Dell, HP Bidding War for 3Par Heats Up
HP's latest bid of $2 billion for 3Par is a 10-fold increase over what 3Par earned last year. But market value has little to do with this war, experts say. While 3Par would highly complement HP's offerings, Dell needs the company to get into the high-end data center space.
Fri, August 27, 2010
Computerworld — In less than two weeks, the bidding war for grid-storage vendor 3Par has nearly doubled from $1.15 billion to $2 billion with Hewlett-Packard's latest tit-for-tat bid against Dell .
HP Ups 3PAR Bid to $30 Per Share, Tops Dell's Latest
Dell Matches HP's $27 Offer, is Accepted By 3PAR
The two technology behemoths are fighting for what is arguably the last independent vendor of enterprise -class data storage on the market. But when do the bids become too outrageous? Or can they? 3Par, an 11-year-old company that sells a high-end, highly scalable storage platform, earned about $200 million last year, so the latest bid represents 10-fold the revenue 3Par generates.
"Regardless of what anyone claims, money is the only factor that will determine the outcome," said Steve Duplessie, founder and lead analyst at research firm Enterprise Strategy Group.
In the leap-frog battle for 3Par , HP has been more aggressive. Dell (DELL) began the public process with its $1.15 billion bid -- or $18 per share -- on Aug. 16, which was topped by a $1.6 billion offer, or $24 a share, by HP. Dell's retort? Just a bit more, and offer of $24.30 per share. HP quickly shot back again with an offer of $27 per share, which Dell matched the very next day. HP's response today? A whopping $2 billion, or $30 per share.
John Bender, who once ran HP's Mergers & Acquisitions group and led the HP-Compaq merger in 2002, said his former company knows exactly how high they'll go.
"They have very sophisticated financial models. They'll know exactly at what point to walk away and when it makes sense from a cash flow and investment perspective to say we'll develop our own technology," said Bender, the founder and managing director of Bender Consulting.
If 3Par were to accept an HP offer, it would have to pay Dell, the original bidder, a $72 million termination fee, a small price to pay after receiving more than $2 billion from the winning bidder.
Scott Archibald, who once worked for HP and was responsible for the IT integration between HP and Compaq, said while 3Par is a great technology company, it's far overvalued.
"You've got to wonder how much of this is emotionally driven versus a good business decision," said Archibald, who is also an analyst with Bender Consulting. "You've got to scratch your head as to why they're paying such a high premium for this company."
In an SEC filing regarding the 3Par merger, HP answered a list of frequently asked questions, the first of which was how much HP was willing to pay. In an answer reminiscent of the vague style of New England Patriots football coach Bill Belichick's, HP wrote: "We are focused on today's new offer, which we believe is superior to Dell's existing proposal."
