Last updated: September 3, 2010 12:22 am

HP to buy 3Par as Dell pulls out of race

Hewlett-Packard won the bidding battle for data storage company 3Par on Thursday after rival computer maker Dell balked at raising its offer again.

3Par accepted HP’s latest bid of $33 a share, or about $2.4bn, and paid Dell a $72m fee to break their standing merger agreement.

HP, the world’s biggest technology company by sales, said it expected the deal to close by the end of December.

The contest, which began before 3Par publicly accepted a Dell offer at $18 last month, provided further evidence that the two largest US computer makers are stepping up their rivalry as they branch into new areas.

HP had bid less before it learnt that Dell was the other suitor, according to a person familiar with the process.

That provided extra motivation because HP wanted to block Dell’s move to gain ground in data storage, where HP is weak and both companies need to expand their product lines to become one-stop shops for large customers’ technology needs.

Storage and analysis tools are vital as businesses shift towards cloud computing, in which data are housed remotely rather than on users’ PCs. The amount of data being amassed is doubling every 18 months, analysts say, and companies need cost-effective access to it from an increasing variety of devices.

HP and Dell exchanged rapid-fire bids until Dell paused last week and prepared a restructured final offer at $32 a share that 3Par felt would have tied its hands too tightly.

Dell wanted the right to resell 3Par’s products at set prices even if HP ended up owning 3Par.

The premium for 3Par gave HP investors – and Dell’s board – cause for concern.

3Par has yet to turn a profit and just before Dell unveiled its original offer, its stock had closed at $9.65, less than a third of the $33 a share now on the table.

Steve Schuckenbrock, Dell president for enterprise customers, said on Tuesday: “You have to think through the valuations ... There is a point when winning and losing blur.”

HP shares fell as it bid up the price for the data storage concern, but have since recovered.

Dell made its last offer conditional on a long-term deal for it to resell 3Par products at set prices no matter which bidder prevailed.

Dell’s shares gained 2 per cent to $12.36 in New York after the company’s exit. HP closed up 47 cents at $39.68.

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