* Dell to purchase 3PAR for $18/shr, 87 pct premium
* Deal expected to close by year end
* 3PAR shares jump to $17.96
* Expands Dells efforts in data center
(Adds analyst comment, background, additional byline, updates
By Ritsuko Ando and Gabriel Madway
NEW YORK/SAN FRANCISCO, Aug 16 Dell Inc
DELL.O plans to buy data storage company 3PAR Inc (PAR.N) for
$1.15 billion in cash, expanding its offering of data center
products to compete with rivals like IBM (IBM.N).
Dell said it would pay $18 a share for 3PAR, an 87 percent
premium over Friday's closing price. 3PAR provides storage
products that use virtualization technology, which allows
companies to boost efficiency.
International Business Machines Corp, Hewlett-Packard
(HPQ.N) and Oracle Corp ORCL.O have been boosting investment
in cloud computing and virtualization technology, as companies
seek to manage the flow of their data and information.
Cloud computing is technology that allows users to access
data and software over the Internet and corporate networks.
Analysts said Dell overpaid for 3PAR, but said the deal
brings the company an important new piece of the puzzle.
"I think this is a very strong fit for their portfolio,"
said Morningstar analyst Michael Holt.
He said Dell's $1.4 billion acquisition of EqualLogic in
2008 brought the company a lower-price storage offering. The
company has also been reselling more expensive products from
EMC Corp EMC.N.
"This gives (Dell) their own product line to push out there
when their customers expand beyond the EqualLogic product
line," he said.
Dell's computer sales have been hurt by the recession. It
said it is seeking smaller acquisitions to diversify and
improve its margins.
Wedbush analyst Kaushik Roy said he did not expect other
companies like IBM or Oracle Corp ORCL.O to put in a
competitive bid, partly because the premium was so high but
also because they already had similar storage products of their
"Dell is paying the premium because they're desperate for
margins, and they're desperate to get into the data center," he
Shares of 3PAR jumped 86 percent to $17.96 in afternoon
trading. Dell fell 0.3 percent to $11.98.
3PAR, which was founded in 1999, posted revenue of $194
million in its last fiscal year, with a gross margin of 65
Dell said 3PAR's virtualization technology helps customers
reduce data management costs, including hardware and energy
Dell will integrate 3PAR's products into an existing
storage portfolio that also includes offerings from its joint
partnership with EMC, as well as EqualLogic.
Dell executives said on a call that they would continue to
offer EMC products.
BMO Capital Markets analyst Keith Bachman said the 3PAR
deal will be a short-term negative for EMC, and speculated that
that the Dell/EMC partnership may eventually be eliminated.
"We believe that the elimination of a Dell/EMC relationship
would be neutral for Dell, since we believe that Dell will be
much better served in the long-term by owning/developing
intellectual property," Bachman said in a research note.
He said the 3PAR deal is too small to have a material
impact on his forecast for Dell.
Dell said the transaction would probably add to its
earnings in fiscal 2012. The 3PAR deal is expected to close by
the end of the year.
Dell had roughly $11 billion in cash and investments as of
its last fiscal quarter. Last year it bought technology
services company Perot Systems last year for $3.9 billion in
its biggest-ever acquisition.
(Additional reporting by Paul Thomasch; Editing by Derek
Caney, Gerald E. McCormick and Lisa Von Ahn)