Hewlett-Packard raised its offer for 3Par to $2 billion, once again topping Dell's bid and showing it had plenty of ammunition in the 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.
Analysts say 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.
"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 per cent 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.
August has been a particularly active month for deals. Intel bid $7.7 billion for security software maker McAfee Inc last week.
The bids for 3Par come as Dell, HP and other large technology vendors such as IBM and Cisco Systems Inc have been expanding into new technologies to offer corporate clients a wider range of products and services.
3Par specialises 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, Hitachi Ltd, NetApp Inc 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.
HP shares, which closed down 0.6 per cent at $38.00 today, have fallen 4.6 per cent this week on worries of overspending. Dell shares rose 1.2 per cent, but were still down about 1.5 per cent from a week earlier.
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 is advising Dell and JPMorgan Chase & Co advised HP.
The latest bids have also sparked speculation that other storage-related companies like Isilon Systems Inc and Compellent Technologies Inc could become the next target. Isilon shares closed 5.7 percent higher while Compellent shares were up 15.2 percent.
Reuters