HP-Dell Bidding War Reaches Fever Pitch

But while neither company is assured of winning the ultimate prize, the true victor in this saga may be the prize itself. By the close of the Dow Jones on Friday, 3Par's stock price had jumped approximately $6.43 to $32.46, an increase of 25 percent. Despite the inherent risk involved in buying a stock whose ascendant value has mainly been influenced by just two participants, investors seem to think the contest is not over yet.

Daniel Duffy, CEO of HP channel partner Valley Network Solutions, Fresno, Calif., suggested “from an outsider perspective, this seems like an excessive bidding war.” Nevertheless, 3PAr’s value to both companies should not be overlooked. The Fremont, Calif.-based enterprise-class storage virtualization company provides several services relevant to cloud computing, including clustering, tiered storage, and thin provisioning, which provides increased storage capacity beyond physical limitations. Acquiring 3Par would allow either company to operate in the cloud more cost-effectively.

3Par is a great fit from a technology perspective for HP, John Convery, executive vice president of vendor relations and marketing at Denali Advanced Integration, a Redmond, Wash.-based solution provider and HP partner, told CRN Thursday. "HP has a lot of smart people looking at how to bring these things together. HP's goal is to be number one. And this shows HP is serious."

That ambition may be aimed at more than increased storage space. HP needs a leadership position if they are going to dominate the market at the same pace as Cisco, Duffy said.

Duffy believes HP’s long-term profitability and its commitment to the channel would make them a better strategic choice then Dell, a company he characterized as “a mess.”

Dell made its original $1.2 billion offer for 3PAR on Aug. 16 and has since reached into its decidedly shallower pockets to keep up with HP -- which it will need to do again to stay in the race. On the other hand, according to The Wall Street Journal, Dell possesses one major advantage: the two venture funds which own the largest share of 3Par stock and co-founded the company have already pledged 35 percent to Dell. At this point, its anyone’s race.

Formerly the world’s largest computer manufacturer, Dell has been looking to reassert itself in the personal computing market it once dominated by establishing a presence in the mobile handheld market, as Apple has done successfully. With 3Par, Dell would be in a position to compete for large data-center customers buying storage and servers.

Of course, as HP and Dell seek to outbid each other, any perceived strategic advantage in acquiring 3Par for either company increases its value for the other. This year, HP will generate about $18.3 billion in revenue and $2.2 billion of profit from large data-center storage and virtualization alone. As aggressive as HP’s bidding has been -- from $1.2 to $1.6 billion, to $1.8 and now $2 billion, while Dell has merely matched each offer -- their reasoning may be more defensive then their actions suggest.

By the end of the market week, 3Par shares were trading above HP's offer price. With 3Par’s shares at $32.46, the market now expects the bidding to reach $2.2 billion. Though no one would have predicted things would come this far, it may not be over just yet.