Dell To Acquire 3PAR For $1.15B

Round Rock, Texas-based PC maker Dell Inc. (DELL) signed a definitive agreement to acquire enterprise storage products manufacturer 3PAR Inc. (PAR). The deal has been valued at a whopping $1.15 billion.

Under the terms of agreement, Dell will pay $18 for each outstanding common share of 3PAR in cash, an 86.5% premium to the price end of trading on Friday. 3PAR’s share price has shot up since and is currently near the offer price.
The terms of the agreement were approved by the board of directors of both companies. Dell expects the deal to close by the end of fiscal 2010 and to be accretive to non-GAAP earnings by fiscal 2012.

Founded in 1999, 3PAR evolved as the leading provider of systems and software for data storage and information management. 3PAR pioneered in the creation of “thin provisioning”, a mechanism that applies to large-scale centralized computer disk storage systems, Storage Area Networks (SANs), and storage virtualization systems. Thin provisioning allows space to be easily allocated to servers, as and when required. 3PAR’s primary competitors in the enterprise storage market are EMC Corp. (EMC), Hitachi Data Systems, International Business Machines Corp. (IBM) and Hewlett-Packard Co. (HPQ).

Dell intends to integrate 3PAR’s storage solutions into its innovative storage portfolio to offer targeted solutions for every storage vertical.

3PAR’s storage product arrays are expected to meet Dell’s target of providing efficient data management solutions, thereby reducing costs and streamlining workloads.

3PAR’s virtualized and utility storage platform simplifies the information technology (IT) needs of any organization. The storage system is flexible enough to meet the requirements of rapidly changing data centers and is expected to lower the total cost of ownership by 50%.

The acquisition seems to be in line with Dell’s growth strategy for the enterprise business, mentioned at its Analyst Day.

During the last month, Dell acquired two companies – Ocarina Networks and Scalent Technology. The acquisitions were intended to beef up Dell’s enterprise solutions portfolio.

We are encouraged by Dell’s attempt to shift its focus from PC and server roots to become a data-center vendor with a broad scope. However, soft demand from the Consumer segment, high debt level and stiff competition in the computing and emerging cloud computing space are concerns.

Dell currently has a short-term Hold rating, which equates to a Zacks #3 Rank.

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