2nd UPDATE: H-P Offers $1.6 Billion For 3Par, Tops Dell Offer

Hewlett-Packard Co. (HPQ) launched a bidding war Monday for 3PAR Inc. (PAR), making a $1.6 billion bid for the data-storage company that tops an earlier offer from Dell Inc. (DELL)

H-P is offering $24 a share for 3PAR, compared with Dell's deal for $18.

Shares of 3PAR jumped 40% to $25.32 in early trading, suggesting investors expect that another offer, possibly from Dell, could emerge. Before the earlier agreement was made public, 3PAR last traded at $9.65.

Dell stock rose 1% to $12.21 and H-P slid 0.3% to $39.72.

3Par makes hardware that stores information in company data centers, one area in the corporate information technology market that continues to grow quickly as companies use more space to hold the billions of e-mails, customer orders and other vital information needed to run their businesses.

Over the past year, suppliers of corporate technology such as H-P, Dell, software giant Oracle Corp. (ORCL) and networking firm Cisco Systems Inc. (CSCO) have accelerated the consolidation of the corporate IT market. Some have formed joint ventures, while others are buying up companies in an attempt to become one-stop shops for corporations by selling hardware, software and IT services.

The battle for 3Par comes as the leader in data-storage and 3Par rival, EMC Corp. (EMC), forms closer ties with Cisco, traditionally a networking company that is now building servers and in some areas competing directly with H-P.

EMC and Cisco formed a joint venture late last year to sell an integrated storage and server product, though both companies said they would continue to work with other partners in the IT world.

H-P's head of enterprise servers, storage and networking, Dave Donatelli, left EMC last year after a long tenure at the firm. He called H-P "the ideal fit for 3PAR," noting that "we've seen great momentum with our converged infrastructure strategy, and 3PAR accelerates that strategy, particularly in cloud and scale-out markets."

H-P called its bid "substantially superior" to Dell's and told 3Par it is poised to cinch a deal "immediately following your termination of the Dell merger agreement."

The offer comes as technology companies are increasing merger-and-acquisition activity as cash levels sit at record levels, highlighted by Thursday's $7.68 billion deal between Intel Corp. (INTC) and McAfee Inc. (MFE).

Founded in 1999, 3PAR builds high-end systems that help companies store and manage their data more efficiently, using what are known as virtualization technologies. In addition to EMC, it competes with products from Japan's Hitachi Ltd. (HIT, 6501.TO), NetApp Inc. (NTAP), as well as H-P and International Business Machines Corp. (IBM).

H-P said it expects that once the deal is approved by 3PAR's board, the deal will close by the end of this year.

A Dell spokesman said the company "won't comment at this point regarding ongoing M&A activity," and a 3PAR spokesman wasn't immediately available for comment.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com

(Nathan Becker contributed to this article.)

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