Wednesday, August 25, 2010

Dell to increase its bid in battle for 3Par as early as tomorrow

According to Financial Times article today, Dell is preparing to make an improved bid within days for data storage company 3Par that is “competitive” with Hewlett-Packard’s rival $1.6 billion offer, according to people with knowledge of Dell’s plans.

Dell’s new offer is not expected to be dramatically higher than HP’s bid, which topped Dell’s initial $1.15 billion approach a week earlier; HP said it would pay $1.6 billion, or $24 a share, for 3PAR, which makes high-end storage systems and data management products that help reduce power and energy costs for companies storing information. The offer represents a 33% premium above the $1.15 billion bid that Dell made the other week. HP said the acquisition of 3Par would accelerate its “converged infrastructure” strategy, which helps its customers organize their servers, data storage and networks on one platform. Dell on the other had has been late to the enterprise services, desparately overpaying for obvious acquisition targets to catch up with IBM and HP

In a regulatory filing on Tuesday, 3Par said that HP’s $24-a-share bid was “reasonably likely” to be deemed superior by its board to the previous Dell bid. The data storage company is expected to meet HP today and provide it with confidential information as the two sides explore a possible deal.

Only after such a deal is reached would 3Par formally tell Dell that it had been trumped, giving the Texas-based computer- maker three days to respond to the move.  A person working with another party in the bidding war said that he was surprised that Dell was moving so quickly, because 3Par’s filing did not by itself start the clock on the three-day period. But one person with direct knowledge of Dell’s plans said the company did not plan to wait for the triggering event. “The clock is running,” the source said, adding that Dell could counter by Thursday.

HP has more cash and cash equivalents than Dell but with $15 billion and $11 billion, respectively, both could easily afford to buy 3Par.

Dell is following HP’s expansion into services and is increasing its foray into smartphones. Although HP is a better fit for 3Par, with a broader set of offerings for big business customers and a larger sales force. I tend to believe Dell might need 3Par more than HP would. HP has lost its chief dealmaker which could hamper their ability to keep bidding up and move swiftly. Similarly, last year EMC and NetApp went back and forth several times for storage software maker Data Domain, which EMC - the orginal bidder - eventually acquired.

3Par is seen as a leader in data storage and management tools, which are increasingly in demand as large companies turn to cloud computing. The new architecture is moving data away from desktop PCs and local servers to remote locations.

Customers need access to that data from a variety of places and devices. They also want to perform more analysis on the information and do so without spending a great deal on power consumption and other operating costs.

Dell has already completed one big deal in data storage with the acquisition of EqualLogic. HP’s purchases in the sector are not on the same scale.

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