HP, Dell Lock Horns Over 3PAR

As the business world becomes ever more reliant on technology in order to function efficiently and remain competitive, there is plenty of behind the scenes wheeling and dealing going on between major players in this fast-moving sector that investors may want to keep track of. A merger bid by Dell, and the subsequent raising of the stakes by Hewlett Packard, for a company that reportedly has not managed to turn an annual profit since it became a public company three years ago, has been drawing a great deal of interest. The company at the center of attention is Fremon, California, based 3PAR, which received and accepted a merger bid from Dell, only to announce on the weekend that the board of the data storage company would be terminating its merger agreement with Dell in favor of the offer by HP, which it considers to be a “superior proposal”.

With 3PAR’s track record of profitability being less than inspiring, why would tech-giants Dell and Hewlett Packard even be interested in the company, let alone being pitted against one another in a bidding war? Apparently, it’s all about data storage, or “cloud computing“, which 3PAR appear to have developed to a degree that makes the company a worthwhile prize in a market that is rapidly expanding. Cloud computing offers companies the service of off-site data storage and access, and analysts anticipate corporate spending on this service is likely to reach more than $55 billion by 2014 – a growth of more than 25 percent per annum on the 2009 figure of $16.5 billion.

While HP currently offers its clients off-site data storage, Dell does not, and both companies would benefit tremendously from the 3PAR’s technology in order to compete in a market already catered for by IBM, EMC and Hitachi Data Systems. With HP’s latest offer of $30 per share pushing the value of 3PAR’s stock up by 211% since the tug-of-war between Dell and HP began, it certainly can be viewed as a superior proposal. Whether Dell will come back with a counter-offer remains to be seen, but there is no doubt that whichever way the board of 3PAR decide to go, its investors will be smiling.