Note: in 2010, Dell and HP engaged in a bidding war for 3PAR and Dell lost to HP which acquired 3PAR for $2.4B.
Dell announced today (8/16/2010) that it plans to buy 3PAR for about $1.15 billion in cash ($18 a share). This is a significant 87% premium to 3PAR's Friday closing price of $9.65.
3PAR is at heart a technology company. It has brought innovation to the architecture of storage arrays with virtualization, thin provisioning, and other data efficiency technologies. It has brought ease-of-use with its storage management software, and Wikibon believes 3PAR is best-of-breed in the industry in this category.
Dell is at heart a manufacturing and distribution company, and has brought innovation and efficiency to these processes. Wikibon believes that Dell can help 3PAR significantly in reaching additional worldwide markets, and to some extent in reducing manufacturing costs.
Dell has now acquired four storage companies, EqualLogic, Exanet, Ocarina and now 3PAR. The long-term challenge for Dell is to organize itself to become a storage innovation leader that will be able to integrate architecturally disparate assets brought through these acquisitions. History and culture increases the risks of friction and the likely outcome could be a short-term boost in 3PAR sales followed by an exodus of engineering and development talent that could hurt the long-term potential of 3PAR products.
Dell's success with EqualLogic's was good, substantially bringing these products to Dell's massive channel. Better sales execution with Dell could confer advantage to 3PAR very quickly.
Key questions remain:
- How will Dell integrate all these piece parts?
- How does a NAS head in front of 3PAR constitute 'unified storage'?
- How does Dell justify a 6X revenue valuation? Clearly the only answer is hyper-growth, but can Dell do for 3PAR what it successfully has done with EqualLogic?
- What is Dell most interested in? 3Par innovation, or 3Par's position with successful cloud service providers?
Action Item: Executives responsible for storage and Infrastructure 2.0 strategies should keep a skeptical eye on Dell's storage technology management and integration progress before deciding on Dell as a strategic storage partner for Infrastructure 2.0 development.