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Dell to buy 3Par for $1.13 billion
Question of the Day
Dell is the world’s second-largest maker of personal computers, behind Hewlett-Packard Co. As PC prices have fallen in recent years, Dell has worked to establish other, more profitable lines of business, but PCs still make up more than half of Dell’s revenue. By comparison, information technology consulting services made up 13 percent of Dell’s revenue in the quarter ended April 30, and storage devices made up 4 percent of revenue.
The deal has been approved by the boards of both companies and is expected to close this year.
3Par, of Fremont, Calif., make systems designed to make efficient use of available storage space through so-called “thin provisioning,” which makes it easier to add capacity when needed. 3Par had an early lead in this technology, but competitors like NetApp Inc., EMC Corp., IBM Corp. and Hewlett-Packard Co. are starting to catch up.
Dell already resells EMC’s products under the Dell/EMC brand, and acquiring 3Par “could negatively impact Dell’s relationship with EMC,” wrote Kaufman Bros. analyst Shaw Wu in a research note Monday. Wu estimates EMC represents about a quarter of Dell’s $2.2 billion storage revenue in the most recent fiscal year.
Wu also wrote that he thinks $1.13 billion is a steep price for 3Par.
But other analysts cast a more positive take on the deal. Dell said 3Par’s technology is particularly suited to “cloud computing,” where many customers may share the capacity of a data center. Dell has been making itself over into a provider of cloud services, and Maynard Um, an analyst at UBS, wrote in a client note Monday that he believes the deal will strengthen the PC maker’s position in that area.
Dell’s shares edged up a penny to $12.02 in midday trading.
In its latest fiscal quarter, which ended March 31, 3Par posted a loss of $3.2 million, or 5 cents per share, on $194.3 million in revenue.
3Par was founded in 1999 and went public in November 2007 at $14 per share.
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