Now HP Gets Into The Act For 3PAR

This morning's M+A news was equally as interesting as the news from a week ago: HP submitted a bid to top Dell's offer for 3PAR.  And, if 3PAR trading prices are any indication, there's investor confidence that the price will go higher still.

When I wrote about Dell's bid last Monday, my central premise was "it's all about competing with HP, folks".

Turns out I was closer to the truth than I thought.

Some Good Commentary Out There Already

Stephen Foskett offered up his insight as to why HP was now playing for 3PAR in this post, and he's right -- the industry is in a battle for #2 behind EMC.  Steve Duplessie offers up his quick multidimensional take, all spot on as usual, right here.  And David Vellante points to all things cloud and service provider in his take.

While I wouldn't disagree with any of the thoughts presented in any of these posts, I would offer that -- first and foremost -- most of the commentators are missing a key formula when it comes to competitive M+A in consolidating segments.

(value of acquisition) = (revenue projections of acquisition) + (harm caused to your competitors)

Put differently, don't just look at who can make the most money from a proposed acquisition through scale of distribution, etc.  You also need to look at what happens when you deny a competitor something they're after.

Not that I would ever have any background in any of this :-)

The World Through HP's Eyes?

As I mentioned before in my previous post, Dell and HP are squaring off against each other in desktops, servers -- and now storage.  In Dell's hands, 3PAR not only represents a credible product, but the nucleus of a type of storage group they didn't get with the EQL transaction -- one that can sell to larger organizations.

Most people think that success in a given market is all about the technology, and that's true -- up to a point.  But, ultimately, success in a given market usually has more to do with having the right people who understand that market segment.  Technology alone is no guarantee of success.

If you're HP, you not only want to keep the technology out of Dell's hands, but you want to keep the organization and the people away from Dell as well.

Yes, the 3Par product slots in nicely to HP's current storage portfolio, and gives them access to certain storage IP that they don't have today.  But, as some have pointed out, there are cheaper ways to go about plugging those gaps that don't involve a multi-billion dollar bidding war.

No, I'm convinced that any premium HP is willing to pay has a lot to do with denying Dell.

This probably isn't done yet ...

Comments

[Stephen]

Absolutely, we're witnessing a battle royale between HP and Dell. 3Par is a prize, and it will make some serious cash, but this is all about shaking up the industry. The fact that HP and Dell are in a dead heat for storage leadership makes this a zero-sum game. One will win, the other will lose. Case closed.

[Paul]

Hi Chuck

In the grand scheme of things, what impact do you foresee 3Par purchase having on us / our industry? What are the long term consequences?

[Sundar]

For the price being floated by HP and Dell, 3Par will be a poor ROI asset. Lucky are the VC's who have funded this company along with the shareholders. You sometimes need a windfall in the market and this could be one among them.

Is 3Par the only alternative to "cloud storage"(a fancy title it has earned from the stock analysts in the midst of the bidding underway)??--No way!!!!

Every leading storage vendor out there has a solution when it comes to private or public cloud infra.

If efficiency is all about storing more with less, then all these vendors have some or other solution to make this happen.

With 3Par in HP's hands(assume), I also foresee a similar problem that have occured to the development team of EVA. The original team that understood EVA left HP due to "the importance HP gave for storage". This lead to lengthy or no road maps in terms of EVA as a product line.

Conciously, this time around HP may want to lap up 3Par R&D team and make this a high profile R&D team within HP.Visibly, they can't make a mistake after paying(assume) ~20 times premium over market price. There are news that if they snatch 3par, they may want to end thier relationship with HDS and offer 3par as an alternative to XP arrays.

It's coincidence that it was David Scott who was key for the marriage between HP and HDS. With his company getting acquired(assume) by HP, he's may become responsible for thier divorce as well!!

[Tim]

reminiscent of the DD purchase. Great strategy