The bidding for a little-known Fremont data storage company rose to $2 billion this morning as first Dell raised its offer to $27 a share, matching an offer by Hewlett-Packard yesterday afternoon, and then HP bumped its price up to $30 a share.
HP and Dell, two longtime rivals in the computer business, have been locked in an intense contest to buy 3Par, which makes innovative data-storage products geared toward the growing cloud computing industry.
But analysts have been shaking their heads as the two computer giants have escalated their offering prices this week. 3Par's stock was trading well below $12 for most of this year, before it first announced it had struck a deal with Dell to be acquired for $18 a share Aug. 16.
HP and Dell see 3Par's technology as providing an important edge in their efforts to sell a wide range of commercial computing gear. And both tech giants have large warchests of cash for acquisitions.
Dell, however, has matching rights under its Aug. 16 agreement with 3Par, which entitle the Texas computer maker to match any competing offer. That's led to a series of increasingly high bids by HP which are matched or slightly raised by Dell.
HP's previous bid of $27 a share, came Thursday just hours after Dell revealed it had raised its offer to $24.30 a share. That was a small bump up from the $24 that HP bid Monday.
Some analysts have speculated that HP, the larger company, could eventually outlast
"The valuation is so extreme now, there's not really a benchmark where you can say, 'OK, they're going to stop here,'" said Jayson Noland of the Robert W. Baird investment firm.
The unusual contest shows both an intense rivalry between the two companies, each of which has a large war chest of cash, and their conviction that 3Par's innovative technology can give them a crucial edge in a larger battle for industry dominance.
"People are saying it doesn't make sense to pay this much for a company that had $200 million in revenue last year. But this is about long-term strategy," said Roger Cox, a storage-technology expert at the Gartner research firm.
HP and Dell are longtime rivals in the computer business, although HP has outpaced Dell in expanding beyond PCs and printers to selling a range of commercial computing gear, including storage and networking products, as well as tech services.
Now the two big computer companies are dueling to acquire 3Par and its technology, which is geared toward the growing market for cloud computing, in which businesses store data and software in large computer centers that users can access over the Internet.
3Par is known for its combination of hardware and software that makes it possible to store data across multiple devices and reconfigure them as needed. This increases storage capacity and lowers operating costs, at a time when banks, retailers and other customers are seeing an explosion in the amount of digital data they need to operate their businesses.
Both Dell and HP already sell data storage products. But each relies partly on agreements to resell products made by other manufacturers, notably EMC and Hitachi, and neither have all the features that 3Par offers, according to Cox.
Buying 3Par would give HP or Dell more control over future products, which is especially important as both companies try to sell big computer systems in which all the components work smoothly together.
Neither HP nor Dell is probably concerned with how many customers 3Par has now, added Mike Workman, CEO of Pillar Data, a small company that competes with 3Par. "What they're buying is next-generation storage technology."
HP Executive Vice President David Donatelli has defended the deal in part by saying HP will use its vast sales and supply networks to sell 3Par's technology on a broader scale than 3Par was able to achieve.
Dell has made other storage acquisitions in recent months, while analysts said HP's storage business has not been as strong as other company segments.
HP first approached 3Par with an offer to buy the company in July, according to a regulatory filing. 3Par then contacted other prospective buyers, including Dell, which submitted a higher offer than HP had initially proposed. 3Par invited HP to raise its initial offer, but HP declined on Aug. 1. The amount of HP's first offer has not been disclosed.
HP has declined to comment on its decision not to raise its first offer on Aug. 1. That decision came as HP's board was in talks with then-CEO Mark Hurd over an investigation into his friendship with an HP marketing director, which led to Hurd's resignation Aug. 6. It's unclear if Hurd's situation affected the effort to buy 3Par or if his departure has changed HP's view of the deal.
Contact Brandon Bailey at 408-920-5022. Follow him at Twitter.com/BrandonBailey.