The Twittersphere and storage industry are abuzz with the ongoing bidding for 3Par.  HP and Dell are aggressively pursuing the company and have a vested interest in 3Par technology. I believe that HP is more motivated to acquire 3Par and will prevail.

Both Dell and HP believe that a 3Par acquisition will generate additional business value, and they both must realize that the losing party will be placed in a difficult situation.  I believe that HP has more to gain by acquiring 3Par and more to lose by failing to do so.  Here is my assessment of the gains and losses by each bidder:

HP gain if they win:

HP has a broad storage portfolio and 3Par’s products would replace/augment the EVA and XP product lines.  EVA was developed by HP, and many storage people suggest that it is desperately in need of a major upgrade.  The XP is an array from Hitachi Data Systems in Japan and is resold by HP.  Thus HP is an interesting position of selling a relatively old, high margin product, the EVA and a newer low margin product, the XP.

The 3Par situation presents an opportunity for HP to alter the situation.  The acquisition would provide cutting-edge technology which could help address EVA’s challenges and provide much improved margins versus the XP.  Of course, HP may continue to sell EVA’s and XP’s, but a 3Par solution could help jump start enterprise array sales and take market share from not only the competition but also from EVA on the low end and XP on the high end.  Long-term, it would not surprise me to see 3Par technology replace the XP for all but the most complex environments and replace high end EVA.

In summary, HP has the opportunity to redefine their enterprise disk array solutions with an acquisition.  This is critical given the needs of re-invigorating the EVA and increasing margins on the high end.

HP loss if they lose:

I can only imagine the competitive FUD (fear, uncertainty and doubt) coming from other disk vendors if they lose.  By bidding so aggressively, HP is stating that they really want 3Par and implicitly indicating that they need to replace their current solutions.  I am sure that HP will argue that the bidding is not a referendum on their currently technology, but competitors will attack this point mercilessly which could impact storage sales.

If HP does want to replace their storage technology then 3Par is critical because there are few alternatives.  The remaining storage players often have great technology but lack the scalability, reliability and performance of the 3Par offering.  In this scenario, HP would need to aggressively pursue a new acquisition candidate to address the intense FUD that would be flung their way.

Dell gain if they win:

Dell has a partnership with EMC on the high end to sell CLARiiON (CX) disk arrays.  It is not clear how many of these arrays Dell sells, but I believe that it is a relatively small number.  Selling a CX system is much more complex and detailed than Dell’s traditional fulfillment model.  The 3Par acquisition represents an opportunity for them to replace the CX product line with a wholly-owned product and to add a sales team experienced in selling storage into large accounts.  Thus, they would better a address a market segment where they currently have a limited footprint which would result in incremental revenue.

Dell loss if they lose:

A failed acquisition will result in status quo for Dell.  They will still be able to attack the enterprise space with EMC’s CX product line, but will lack the technology and enterprise sales talent that 3Par would bring.  EMC has been highly successful selling CX technology and so I believe that Dell could effectively sell against HP/3Par on a technology basis.  The real challenge is the loss of the enterprise sales talent and customer base that 3Par would have brought.  However, I believe Dell could build a larger and more aggressive enterprise storage sales team focused on CX technology which would enable them to compete aggressively with HP/3Par and generate incremental revenue.

From a FUD perspective, Dell is at less risk since they do not own a technology that competes with 3Par.  If competitors tried to attack the failed acquisition, Dell could simply (and reasonably, in my opinion) respond that they saw an opportunity to own enterprise storage technology at a fair price and so pursued 3Par.  They could position the loss of 3Par as a situation where the bidding got out of hand so they decided to stick with their current provider.

Conclusion:

In my opinion, HP has more to gain and lose in this bidding war than Dell.  The addition of 3Par will enable them to instantly improve their storage offerings while minimizing potential FUD from the competition.  Dell, in contrast, could gain greater access to a market segment that they already address through their EMC partnership.  Dell certainly would miss out on sales talent and a customer base, but I believe that this is something that they could address using other methods.

[Cross-posted at About Restore]