HP's Bid for 3Par Is Weird

In a great example of 'me too' M&A, HP has started a surprise bidding war with Dell over 3Par.
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PALO ALTO, California (

TheStreet

) -- In a great example of 'me too' M&A,

Hewlett-Packard

(HPQ) - Get Report

has started a bidding war

with

Dell

(DELL) - Get Report

to acquire

3Par

(PAR) - Get Report

, whose thin provisioning technology is seen as key in offering cloud services.

Storage is one of the least sexy parts of the tech sector, but in what tech bellwether

Cisco

(CSCO) - Get Report

has described as a waning IT-buying environment, cloud computing, which offers more efficient computing power and storage via the internet, helps companies reduce their spending on hardware and software.

HP seems anxious to get in on the trend; in its statement released before market open, HP described 3Par as potentially boosting the company's converged infrastructure strategy, which aims to streamline data center server, storage and networking.

However, HP's brinksmanship has left some experts scratching their heads. "I am not totally sure how the deal makes sense for HP," Charles King, principal analyst at technology research firm

Pund-IT

told

TheStreet

, explaining that

3Par filled a more obvious hole

in Dell's storage portfolio. "

HP's storage solutions are more of a mish-mash of low-end products that they developed and built internally, and higher-end products that they got from

HDS

-- I don't really understand how 3Par fits in there."

Some are wondering if acquiring and integrating 3Par would be too much of a distraction for HP, at a time when the company has plenty of other projects on its plate. The tech giant, for example, recently completed its

$12 billion acquisition of Palm

, part of an ambitious strategy to challenge

Apple

(AAPL) - Get Report

and

Research In Motion

(RIMM)

in

areas such as tablet computers.

Other high-growth, cloud-involved companies, like

Salesforce.com

(CRM) - Get Report

and

Akamai

(AKAM) - Get Report

, have been touted as more attractive acquisition targets for HP.

Salesforce.com, which provides Internet-based customer relationship management (CRM) services, has already carved out an impressive niche in the cloud space. Salesforce recently beat Wall Street's second-quarter estimates, prompting

Morgan Stanley

and

Barclays Capital

to raise their estimates for the company through 2012.

Then there's Akamai, one of

TheStreet's

Breakout Stocks, which provides services for accelerating content and applications over the Web. The company has benefited greatly from the rapid growth in Web video as well as the smartphone explosion.

If HP is nonetheless desperate to bolster its storage story, then

NetApp

(NTAP) - Get Report

may also have proved a more logical choice. The HP rival and Wall Street darling

has been ramping up its enterprise strategy

and recently gave healthy guidance after beating first-quarter estimates.

The challenge for anyone acquiring NetApp, however, would be meeting the company's price tag. The storage maker has a market cap of $14.23 billion, much higher than 3Par's $1.61 billion.

"NetApp has got more buzz

than 3Par," said King. "I think that NetApp is going to be a great fit for somebody, but I think that HP would have to come in with a considerably higher premium than $1.6 billion."

Given these factors, HP's 3Par bid may be more about halting Dell and sending a message to the rest of the market. "I wonder whether it's more a case of HP wanting to keep 3Par out of Dell's hands," said Pund-IT's King, adding that

recent events at HP

may also may played a part in the bid. "Maybe this is the HP board trying to get the public's minds off all the other shenanigans."

Investors, however, were less than impressed with HP. The company's stock fell 81 cents, or 2.03%, to $39.04 on Monday, outpacing the modest retreat in tech stocks that saw the Nasdaq dip 0.40%. Dell, which is now under pressure to increase its own bid for 3Par, also closed southward, albeit at a more modest clip. The PC and server maker's stock fell 13 cents, or 1.08%, to $11.94.

3Par was a winner, though. The company's stock was up more than 44% as the market digested HP's $1.6 billion offer, a third higher than Dell's recent bid. 3Par's stock closed up $8.05, to $26.09.

With Dell expected to increase its bid for 3Par, there could be yet more upside ahead for investors in the storage specialist, whereas the bidding war could easily weigh on shares of HP and Dell.

-- Reported by James Rogers in New York

Follow James Rogers on

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