HP says cost for 3Par deal worth it

Hewlett-Packard’s victory over Dell this week in a rapid-fire bidding war for storage technology company 3Par, should secure its lead over its long-term rival in the increasingly important data storage segment, according to the company.

Its offer of $33 a share beat Dell’s final bid of $32. Dell’s first publicly disclosed offer of $18 had launched an intense contest for 3Par, a California-based company run by a former HP executive.

HP reasoned that a price of more than three times 3Par’s stock valuation was worth it to stay ahead in a fast-growing market.

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’s final price worked out to nearly nine times 3Par’s projected revenue for 2011 and left many industry experts shaking their heads. A top official at EMC, the leading data storage maker, said 3Par was clearly overvalued even during the earlier rounds of bidding.

In the short term, 3Par will not do much for HP’s revenue. For that reason, Shaw Wu, analyst at Kaufman Bros, said: “While we understand and appreciate 3Par’s technology, we continue to find the price paid very rich.”

In the second quarter of this year EMC had more than a quarter of external disk storage sales worldwide. IBM was second with about 14 per cent of the market, research group IDC said, with HP and NetApp in a statistical tie for third with more than 11 per cent apiece.

HP is increasing its bets on storage. Dave Donatelli, a former EMC executive, has been running the company’s storage effort, as well as sales of big servers and networking gear, since earlier this year.

Even before securing 3Par, HP sold more storage than Dell. Dell resells storage gear made by EMC, providing about 20 per cent of the latter’s revenue in the sector. Dell sold about $1.6bn worth of external storage in 2009, according to estimates from IDC.

HP, by contrast, sells about $3.6bn in storage, Mr Wu said, and this figure could now grow to as much as $6bn in a few years, while remaining less than 5 per cent of HP’s overall revenue of $115bn last year.

Worldwide sales of disk storage grew 21 per cent in the second quarter to $6.8bn, IDC said on Friday.

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