Dell raised its offer for 3PAR today with a revised bid that is a mere $20 million more than Hewlett-Packard’s Monday offer of $1.6 billion.
Dell’s latest offer of $24.30 per share beats HP’s $24 per share. Dell’s first offer disclosed Aug. 16 was for $18 per share or $1.15 billion.
Dell also said 3PAR has accepted today’s offer and signed an amendment to their original agreement. The revised agreement increases the termination fee to $72 million that 3PAR must pay Dell if it accepts another offer. The previous termination fee was $53.5 million. HP’s offer to 3PAR did not include a termination fee.
After receiving HP’s offer Monday, 3PAR gave Dell three days to respond. That three-day window ended today. Now we await HP’s response to Dell’s revised bid.
According to financial analyst Aaron Rakers of Stifel Nicolaus Equity Research, Dell’s response was not surprising and he expects HP to raise the ante again.
“… this acquisition makes sense for Dell when thinking about the need to diversify deeper into the enterprise data center market,” Rakers wrote today in a note to clients. “As it relates to HP making a counter offer, our discussions led us to believe it is likely that HP will counter in this situation, given that they had an offer on the table for 3PAR prior to Dell’s original announcement, the 33% premium on [HP’s] original counter offer, availability of cash on hand, and the company’s desire to have a proprietary offering in the high-end storage market.”
You can expect Dell to respond by the end of this week to Hewlett-Packard’s unsolicited $1.6 billion bid to buy Dell acquisition target 3PAR.
3PAR gave Dell three days to make a counter offer following HP’s offer on Monday, according to the latest SEC filing by 3PAR.
3PAR’s filing confirmed that HP was Company B in its previous filing, and said HP’s offer probably fit the definition of a “superior proposal” to Dell’s under terms of 3PAR’s previous agreement with Dell. HP’s offer of $24 per share was 33% higher than Dell’s $18 per share bid, which would total $1.15 billion.
The filing said that after receiving HP’s offer Monday, 3PAR told Dell it would open its books for HP and discuss the latest offer. 3PAR’s filing emphasized its directors have not yet taken any action on HP’s proposal and “continues to unanimously recommend that 3PAR’s stockholders accept the offer by Dell.” You can expect that to change, of course, if Dell declines to make a counter offer.
The three-day window would expire Thursday, which means any Dell counter offer – or a refusal to make another offer – would likely be public by Friday morning.
Meanwhile, speculation continues about other possible bidders. RBC Capital Markets analyst Amit Daryanani raised the possibility of EMC getting involved as a defensive position against its long-time partner and recent competitor Dell.
“We would not be shocked to see a competitive bid from EMC (or by way of VMware) as a defensive move to primarily keep Dell out of the high-end, scale-out, SAN marketplace,” Daryanani wrote in a note to clients. “EMC would likely view a winning bid from Dell for 3PAR as most negative, as it would add a fourth, large competitor in the high-end SAN market. In addition, given Dell’s OEM/reseller relationship with EMC since October 2001, Dell has intimate knowledge of a large segment of EMC customer environments. Therefore, if Dell were successful in acquiring 3PAR, we believe EMC would likely scuttle its reseller/OEM relationship with Dell, as Dell would likely target EMC’s midrange and high-end enterprise storage customers’ environments with the 3PAR products.”
Daryanani said NetApp would probably find 3PAR too expensive to make a bid, and he doesn’t expect larger vendors such as IBM, Oracle, Hitachi Data Systems, Cisco, or Fujitsu to get involved. Some in the industry have speculated that Oracle was Company A in 3PAR’s previous filing. That was the company that showed some interest in an acquisition but declined to bid. Daryanani pointed to Oracle’s recent acquisition of Sun and Oracle CEO Larry Ellison’s heavy investment in private SAN vendor Pillar Data as reasons why Oracle is unlikely to bid on 3PAR.
Hewlett-Packard and Dell weren’t the only companies interested in buying 3PAR. A third company also discussed buying the storage array vendor, according to an SEC filing detailing negotiations leading to Dell’s $1.15 billion offer for 3PAR.
The document lists Dell, Company A and Company B as the interested parties. Company B made an offer July 23, and is apparently Hewlett Packard based on HP’s claim that Monday’s $1.6 billion offer was not its first for 3PAR. Company A first talked to 3PAR about a “commercial relationship” – likely an OEM deal — and asked to be contacted if 3PAR put itself up for sale. But after offers from Dell and Company B, Company A declined to bid. 3PAR also reached out to a Company C, but that company was not interested in a deal.
