Dell has announced its plans to acquire data-storage company 3Par for about $1.5 billion in cash. The deal is expected to boost Dell’s enterprise offerings for corporate technology entities.

3Par, founded in 1999, builds high-end storage systems designed around the enterprise. The company has been offering cloud-based storage as part of the current virtualization trends. It competes with the likes of EMC, who’s CEO Chuck Hollis recently outlined enterprise tactics for transitioning IT management for cloud optimization. Dell will be paying $18 a share for 3Par, which is an 86.5% premium for the California-based company, which closed at $9.65 at week’s end. From Dell’s statement,

“We have aligned our storage offerings over the last several years to provide our customers choice and value,” said Brad Anderson, Dell senior vice president, Enterprise Product Group. “3PAR brings the same values of performance, agility and ease-of-use to higher end, virtualized storage deployments as EqualLogic does for the entry-level and mid-range, rounding out our industry-leading solutions portfolio.”

The acquisition is Dell’s latest move to control a large chunk of the cloud-computing industry–something the hardware manufacturer will need to do in order to remain competitive. Nearly half of Dell’s revenue comes from the sale of personal computers, and as business needs continue to grow around streaming IT department budgets, Dell will need to find additional ways in which to meet these needs.

The deal will also give Dell more fodder to compete with IBM and the scandal-ridden HP, both of which have made strong moves within current virtualization trends as well. Dell also acquired Ocarnia last month, towards optimizing cloud storage. As Dell has not been considered an innovator in storage optimization, these acquisitions may be key for Dell in the coming year’s development and enterprise goals.

Senior industry analyst Dave Vellante, who recently broke the Oracle Google lawsuit story her on SiliconANGLE weights in on Dell / 3Par.  Dave writes (posted on his anlyst firms blog wikibon.org):

The purchase is a 87% premium over the company’s current stock price. This deal is a no-brainer for 3PAR. The company wasn’t growing fast enough and was up against some major competition in EMC, Hitachi and IBM at the high end. In the end, it got a good price and is closing the chapter on a great startup. 3Par just didn’t have the juice to compete at the high end alone.

3PAR was an innovator. It’s singular focus on simplifying storage by bringing virtualization, thin provisioning and automated storage management to data center infrastructure is and will continue to be a fundamental component of infrastructure 2.0 in the coming decade for Dell. 3PAR is an eleven year old company that generated about $200M in revenue. The company ran itself roughly at breakeven and has been investing in building out its technology portfolio and sales channel; which is why it was basically breakeven.  The company had a clean balance sheet, a $600M market cap and was growing at a 2-year clip of around 26%. However it’s recent stock performance was being outpaced by most of its competitors. Why?

The answer is seen when placed side-by-side with the major pure plays in the storage business. 3PAR doesn’t stand out financially:   Right now, Isilon and NetApp are the ‘now’ companies in the storage business. If anything, Compellent stands out as the most undervalued on this chart given Isilon’s recent meteoric valuation increase. 3PAR choose to sell to Dell precisely because 3PAR’s Board realized  it couldn’t compete alone with the big boys (i.e. EMC, IBM and Hitachi) at the high end and couldn’t demonstrate the type of growth rates that Isilon and Compellent are seeing. 3PAR was too much of a niche, it didn’t have a file strategy or a way to penetrate growing small business markets and and it needed a white knight to provide the resources necessary to win in the marketplace.

Ironically, I was crunching some numbers this weekend to see how long it would take 3PAR to hit $1B in revenue. By my estimates it wouldn’t get there alone until 2019. Given that most storage companies trade at 2-3X revenue, it’s likely 3PAR’s valuation wouldn’t hit $1.2B (roughly what Dell’s paying) until 2014 or even 2016. The bottom line to me is 3PAR wasn’t on a trajectory to get to $1 billion dollars in revenue within five years and it was destined to become irrelevant. It was caught in the middle between the high end glass ceiling in place by the big boys and the rest of the market catching up. Dell brings resources, channels and a nice fit with EqualLogic.

Some questions remain to be answered – something we will be covering here on SiliconANGLE?

• How will Dell organize 3PAR?
• Will Dell maintain 3PAR’s largely direct sales strategy?
• Will Dell squeeze 3PAR’s R&D spend to cut costs?
• Can the EqualLogic and 3PAR technologies come together to form a consistent architecture?
• How will that happen – who is the visionary?
• Or will Dell operate two largely independent business units?
• What will happen to 3PAR’s emphasis on the very high end of the marketplace (e.g. federated storage) – will Dell allow those to continue?
• Is there anything left to the Dell EMC relationship?