dell sent a signal to its main storage partner EMC that it was willing to take a competing product to market, solution providers said.

"Dell admits it has a gaping hole in its high-end storage by giving up on 3PAR," Advanced Systems Group's Murphy said. "I think Dell will be pretty aggressive in trying to fine an alternative to acquire."

Dell's 3PAR bid showed it wanted to rely less on EMC for its storage technology, said Dave Bondo, principal and executive vice president of Preston Data Systems, a Preston, Wash.-based solution provider and Dell storage partner.

"Maybe some of the damage has been done to its relationship with EMC," Bondo said. "But Dell is the largest reseller of EMC on the planet. EMC won't do anything hasty."

Bondo said he has to believe Dell will be looking to acquire other storage technology, and said that there are a lot of vendors from which it can choose.

"There's others out there," he said. "The more you dig, the more you see."