Friday, August 27, 2010

Dell matches HP’s $1.8 billion bid for 3Par

Dell, in the rapidly escalating bidding war over 3Par, has sweetened its bid for the data storage company to $1.8 billion matching last night’s rival offer from Hewlett-Packard. In my opinion bidding war for company that has yet to deliver profits has become such irrational maddness that neither vendors are acting on the best interests of their respective shareholders.

According to media, Dell said 3Par had accepted its new bid of $27 per share, which is up 10 per cent from its last offer. The new Dell deal comes hot on the heels of HP’s tender offer on Thursday to buy all outstanding shares of 3Par for $27 per share in cash. Last week, Dell had offered $18 a share for 3Par, which makes high-end storage systems and data management products used in “cloud computing”.

3Par shares rose 9.4 per cent in premarket trading on Friday to $28.50 in anticipation that the bidding war for control of the computer group has further to go. The latest salvos value 3Par, which has yet to turn a profit, at $1.8 billion, net of the company’s cash.
HP is more than four times the size of Dell by market value, but both companies have ample cash to keep bidding. The competition over 3Par underscores the importance of data storage and analysis as big businesses shift towards “cloud computing”, where information is housed remotely rather than on users’ computers. This is an attractive and emerging part of the services market and both hardware vendors are desparate to scale up a services franchise.  Dell Services is far behind HP and IBM in terms of scale anbd breadth of its portfolio of offerings. There are not too many firms available in the enterprise storeage space particularly with cloud computing capabilities.

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