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TheStreet Open House

Dell's 3Par Buy Is a Shrewd Move

Stocks in this article: DELLPAREMCIBMVZSVVSCS

ROUND ROCK, Texas ( TheStreet) -- Dell's (DELL) $1.15 billion acquisition of storage specialist 3Par (PAR) could be a shrewd move, opening the door to new cloud computing revenue.

Long touted as attractive acquisition bait, 3Par is seen as well-positioned for the shift towards cloud computing, which will force users to drive more efficiency out of their servers and storage. 3Par is a pioneer in thin provisioning technology, which allocates storage only when it is needed in an attempt to boost utilization rates.

Dell

The Fremont, Calif.-based storage specialist, which competes with EMC (EMC) and IBM (IBM), lists Verizon (VZ), Savvis (SVVS), Credit Suisse (VZ) and the New York Stock Exchange (NYSE) among its customers.

The 3Par acquisition is not Dell's first foray into the storage space. The tech giant bought privately-held Ocarina Networks for an undisclosed fee earlier this year, and spent $1.4 billion on EqualLogic in 2007.

Storage remains a small part of the broader Dell empire. Dell's storage revenue increased just 4% year-over-year to $554 million during the first quarter, compared to overall revenue of $14.9 billion. EqualLogic sales, however, increased 21% compared to the prior year's quarter and Dell said that its storage product mix is delivering better margins.

Dell also sells storage via an OEM deal with EMC, but is clearly eyeing additional opportunities in the storage market. In a statement released before market open, Dell confirmed that 3Par's technology will sit alongside its existing PowerVault storage products, as well as offerings from EqualLogic and EMC.

"3PAR brings the same values of performance, agility and ease-of-use to higher end, virtualized storage deployments as EqualLogic does for the entry-level and mid-range," explained Brad Anderson, senior vice president of Dell's enterprise product group.

The 3Par deal has been approved by the boards of directors of both companies, and is expected to close before the end of 2010. Dell said the transaction, based on current estimates, is expected to be accretive to its non-GAAP earnings in fiscal 2012.

Shares of Dell, which reports its second-quarter results after market close on Thursday, were flat in pre-market trading.

-- Reported by James Rogers in New York

Follow James Rogers on Twitter.

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