3PAR CEO Dave Scott first talked to Company A executives May 3. Scott then met with Michael Dell and Dell SVP of corporate strategy Dave Johnson May 7. Company B contacted Scott July 8 to discuss “a possible business combination” between the companies.
Company B made a non-disclosed non-binding offer to acquire 3PAR on July 23, and Dell made its first non-binding offer of $15 to $17 on July 30. 3PAR asked Dell for $18.25 per share on July 31 and Dell made its $18 per share offer the following day. Company B declined to make another bid, and 3PAR agreed on an exclusive negotiation period with Dell through Aug. 15. The two companies agreed on the $18 per share deal on Aug. 15, and made the deal public the following morning.
The filing also said Dell and 3PAR discussed a reseller agreement beginning late last year.
Dell has yet to say whether it will raise its bid to beat the counter offer of HP (or should we say Company B?)
Hewlett-Packard isn’t going to just let Dell walk away with 3PAR.
HP outbid Dell today for the thin provisioning storage pioneer. HP offered $24 per share in cash for a total of $1.6 billion, trumping Dell’s bid of $18 per share and $1.15 billion made public last week.
HP’s offer was approved by the board, and it hopes to close the deal by the end of the year. A letter from HP chief strategy and technology officer to 3PAR Dave Scott revealed that HP made a previous offer for 3PAR, which apparently was below Dell’s bid.
“We’ve been working on this deal for some time,” HP storage chief Dave Donatelli said today during a conference call with financial analysts. “It’s been part of an active M&A process.”
Donatelli also said he considered 3PAR’s product portfolio a fit for midrange customers, although 3PAR sold mostly into enterprises. That could mean HP doesn’t necessarily see 3PAR as a replacement for the XP enterprise system that it sells through an OEM deal with Hitachi, and it may end up replacing HP’s EVA line instead.
Dell has not yet responded, but the situation is now similar to the battle between EMC and NetApp for Data Domain last summer. NetApp made the first bid, EMC responded, and NetApp raised its bid slightly before EMC walked off with Data Domain for $2.1 billion. But while EMC is substantially larger than NetApp and was heavily favored in a bidding war, HP and Dell are more evenly matched.
Hitachi Data Systems has quietly picked up the assets of cloud storage startup Parascale, which went under after it failed to gain additional funding earlier this year.
HDS chief strategist for file and content services Miki Sandorfi announced the acquisition in his Thursday blog about Hitachi’s cloud strategy. Sandorfi wrote that HDS acquired Parscale’s IP and hired the core engineering team.
“By complementing our existing product set and leveraging the distinct capabilities of this acquisition, we will continue to bring to market additional Hitachi Cloud Services that leverage best-of-breed technology and are deployed in ‘cloudy’ ways,” Sandorfi wrote.
Parascale already had two generations of its ParaScale Cloud Storage (PCS) clustered NAS product in the market, but it’s unclear if HDS is more interested in Parascale’s existing product or its engineering experties. HDS already has a Private File Tiering cloud service aimed at customers with their own NAS systems who want to archive data off primary storage, and now you can expect them to add clustered NAS to its cloud services in some capaicty.
HDS doesn’t spend much on acquisitions, but the money it has laid out has ended up in the cloud. HDS acquired Archivas in 2007, turning the Archivas object-based storage technology into the Hitachi Content Platform that its cloud services are built on.
In the wake of Dell’s $1.15 billion acquisition of 3PAR, NetApp CEO Tom Georgens said his company is under no pressure to make any significant acquisitions. Ever since EMC outbid NetApp for Data Domain last year, people have been wondering if NetApp would turn to another well established storage company to grow its business.
But during NetApp’s earnings conference call Wednesday night Georgens said the vendor is more likely to go after smaller acquisitions like Bycast than those that cost billions of dollars, such as Data Domain and 3PAR.
“I think that the [Dell-3PAR] transaction probably doesn’t change our thinking in any meaningful way,” Georgens said. “We’re always looking for tuck-ins. Certainly, nothing about this changed our tuck-in belief. As far as larger transactions, I think that if the time is right and the price is right … Our thinking on acquisitions is there has to be something that has some affinity to what we do, has to be something that either our sales force can sell, or something that by virtue of having it in the portfolio, we can move more of our existing product. So I’m not looking for similar assets just to be a holding company, I don’t think that’s worked for anyone in our space.”
