Does Dell and HP's "ridiculous" bidding war expose storage shortcomings?

6th Sep 2010

Dell has pulled out of a high-profile bidding war for a storage firm after HP lodged a substantial offer - but analysts believe the whole saga merely demonstrates storage shortcomings at the IT firms. 

Dell has pulled out of its bidding war for 3Par after Hewlett-Packard upped its price to more than $33 per share, leaving the data storage firm with a $72 million bill in break fees.

According to the Bloomberg news wire, the winning bid values 3Par at $2.07 billion, some 325 times its earnings before tax, interest, depreciation and amortisation compared with an industry average ratio of 16.

The $33 offer is also three times the value at which the vendor’s shares were trading before Dell made its initial $18 bid on 16 August. But the move is likely to raise questions over whether HP is paying too high a premium for a stock that has languished at $10 for the last 18 months. Yesterday 3Par’s shares closed at $32.88, just below HP’s offer price.

Dell said that it walked away from the negotiations after making a final bid of $32 per share or $2 billion.

But Jayson Noland, an analyst with Robert W Baird & Co, told the AP newswire: "At this price, it’s a little ridiculous. To me, it tells you how far behind HP and Dell are in storage, not necessarily how incredible an asset 3Par is."

The two vendors are keen to get into a data storage market that is rapidly expanding due to increasing volumes of emails, online video and electronic transactions that are putting a strain on corporate data centres.

HP’s tender offer is scheduled to expire on 24 September and the acquisition is expected to close by the end of the year. 3Par is based in Fremont, California, and employs 670 staff. It went public three years ago with an initial public offering of $14 per share.

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