UPDATE 9-HP raises 3PAR offer to $2 bln, trumps Dell again

* HP raises offer to $30 per share from $27

* 3PAR shares jump 24.7 pct to $32.46

* Dell had matched HP’s previous bid

* HP to keep pressure on Dell, ready to bid higher -sources

* HP, Dell shares both down for week
(Adds details about HP strategy, executive from sources)

By Ritsuko Ando and Soyoung Kim

NEW YORK, Aug 27 (BestGrowthStock) – Hewlett-Packard Co (HPQ.N: )
raised its offer for 3PAR Inc (PAR.N: ) to $2 billion, once again
topping Dell Inc’s (DELL.O: ) bid and showing it had plenty of
ammunition in a bidding war for the data storage company.

HP’s offer on Friday of $30 per share was the latest in a
week-long volley of escalating bids, and came less than 3 hours
after Dell announced 3PAR had accepted its bid of $27 per
share, which matched HP’s previous offer.

People familiar with the matter said that HP’s strategy is
to keep the pressure on its smaller rival. They said HP has the
financial firepower to go higher than the current bid.

The sources declined not to be named since the discussions
are private.

Analysts have said that HP may be the stronger bidder with
$115 billion in annual revenue compared with Dell’s $53
billion, and a more global sales force that could help 3PAR
grow faster. HP’s bids have also been bolder, while Dell has
mostly moved to match its rival.

“It’s strategically important to both companies. But given
the bidding behavior, I feel like HP’s in this to win it,” said
Dinesh Moorjani, analyst at Gleacher & Co.

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Graphic on tech M&A deals:

http://link.reuters.com/suw95n

Graphic on HP vs Dell:

http://link.reuters.com/jeb26n

Reuters Breakingviews on 3PAR battle:

[ID:nN2797611]

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Dell’s prior agreement with 3PAR, however, allows it to
match competing bids, and the company said it was assessing the
latest move, which has raised 3PAR’s valuations to what some
analysts see as unreasonable levels.

“We’ll act in the best interest of our customers and our
shareholders, and the long-term value creation for both,” said
Dell spokesman David Frink.

3PAR shares closed 24.7 percent higher at $32.46,
indicating investors expect an even higher bid to emerge.

The shares had mostly traded around $10 this year, until
Dell announced its $18 per share bid earlier this month.

If it wins, HP would also need to pay the breakup fee of
$72 million that is part of the Dell-3PAR deal. HP said that
once the deal is accepted by 3PAR, it will close by the end of
the year.

HIGH VALUATION

August has been a particularly active month for deals.
Intel Corp (INTC.O: ) bid $7.7 billion for security software
maker McAfee Inc (MFE.N: ) last week. [ID:nN23195576]

The bids for 3PAR come as Dell, HP and other large
technology vendors like International Business Machines Corp
(IBM.N: ) and Cisco Systems Inc (CSCO.O: ) have been expanding into
new technologies to offer corporate clients a wider range of
products and services.

3PAR specializes in high-end data storage, a key part of
“cloud computing” — an increasingly popular technology that
enables computer users to access data and software over the
Internet, allowing companies to cut costs.

It competes with EMC Corp (EMC.N: ), Hitachi Ltd (6501.T: ),
NetApp Inc (NTAP.O: ) and other companies offering storage
products.

But 3PAR has barely made a profit since its founding in
1999, and some analysts say the rapid-fire bidding has raised
the risk of buyer’s remorse, as egos take over and rational
assessments of valuations take a backseat.

At current bids, 3PAR is valued at around eight times
sales. Multiples above five are considered lofty in technology
acquisitions.

Some say Dave Donatelli, who is leading HP’s efforts, may
see the deal as a test for his candidacy to replace Mark Hurd,
who resigned from his CEO role following allegations of sexual
harassment.

Donatelli, head of HP’s enterprise servers, storage and
networking unit, has made the business case to the board for
why 3PAR would be a good fit, people familiar with the
discussions said.

Michael Dell, for his part, has been struggling to improve
profitability at the company, which has been steadily conceding
market share to HP and Acer Inc (2353.TW: ). He was reelected
to his company’s board this month with more than a quarter of
the votes withholding support, reflecting shareholders’
displeasure with his tenure as CEO.

“I only hope that HP does not overpay just to show that it
can execute on its so-called strategy without a permanent CEO.
I also hope that Dell is not acting desperate to rapidly build
its capability for enterprise IT services in an uncertain
economic environment,” said Boston University Professor N.
Venkat Venkatraman.

HP shares, which closed down 0.6 percent at $38.00 on
Friday, have fallen 4.6 percent this week on worries of
overspending. Dell shares rose 1.2 percent Friday, but were
still down about 1.5 percent from a week earlier.

Some say, however, the company may be worth more than
traditional metrics suggest, since its high-end storage
technology is so hard to replicate and its sales could grow
exponentially with the massive sales channels of Dell or HP.

“On the face of it, it looks expensive, but if you make the
assumption that they could double revenue, then it doesn’t seem
too expensive,” said Gleacher’s Moorjani.

Brenon Daly, financial analyst at The 451 Group, said the
latest bid may be a defensive play, to keep Dell from becoming
a top vendor in enterprise technology.

“Is it an expensive price? Yes, absolutely. But, from HP’s
perspective, it could be, down the road, expensive to let Dell
come up into enterprise,” Daly said.

The bidding war, a rare occurrence in the tech sector,
started earlier this week when HP bid $24 a share for 3PAR,
topping Dell’s previous $18-per-share deal.

In the last notable bidding war in the tech industry, EMC
outbid NetApp last year to buy Data Domain for $2.4 billion.
Data Domain was advised in that deal by Frank Quattrone, the
same veteran technology banker who is advising 3PAR in the
latest negotiations.

Credit Suisse Group AG (CSGN.VX: ) is advising Dell and
JPMorgan Chase & Co (JPM.N: ) advised HP.

The latest bids have also sparked speculation that other
storage-related companies like Isilon Systems Inc (ISLN.O: ) and
Compellent Technologies Inc (CML.N: ) could become the next
target. Isilon shares closed 5.7 percent higher while
Compellent shares were up 15.2 percent.
(Reporting by Ritsuko Ando and Soyoung Kim; Additional
reporting by Clare Baldwin, Gabriel Madway, Paritosh Bansal,
and Megan Davies; Editing by John Wallace, Dave Zimmerman,
Matthew Lewis, Gary Hill)

UPDATE 9-HP raises 3PAR offer to $2 bln, trumps Dell again