Dell vs. HP

logo_3parDell 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.