Georgens said 3PAR was a less obvious fit for Dell than EqualLogic — the iSCSI SAN vendor that Dell bought in 2008 — because iSCSI plays well with Dell’s server business. But he was quick to point out who he thought was a loser from the Dell-3PAR deal. Like many in the storage world, he said it raises questions about Dell’s relationship with NetApp’s archrival EMC.
“I think we can debate whether it is bad or is it very bad, but suffice it to say it is probably not good for the relationship with EMC,” Georgens said.
NetApp has done a good job of growing without making major acquisitions. Its revenue of $1.14 million last quarter was a 36% increase from the previous year and its product revenue grew 51%.
Dell took another huge step into the storage world today when it said it will buy thin provisioning pioneer 3PAR for $1.15 billion.
The blockbuster deal isn’t Dell’s most expensive storage buy – it paid $1.4 billion for iSCSI vendor EqualLogic in 2008 – but 3PAR becomes another key piece in an expanding storage strategy. The storage industry has been waiting for Dell to make a large acquisition for more than a year, but it concentrated on adding pieces such as Exanet’s clustered NAS technology and Ocarina Networks’ primary data optimization.
3PAR’s InServ storage systems gives Dell a utility-based modular storage system that appeals to larger customers than EqualLogic’s iSCSI SANs. It also brings it into greater competition with its storage partner EMC, which 3PAR considers its largest competitor. Dell resells EMC’s midrange Clariion and Celerra storage systems as well as Data Domain deduplication backup appliances.
According to Dell’s press release: “Dell plans to make 3PAR an integral part of its industry-leading storage portfolio, including PowerVault, EqualLogic and Dell/EMC. With 3PAR, Dell will offer innovative systems and customer choice at every storage tier, from direct-attach to highly-virtualized, clustered SAN.”
Dell also added an object-based storage platform this year, which competes with EMC’s Atmos system. EMC and Dell keep saying their relationship is strong, yet Dell keeps acquiring EMC competitors or developing its own products that compete with EMC.
Dell also paid a large price for 3PAR. The $18 per share cash transaction is an 86% premium on 3PAR’s share price last Friday. “Nonetheless, we think it is a positive for Dell,” Wedbush financial analyst Kaushik Roy wrote of the deal in an email. “Dell needs to move up into the data center and this is what would help Dell get into the data center, Dell is desperate for better margins … and storage is adjacent to what Dell sells – in other words, it is an easy product to sell for Dell.”
We’ll have more on this breaking story later on SearchStorage.com.
You could tell by listening to CommVault’s earnings report call this week that Simpana 9 is just around the corner. Maybe it won’t be available in early October as a report out of New Zealand put it, but it probably won’t be too long after that.
We know that because CommVault CEO Bob Hammer sounded more like a product marketing manager than a CEO discussing his company’s earnings earlier this week.
Hammer gave a quick rundown of CommVault’s earnings – in line with the disappointing preliminary results it gave last month. After assuring financial analysts that things are looking up this quarter, he spent most of the call talking about Simpana 9.
Highlights of that product, which will include source- and target-side data deduplication:
“We’ll enable the customer to dedupe at the source, target, or in between, at a very high scale and with the deduplication volume being fully indexed,” Hammer said. “All those are unique. Nobody has fully indexed dedupe, nobody can dedupe at the source or target, or manage dedupe in the stack across different storage silos.”
When I spoke to Hammer after the call, he expanded on the “dedupe everywhere” concept.
“It’s not just dedupe. Dedupe is a feature but it has to be managed across the stack and it has to be application specific,” he said. “What we’re seeing is to manage your data and data movement, you have to automate the virtualization layer granularly with application-specific information to manage virtual nodes that are moving dynamically. You’re talking about hundreds of thousands of these nodes. And you have to manage them to a storage space across all hardware silos. You don’t just move them with snapshots and replication. They have to be indexed and granular, and you have to be able to move them down the storage stack, across silos and into the cloud.”
Despite his enthusiasm about the new release, Hammer remained disappointed in sales from last quarter. CommVault’s revenue was $66.3, as it forecasted in July. That was more than $5 million below Wall Street expectations. Hammer did say many deals that failed to close by the end of the quarter have since closed. The quarter was the first of CommVault’s fiscal year, and Hammer said he hasn’t lower expectations for the full year.
“We had a big hole [last quarter],” he said. “Now our objective is to catch up.”
