3PAR Lowers IPO Target

Thin provisioning specialist 3PAR has set the terms for its imminent IPO, lowering its estimate from $100 million to $81 million.

In an amended form S-1 filed with the SEC late last week, 3PAR confirmed its plans to offer 7,500,000 shares priced at between $11 and $13, and said it expects to raise $81 million.

This is almost $20 million less than the figure described in 3PAR's initial S-1 filing three months ago, reflecting a more cautious approach from the vendor.

3PAR's decision to change its pricing was likely prompted by rival Compellent's recent IPO, according to Scott Sweet, senior managing partner of analyst firm IPOBoutique.

"In my opinion, Compellent had a much too high valuation and came down hard and fast in the days following the offering," he says, highlighting the falling value of the vendor's shares.Certainly, Compellent's shares have been on something of a roller coaster for the last few weeks. The vendor quickly surpassed its $13.50 estimate when it began trading last month, almost reaching double the target price at the end of the first day of trading.

Within two days, the shares were trading at less than $19 and are now even lower. When the markets closed today, Compellent's shares were priced at $15.79.

"It left a bad taste in a lot of peoples' mouths," says Sweet. "3PAR realized that they didn't want to get into the same position."

Despite its amended SEC filing, 3PAR has not yet set a date for its IPO, although Sweet told Byte and Switch that the offering is likely to be soon. "Once the range has been established, the deal is about two weeks away, he says.

The Fremont, Calif.-based vendor is one of a number of firms that are touting thin provisioning as a way for users to get the most out of their storage infrastructure. This ensures that physical disk capacity is only used as it is needed.This message appears to be getting through. In the amended S-1, 3PAR cites more than 200 customers, which include Credit Suisse, the FBI, Dow Jones, Priceline.com, and the U.S. Census Bureau.

In addition to the IPOs from 3PAR and Compellent, recent M&A activity underlines the growing momentum behind thin provisioning. Like 3PAR, rival EqualLogic was also scheduled for a November IPO, but was bought by Dell for $1.4 billion today.

Although 3PAR's SEC filing does not reveal any product roadmap information, the vendor is clearly keen to fill out its product line, unveiling virtual machine software for its InServ devices earlier today.

By splitting the InServ servers up into what are called 'Virtual Domains', the vendor claims to deliver more secure access for up to 2,000 virtual arrays per device.

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