Article

HP VARs assess 3Par impact

Barb Darrow

Now that Hewlett-Packard has prevailed over Dell in a frenzied bidding war for 3Par, HP VARs

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are assessing the result. And they're not all that happy about it.

While most agree that 3Par Inc.'s cutting-edge storage technology fills a lot of checkmarks in functionality -- it's "cloud worthy" and offers "enterprise-class" clustering, tiered storage and thin provisioning -- observers question whether the company acquisition was a wise move.

In combination, these technologies allow customers to configure applications with more storage capacity than is physically available to them. That means they no longer have to buy more actual storage capacity than they need.

Still, for all of that whiz-bang technology, the consensus remains that Hewlett-Packard Co. overpaid for a company that had yet to turn a profit. The winning offer was $33 per share, or $2.1 billion for 3Par, which traded at $10 a share just three weeks ago. (Dell's initial offer was $18 per share or $1.1 billion.)

That prompted Rob Cihra, an analyst at Caris & Co., to tell the Wall Street Journal that HP entered "into a land of dreamed-up future payoff."

For HP, "I think the deal got personal because it was Dell" and that caused HP to overpay, said a longtime HP partner in the Midwest. "It's ridiculous in my opinion to spend that kind of money when they cut so much elsewhere. But who am I to know why they do what they do?" he added.

On a conference call last week, iHP execs admitted in response to a questionthat HP had made a bid on 3Par prior to Dell's offer, but it went nowhere. That caused speculation that HP's former CEO Mark Hurd was not aboard on the 3Par acquisition and that after his ouster, executive vice president Dave Donatelli, decided to pursue it anew after Dell's bid.

One of the trademarks of Hurd's HP was a certain efficiency when it came to acquisitions. On Hurd's watch, HP acquired such companies as IT services giant Electronic Data Systems (EDS) and Palm Computing.

A Texas-based HP partner agreed. "If Mark Hurd was still there, I don't think they'd own 3Par. I didn't agree with a lot that he did, but one thing I'll say is, when he went after something, he got it done real fast. Look at EDS, he got that done and then Dell bought Perot; he forced Dell to overpay for a second-tier player. There's no way in the world he would have let this 3Par thing happen."

Pete Busam, an executive with Equilibrium Consulting LLC, in Marlton, N.J., gave HP the benefit of the doubt on this. "I am not sure on the price, since it was above the normal multiplier, but 3Par does have some cool technology in storage virtualization."

He said the rationale may come down to the fact that whatever company owns 3Par gets a time advantage in bringing that cutting-edge technology to market. "This sale shows the cost of purchase vs. R&D vs. time-to-market in that HP and Dell both wanted to be the top player in virtualized storage. … I wonder how long it would take either company to develop, test and bring it to market [on their own]," he noted.


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