The bidding battle between tech giants, Dell Inc. (DELL) and Hewlett-Packard & Co. (HPQ) to acquire 3PAR Inc. (PAR) is likely to stretch longer than expected.
The tug-of-war between the tech titans is raising value for the shareholders of 3PAR, which has not been making much profit lately. The chase to tap new markets (beyond PCs) with huge growth prospects is the main reason for the bidding war.
The bidding started with Dell offering $18 a share, which was counter-bid by HP and Dell in rapid succession, with the final offer (so far) from HP coming in at $30 a share.
Looking Back
On August 16, Dell had signed a definitive agreement to acquire enterprise storage products manufacturer 3PAR Inc. in an all cash deal valued at $1.15 billion, or $18 per outstanding common share of 3PAR. The 3PAR deal would help to bolster Dell's competitiveness and profitability in the mid and high-end of the Fibre Channel SAN segment and strengthen its position for cloud and virtualized environments.
On August 23, HP made a counter-bid of $24 per 3PAR outstanding common share, which indicated a premium of 33% over Dell’s offer price. With the acquisition, HP intends to strengthen its innovative Converged Infrastructure solutions by improving competitiveness of its storage portfolio.
On August 26, Dell announced that it raised its bid to $24.30 per share, marginally topping HP’s offer, after which officials from Dell said that 3PAR had accepted the offer. Dell also increased its breakup fee to $72.0 million from $53.5 million in its prior offer, implying that 3PAR would have to pay $72.0 million in case it signs another deal.
Some analysts (UnionBankSwitz., Raymond James, R.W. Baird and BofA Merrill Lynch) were expecting a counter offer from HP, since 3PAR is the only pureplay, high-end Storage Area Network (SAN) player of significant size available for acquisition.
The analysts’ expectations proved correct when HP bid up the price to $27 per share, representing a premium of 11% over Dell’s most recent offer price. However, the analysts expected another move from Dell.
And sure enough, Dell matched HP’s offer, after which HP offered $30 a share.
Where the Meat Is
3PAR is a global provider of virtualized storage solutions founded in 1999. The company provides highly-virtualized storage solutions with advanced data management features (dynamic tiering, thin provisioning, etc.) for cloud-computing environments. 3PAR’s high-end enterprise storage products compete with those from key players in the segment, such as EMC Corp.’s (EMC) Symmetrix, International Business Machines Inc.’s (IBM) XIV and other offerings from Hitachi.
Our Take
In today’s technology-driven world, the enterprise storage space is one of the most enviable growth areas. This is drawing in many players and intensifying competitive pressures. Under the circumstances, if 3PAR’s board approves the deal on its financial merit, Dell’s endeavors to grow in the space would likely suffer. Simultaneously, HP would effectively free itself of a rival.
We are encouraged by Dell’s attempt to shift its focus from PC and server roots to become a data-center vendor with a broad scope. However, soft demand in the Consumer segment, high debt level and stiff competition in computing and emerging cloud computing space are concerns.
On the other hand, HP has a strong business model, and still rules the computing world, with a leadership position in both PC and Server segments. HP is also well positioned to challenge network leader Cisco Systems Inc. (CSCO), and gain share in the networking market. The company also expects to benefit substantially from the increase in IT spending and has offered an encouraging guidance for fiscal 2010. Despite the company’s market position and compelling product line, we remain cautious about future growth, especially on the consumer side.
Hence, we currently have a short-term Hold recommendation for both HP and Dell shares, which equates to a Zacks #3 Rank.
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
EMC CORP -MASS (EMC): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
3PAR INC (PAR): Free Stock Analysis Report
Zacks Investment Research
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The bidding started with Dell offering $18 a share, which was counter-bid by HP and Dell in rapid succession, with the final offer (so far) from HP coming in at $30 a share.
Looking Back
On August 16, Dell had signed a definitive agreement to acquire enterprise storage products manufacturer 3PAR Inc. in an all cash deal valued at $1.15 billion, or $18 per outstanding common share of 3PAR. The 3PAR deal would help to bolster Dell's competitiveness and profitability in the mid and high-end of the Fibre Channel SAN segment and strengthen its position for cloud and virtualized environments.
On August 23, HP made a counter-bid of $24 per 3PAR outstanding common share, which indicated a premium of 33% over Dell’s offer price. With the acquisition, HP intends to strengthen its innovative Converged Infrastructure solutions by improving competitiveness of its storage portfolio.
On August 26, Dell announced that it raised its bid to $24.30 per share, marginally topping HP’s offer, after which officials from Dell said that 3PAR had accepted the offer. Dell also increased its breakup fee to $72.0 million from $53.5 million in its prior offer, implying that 3PAR would have to pay $72.0 million in case it signs another deal.
Some analysts (UnionBankSwitz., Raymond James, R.W. Baird and BofA Merrill Lynch) were expecting a counter offer from HP, since 3PAR is the only pureplay, high-end Storage Area Network (SAN) player of significant size available for acquisition.
The analysts’ expectations proved correct when HP bid up the price to $27 per share, representing a premium of 11% over Dell’s most recent offer price. However, the analysts expected another move from Dell.
And sure enough, Dell matched HP’s offer, after which HP offered $30 a share.
Where the Meat Is
3PAR is a global provider of virtualized storage solutions founded in 1999. The company provides highly-virtualized storage solutions with advanced data management features (dynamic tiering, thin provisioning, etc.) for cloud-computing environments. 3PAR’s high-end enterprise storage products compete with those from key players in the segment, such as EMC Corp.’s (EMC) Symmetrix, International Business Machines Inc.’s (IBM) XIV and other offerings from Hitachi.
Our Take
In today’s technology-driven world, the enterprise storage space is one of the most enviable growth areas. This is drawing in many players and intensifying competitive pressures. Under the circumstances, if 3PAR’s board approves the deal on its financial merit, Dell’s endeavors to grow in the space would likely suffer. Simultaneously, HP would effectively free itself of a rival.
We are encouraged by Dell’s attempt to shift its focus from PC and server roots to become a data-center vendor with a broad scope. However, soft demand in the Consumer segment, high debt level and stiff competition in computing and emerging cloud computing space are concerns.
On the other hand, HP has a strong business model, and still rules the computing world, with a leadership position in both PC and Server segments. HP is also well positioned to challenge network leader Cisco Systems Inc. (CSCO), and gain share in the networking market. The company also expects to benefit substantially from the increase in IT spending and has offered an encouraging guidance for fiscal 2010. Despite the company’s market position and compelling product line, we remain cautious about future growth, especially on the consumer side.
Hence, we currently have a short-term Hold recommendation for both HP and Dell shares, which equates to a Zacks #3 Rank.
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
EMC CORP -MASS (EMC): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
3PAR INC (PAR): Free Stock Analysis Report
Zacks Investment Research
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