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Will 3Par Be Good For HP? The Jury Is Out

HP has prevailed in its bidding war with Dell for 3Par, a high-end storage vendor, giving HP an important advantage in the converged infrastructure and cloud computing era. Dell withdrew from the bidding war for 3Par on Thursday, after its board voted not to try to counter the $2.4 billion cash offer ($33 per share) that HP made earlier. The bidding war started Aug. 16 with Dell's $18 a share, or $1.15 billion, offer. For coming in second, Dell will receive a $72 million "break-up fee" from 3Par.

The 3Par board "determined that HP's revised proposal constitutes a 'Superior Proposal'" as defined in the original merger agreement with Dell, according to a 3Par news release. 3Par is prized for its virtualized approach to providing multi-tenant storage arrays for private and public cloud computing. It is expected to advance HP's Converged Infrastructure strategy of developing a pool of server, storage and network IT resources for an enterprise that are all controlled through a common management platform. "That makes 3Par a good fit for HP's Converged Infrastructure, which depends on virtualization for many of its benefits," said Charles King, president and principal analyst at Pund-IT Inc. "In a very real sense, cloud and utility computing can't exist without virtualization."

The flagship of the 3Par product line is its InServe Storage Servers line that is built with 3Par's InSpire Architecture. "It's a pretty innovative solution," said Andrew Reichman, senior storage industry analyst with Forrester Research. "It's more modular, easier to use, easier to scale and it offers some embedded virtualization features that improve efficiency and usability."

The reason HP and Dell got into such an intense bidding war for 3Par is that it's the only independent top-tier storage vendor with the technology to go up against industry leaders EMC, IBM and Hitachi, said Reichman. Dell's only top-tier storage offering is reselling EMC storage and HP's EVA line is aging, said Reichman. HP also resells Hitachi and EMC products. As a result, storage has been a "weak spot" in HP's Converged Infrastructure goal to deliver the whole range of enterprise technology from one vendor.

Without 3Par, Dell has a few options, none of them particularly promising, according to Reichman. It could just walk away and resign itself to being out of the high-end storage business, or the company could go back to EMC and maybe "double down" on that partnership. "Or they could buy a lower-end vendor and try to build it up, but that would be difficult and time consuming and would have other issues," he said. As to whether the bidding war resulted in HP paying too much for 3Par, Reichman said the price it paid is whatever the market will bear. The $2.4 billion price tag may still be cheap compared to the R&D cost of HP of trying to build its own storage technology to match 3Par's. But Pund-IT's King disagrees: "Innovative technology aside, $2+ billion for an unprofitable high-end storage company is too much."