Dell and HP are fighting each other to have 3PAR’s hand in marriage.
It all formally started on August 16th with Dell attempting to acquire 3Par for $18/share. Then on August 23rd, HP entered the race and raised the ante to $24/share. On August 26, Dell raised its offer again to $24.30/share for an enterprise value of $1.53 Billion. Next, HP raised its offer to $27/share. On Friday, August 27th, Dell matched the $27/share and HP upped the ante to $30/share – all in one day.
All this for a company with current revenues of around $130 Million, which is, by the way, unprofitable.
How does that fit in your typical valuation model?
Well they are duking it out for future growth – the data storage market is expected to continue growing about 30% per year while the PC market is nowhere near that and has declined in some areas. Why pay so much? I see four primary reasons:
- Window dressing to make sure the other doesn’t get the company too cheaply
- Tap into high growth markets—nearly 30% expected growth for data storage
- Organic growth is anemic so they have few alternatives
- Tons of cash: $13 B for Dell $14.7 B for HP
I anticipate this fight will end with Dell winning. Expect to see more of this kind of activity in the coming months.