- Associated Press - Monday, August 23, 2010

SAN FRANCISCO (AP) - The world’s two biggest personal computer makers are locked in a pricey struggle over which can move away from the PC business the fastest.

Hewlett-Packard Co. offered $1.5 billion on Monday for 3Par Inc., a company whose data-storage machines are designed for “cloud computing,” or delivering services over the Internet. HP's rival, Dell Inc., last week offered about $400 million less for 3Par, and many analysts and investors expect Dell to make a sweeter counteroffer.

HP's offer comes just weeks after HP CEO Mark Hurd’s ouster over inaccurate expense reports and shows that the company is committed to keep growing through acquisitions, even without him at the helm.

The willingness to spend so much money on such an obscure company underscores how aggressively both companies are about moving into more profitable markets than PCs.

Cloud computing is one of those markets.

It has caught on because many companies aren’t buying their own computer servers for certain tasks anymore. Instead, they’re paying to have software they would have stored on those machines delivered to them over the Internet, on a subscription basis.

Companies such as Dell and HP are turning themselves into cloud-computing providers to take advantage of the trend.

One problem, though, is the machines needed to run such operations are designed to be shared by multiple customers. Those machines need to ramp up or scale down their output quickly based on demand. Storage machines offered by 3Par could help cut the cost of operating those services because they are designed for such tasks.

Dell began the bidding contest last week by offering to buy 3Par for $18 per share, or $1.13 billion. HP responded by offering a third more, or $24 per share, for a total of $1.5 billion.

Investors, believing Dell will make a counteroffer, sent 3Par shares above HP's offer price. Shares of 3Par closed Monday at $26.09, up $8.05, or 45 percent.

But many analysts are worried that the price for 3Par has gotten too high, meaning HP or Dell would be overpaying for the company. HP shares fell 81 cents, or 2 percent, to $39.04. Dell shares were down 13 cents, or 1.1 percent, to $11.94.

Analyst Ben Reitzes with Barclays Capital called 3Par “a very good fit for HP strategically” but said “the timing and level of premium may raise a few concerns.”

Shaw Wu with Kaufman Bros. said the strategy behind the deal is sound, but “the price offered is a bit steep.” Wu noted that 3Par’s shares have traded at around $10 for most of the year and that some investors are wondering why HP is now offering more than double that price.

“The biggest winners here are clearly 3Par employees and shareholders,” he wrote.

The tussle over 3Par comes at a time when both companies are dealing with CEO troubles and badly need a win on Wall Street.

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