HP Is So Subpar It Overpays for 3PAR - Today's Outrage

Is 3PAR really worth eight times revenue? Or is that just the price HP is paying to show it's still alive?
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PALO ALTO, California. (TheStreet) -- If HP (HPQ) - Get Report is trying to show that it's not on auto pilot under an interim CEO, then the decision to battle Dell (DELL) - Get Report for 3PAR (PAR) - Get Report is an expensive way to do it.

HP trumped Dell's bid for 3PAR

by more than a third, offering $1.5 billion in cash for an unprofitable business that has yet to prove its potential.

I'm not saying 3PAR doesn't have potential, mind you. As TheStreet's Scott Moritz proclaimed when HP's bid was announced: "Storage is hot." This concept of "cloud computing" that uses Web servers to store data offers great economies and savings by reducing data storage costs.

3Par is a pioneer

in a special technology that allocates storage only when it is needed in an attempt to boost utilization rates, as TheStreet's James Rogers explained at the time Dell announced its $1.15 billion bid for the company. So it has potential, it just doesn't have profits.

Everybody whose anybody in tech is getting into the cloud, from

Cisco

(CSCO) - Get Report

to

IBM

(IBM) - Get Report

to

Oracle

(ORCL) - Get Report

to Dell. HP's been heading in that direction, too, and interim CEO Cathie Lesjak, who took the reins after

Mark Hurd's "resignation"

, made the point in the

recent earnings call

that HP is building for the "future in the data center and converged infrastructure."

Dell's bid for 3PAR must have made HP nervous. So much so that it's willing to throw its weight -- and its cash -- around wantonly. It seems a little desperate and certainly lacking in originality.

While revenue has been growing steadily at 3PAR over the years, and operating profit is edging higher,

3PAR's income statements

show the company has yet to deliver a net profit.

So I have to ask: Is 3PAR really worth eight times revenue? Or is that just the price HP is paying to show it's still alive?

One thing is clear, HP under the interim leadership of Lesjak isn't any different than under Hurd. The company is still paying top dollar to acquire technology that it hasn't had the wherewithal to build itself.

This is one of the most costly means of expanding the company's competencies, as the price for 3PAR shows.

For a company that was once a technology leader, these acquisitions sound like capitulation -- admission that the company is no longer capable of innovation on its own.

A succession of HP leaders have looked everywhere but within the company itself to get the right products and live up to the company's heritage of innovation. Carly Fiorina infamously bought Compaq and Hurd brought Palm into the family.

Yet the company is still struggling for relevance.

HP needs to be in a much bigger hurry to get a real leader at the helm.

--Written by Glenn Hall in New York.

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Glenn Hall

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.