September 07, 2010, 9:26 AM — Few, if any, expected Dell to win the weeks-long bidding battle for 3Par after HP slammed down a $2 billion bid for the company, trumping Dell's previous bid by almost $400 million.
Technically, Dell had three business days after HP submitted its Aug. 27 bid to counter the offer. Sometime last Wednesday evening, Dell submitted a final $32-per-share offer to 3Par, topping HP's bid by $2 per share. As it had before, HP didn't even flinch; at sunrise Thursday morning, it fired back, offering $33 per share or $2.4 billion.
The message to Dell from HP was clear: We will outbid you.
Dell walked away. But how badly was it really hurt? Dell got a $72 million deal termination fee from 3Par and HP gets to pay more than three times 3Par's market capitalization -- a price that's 11 times what it earned last year.
"Anytime companies get into a bidding war, the biggest winner is the company up for sale. [3Par's CEO] David Scott is sitting there smiling, as [are] his staff and his company's share holders," said Arun Taneja, lead consultant at Taneja Group in Hopkinton, Mass. "The only question that matters now is can HP make hay with it?"
In fact, HP's share price fell right after the 3Par purchase a sign investors were nervous that the company had overpaid for its prize.
John Bender, who once ran HP's mergers and acquisitions group and led the HP-Compaq merger in 2002, said his former company did not overpay for 3Par, and in fact, it needed a win after the contentious departure of CEO Mark Hurd .
While Dell wanted 3Par to build out a cloud services offering and boost it into the enterprise data center arena, HP needed 3Par for two reasons. One, it wants its own storage technology rather than reselling high-end arrays from Hitachi Data Systems. And two, "it's a strategic blocking move against Dell primarily," said Bender, managing director of Bender Consulting.
"It's also a strategic blocking move globally against companies like Acer," he continued. "Acer is number two in PCs and their CEO has gone on the record and said, 'I'm going after the enterprise.'"
According to bender, what many pundits and investors don't see is monetization of the cloud. "If you see how the cloud will take shape over the next three, five or 10 years, HP may have underpaid at the end of the day," he said.