HP outbids Dell for data-storage group

It seems strange that HP and Dell would fight over a relatively unknown company that specializes in data storage … until you factor in the cloud computing angle; then it makes sense.

Wall Street sees Hewlett-Packard and Dell rival bids as indication that deal-making is back in vogue

The world’s two largest computer manufacturers, Hewlett-Packard and Dell, are going head-to-head in a bid to buy 3PAR, a hitherto obscure provider of back-office data storage.

HP today slapped down a $1.6bn (£1bn) offer for 3PAR, upsetting a $1.13bn takeover of the company announced by Dell last week, and fueling a sense on Wall Street that deal-making is beginning to return after a long hiatus.

The move by HP came despite a leadership vacuum at the top of the Silicon Valley company. HP lost its chief executive, Mark Hurd, this month in a scandal surrounding allegations of sexual harassment and personal expense irregularities. A permanent successor is yet to be chosen.

Dave Donatelli, head of HP’s servers, storage and networking business, urged 3PAR to accept the new offer: “HP’s proposal offers superior value to 3PAR’s shareholders. Our global reach, strong routes to market and commitment to innovation uniquely position HP as the ideal fit for 3PAR.”

In a conference call, he said HP’s top-rank turnover made no difference to the bid: “I have absolutely no concerns as it relates to this deal.”

HP and its smaller rival, Dell, are both anxious to build their presence in so-called “cloud computing”, whereby their client companies spend less on servers and software – choosing instead to receive technology over the internet according to need. Contracting out the storage of data on an adjustable basis is part of this trend.

Based near San Francisco, 3PAR has 670 staff. Although the company made a loss of $3.2m last year, experts say it is in a growth area and could benefit from a surge in information technology spending when the business world finally establishes a sustained recovery from the recession.

Shannon Cross, a technology analyst at Cross Research, said 3PAR made sense as a purchase for HP.

“I don’t think they are making an acquisition just to hurt Dell; this is a strategic asset,” Cross said. “Storage is a focused area for HP as well as others, and 3PAR has a good product set.”

HP’s bid for 3PAR is priced at $24 a share, while Dell’s offer is for $18. Both the major hardware makers have already done substantial deals to expand into services – Dell last year bought Perot Systems, founded by erstwhile presidential candidate Ross Perot, while HP spent $13.9bn on Electronic Data Systems back in 2008.

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