3PAR board gives Dell three days to outbid HP

Dell could struggle to fight back against HP's muscle

Storage vendor 3PAR has told Dell it has until Thursday to make an improved offer in response to HP's $1.6bn (£1.03bn) tender for the firm.

In a filing with the Securities and Exchanges Commission (SEC), 3PAR outlined the way things currently stand with the two bidders, noting it had "given Dell three business days to negotiate an amendment to its Merger Agreement".

Dell had offered $1.15bn (£737m) for the firm but saw its hopes for a smooth acquisition dashed by HP, whose offer is now being scrutinised by 3PAR's board.

"3PAR intends to engage in discussions with HP regarding its unsolicited acquisition proposal, and share non-public information with HP regarding 3PAR, in order to more fully evaluate HP’s proposal," the SEC filing read.

Dell had hoped the move would beef up its datacentre virtualisation portfolio as cloud computing continues to grow in importance, but it now looks as if its plans are in jeopardy.

Emma Leathley, senior technology analyst at consultancy firm Clearwater, said it would be difficult for Dell to come back with a higher offer given the size of HP's bid and its clout in the market.

"HP is a very cash rich company and it's likely that it made the improved offer primarily to stop Dell getting what it wanted, while Dell itself is facing difficulties in raising revenues after many thought it overpaid for Perot Systems," she said.

"It will be very frustrating for Dell that this has happened as it was probably hoping to do a quick deal, but that is not going to happen now."

Leathley said that although she thought the $1.6bn price for 3PAR was a bit on the high side, it was understandable given the current mad rush by vendors to establish themselves in the cloud market.

"Firms are prepared to pay over the odds for the different parts of the jigsaw that make up cloud computing because of the potential it could have for the future," she said.

However, in some good news for Dell, the filing did at least note that until HP's offer is confirmed as being the highest bid, the board will continue to recommend that shareholders accept Dell's offer.