Paul Sakuma  /  AP
Hewlett Packard Company headquarters in Palo Alto, Calif. Hewlett-Packard is making a bid for data storage provider 3Par, just a week after rival Dell agreed to acquire the company.
updated 8/23/2010 3:05:25 PM ET 2010-08-23T19:05:25

Hewlett-Packard Co. is bidding $1.5 billion for data storage provider 3Par Inc., offering 33 percent more than what rival Dell Inc. agreed to pay for the company just a week earlier.

The tussle for control of 3Par comes as both HP and Dell have been looking to expand beyond personal computers in search of bigger profits. The company they both want to buy provides products for organizing data on corporate servers. Those tools could help either company go deeper into "cloud computing," the growing practice of offering software on a subscription basis over the Internet.

The offer announced Monday raised questions about the direction HP is taking since CEO Mark Hurd was forced to resign earlier this month. Hurd was pushed out for filing inaccurate expense reports for his dinners and other outings with a former HP marketing contractor.

Faced with questions about why HP only made an offer for 3Par after Dell jumped in last week with a bid for $1.13 billion, company executives declined to say exactly how long they have been considering the deal, or whether Hurd had been in favor of it.

HP Executive Vice President Dave Donatelli indicated that HP had made a previous offer, but would go only as far as saying, "We've been working on this deal for some time."

HP's bid of $24 per share represents a 33 percent increase over Dell's offer last Monday of $18 per share, which itself had been 87 percent premium over the company's most recent closing price at the time. Including debt, HP valued the deal at about $1.6 billion.

HP, based in Palo Alto, Calif., is the world's biggest computer maker, with Dell trailing at No. 2. But HP has gone further than Dell in stretching beyond the PC market. PC sales made up less than a third of HP's annual revenue of $116 billion during the most recent fiscal year, while they account for more than half of revenue at Dell.

With the acquisition of 3Par, which is based in Fremont, Calif., HP would add to a data storage business that makes up about 13 percent of its revenue.

The software 3Par offers is designed to maximize available space on data storage hardware — a cost-cutting step — by using a technique called "thin provisioning," by which extra capacity can be added as needed.

HP executives cast the acquisition as adding to the one-stop-shop it is building for customers across a broad set of technologies, including data storage, network equipment and servers. The most recent deal in that effort was HP's $2.7 billion acquisition this past April of 3Com Corp., which makes routers and switches that direct Internet and other data traffic.

"Customers want to buy from fewer larger companies that they trust," Donatelli told analysts on a conference call.

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