3rd UPDATE: H-P Offers $1.6 Billion For 3Par, Topping 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. The bid sent shares of 3Par soaring in early trading, up 40% to $25.29, 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 0.66 to $12.15 and H-P slid 2.4% to $38.91.

The budding acquisition battle comes amid a rush for consolidation across the tech sector. Over the past year, suppliers of corporate technology such as H-P, Dell, software giant Oracle Corp. (ORCL) and networking company Cisco Systems Inc. (CSCO) have gobbled up competitors and formed joint ventures to expand into new markets. Tech giants flush with cash want to enter quickly into faster-growing areas, a trend highlighted by Intel Corp.'s (INTC) $7.68 billion bid for security-software maker McAfee Corp. (MFE) last week.

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 emails, customer orders and other vital information needed to run their businesses.

Philip Tasho, head of Tamro Capital Partners in Alexandria, Virginia, a 3Par shareholder, said the company's high-end storage products are crucial for any firm looking to participate in that segment of the market.

"Dell and H-P don't have a solution at the high end so, once 3Par goes away, you'd have to start from scratch," Tasho said.

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."

But analysts say the battle for 3Par is likely to continue.

A counteroffer from Dell is likely, said Roger Kay, president of Endpoint Technologies, which tracks the field. Dell and H-P each possess a war chest that "dwarfs the deal as it stands," he said. Dell had $13.1 billion in cash and investments on its balance sheet as of July 30, while H-P had $14.7 billion in cash and cash equivalents.

During a conference call with investors and analysts, H-P's Donatelli said the company has been working on the 3Par deal for some time and that it's part of the company's active merger-and-acquisition process.

"We are determined to play across the entire enterprise marketplace and we feel this product enables us to expand our reach into that market," Donatelli said. "And any time we have growth opportunities like that, we'll pursue them."

He added that the deal is expected to have no "significant or material" impact on H-P's fiscal-2011 GAAP or non-GAAP earnings and should close by the end of the calendar year.

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), as well as from H-P and International Business Machines Corp. (IBM).

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 and Shara Tibken, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com

(Nathan Becker contributed to this article.)

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