HP (HPQ) finally got what it wanted -- a deal to buy 3PAR (PAR), which Dell (DELL) had originally courted. But HP cut into line with a $33 a share bid. Technically, the company temporarily headed by its CFO after the ouster of former-CEO Mark Hurd, is a victor. In practice, this has been a foolish maneuver that will drain HP's coffers, give it little advantage, and open the door for Dell's next attempt to buy a storage company.
The whole saga started close to three weeks ago. Dell wanted to buy the storage vendor to expand sales efforts into large corporate customers. Clearly HP didn't want to cede any ground to Dell, even though the Texas-based PC vendor already has made big inroads into corporate sales. Such much of the strategy was to deny Dell a resource, rather than pick up something HP needed.
In addition, this was like HP's authorization of a company-record $10 billion stock buy-back. The board and remaining management team members want to take people's minds off reminders of all the scandals that have happened at the company.
But the entire process has been insane. I can understand wanting to limit Dell, but, good gravy, to run the bidding up from $18 a share to $33, for a total price of $2.4 billion? According to IDC, 3PAR's market share is 0.58 percent. The company's annual revenues for its fiscal 2010, which ended in March, were $194 million, and that resulted in a $3 million operating loss. Cash and cash equivalents were $39 million.
I understand strategic acquisitions, but come on, this was a complete waste of time and money. Not only is the strategic advantage to HP insignificant -- it wasn't as though Dell was buying EMC (EMC) -- but how does the company justify blocking Dell's next acquisition?
The faces of management at both companies must have had that round-eyed stare of people too far gone in an auction to remember that they were supposed to have a top bid. Dell may be unhappy that it didn't get 3PAR, but there has to be at least a few smiles in its board room that it got HP to shell out so much when that competitor has already potentially committed a lot of cash to the stock buy-back.
Of course, the real smiles are at 3PAR. Management and investors made out like bandits. In fact, the VC backers get $560 million for delaying their exit. The real irony? It may be that HP would have won the deal at a lower price had it waited literally 90 minutes longer. You have to wonder what mix of hormones drive big business.
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