Hitachi Data Systems has kept a tight lid on any upgrades to its flagship USP-V enterprise storage platform. Everybody in the storage industry expects an upgrade this year, but the HDS folks won’t even confirm that much. They will talk about other developments, though, while keeping details sparce.
One thing HDS is working on is automated tiering software, which HDS VP of storage platforms Robert Basilio says is a key to driving solid state storage adoption. “SSD adoption will be limited until you have a better way of managing storage,” he said. “And prices are not coming down as fast as anybody would like.”
Basilio says he’s not concerned that archrival EMC already has its FAST tiering software out with version 2 on the way. “We have more know-how than anybody in this area,” he said. “EMC is bringing out FAST, but we think we’ll have faster and fastest.”
HDS, which partners for backup data deduplication, plans to have dedupe for primary storage as well but “there’s nothing I can share now,” Basilio said.
HDS did break out its revenue results from the Hitachi parent company’s earnings report, and while it doesn’t get as specific with its numbers as most of its competitors those numbers do show some interesting trends.
HDS said its revenue for last quarter was $804 million, up 13% from the previous year. This compares to 21% year over year growth by EMC, but Stifel Nicolas financial analyst Aaron Rakers points out EMC’s revenue grew 14% if you exclude the Data Domain platform that EMC acquired after the second quarter of 2009.
Still, EMC said its high-end Symmetrix revenue grew 32% since last year. HDS says its USP-V grew only “high-single digits.”
But HDS is becoming less reliant on USP-V business. Hardware made up 55% of its revenue for last quarter with services contributing 30% and software 15%. And HDS midrange modular storage grew in “strong double-digits.” Basilio says USP-V isn’t losing share to competitors but customers are finding more value in the HDS Adaptable Modular Storage 2000 midrange platform. It is also selling a lot more NAS through its OEM partnership with BlueArc.
“There’s a lot of change in the storage world today,” he said. “The AMS is not our best or fastest system, but it’s the most consistently reliable product in the modular area today.”
Quantum’s strategy for breaking its sales slump is to think small. That means a large steady stream of smaller deals rather than relying on a handful of big deals.
Quantum CEO Rick Belluzzo says the vendor made some large deals with its DXi7500 deduplication systems last quarter but many large deals also got pushed back because of spending issues, resulting in “lumpy” results. The bottom line is that Quantum needs to improve sales for the DXi6500 midrange and DXi4500 SMB platforms instead of relying heavily on larger DXi7500 deals in the enterprise.
“The nature of our business is big-deal oriented, and that makes us more susceptible to when people pull back,” Belluzzo said. “We look at bigger deals that we track, and very few – virtually none – are deals we lost. A lot didn’t close, but hopefully slipped into the next quarter. But our smaller deals can’t offset that because we don’t have enough of that business yet. We need a more diverse strategy.”
Quantum this week reported revenue for last quarter of $163 million, well below the $170 million to $180 million it forecasted for the quarter. The vendor lost $3 million for the quarter. “We clearly did not deliver the growth we expected,” Belluzzo said.
Belluzzo said Quantum struggled mightily in Europe and one geographic area of North America. The vendor made some realignment in its sales force, but will concentrate on pushing its DXi disk backup, StorNext software and tape library products through the channel. Quantum hopes to win partners looking for an alternative to Data Domain’s dedupe line now that EMC owns it and are frustrated with Oracle’s handling of the Sun tape platform.
It now appears unlikely that Quantum will sign any more major deduplication OEMs to replace the deal it lost with EMC after EMC bought Data Domain. Quantum did announce one OEM deal in January (believed to be Fujitsu) but is now more channel focused.
“Don’t expect any imminent changes in what we’re doing today, and that’s mostly driving branded business,” Belluzzo said. “Our disk and software and StorNext platform will have various partners and maybe OEMs associated with them, but we think we have plenty to work with.
“It was a disappointing quarter with the economy, but underlying this we are making progress around the core tenets of our strategy. That’s growing our branded business and taking advantage of channel disruption.”
A longer term goal for Quantum is to expand its data reduction capabilities beyond deduplication for backup. Primary data reduction is a hot topic with storage vendors these days and Quantum has designs on that space.
“We are driving our architecture and technology into a world where deduplication becomes more common in various tiers,” Belluzzo said. “That basically calls for the process to become more about data reduction than deduplication. We can take a stream of data that has lot of influences, and respond accordingly to get bet overall result. There is a lot of thinking and technical work underway to move our architecture into a world that is different than what we see today.”