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Posts Tagged ‘3par’

Article from GigaOm.

Fundamental changes in networking and computing are shaking things up in the enterprise IT world. These changes, combined with ubiquitous broadband and new devices like smart phones and tablets, are leading to new business models, new services and shifts in corporate behavior. It’s also leading to a lot of M&A activity as companies jockey for position before the ongoing technology shift settles into the new status quo.

A report out today from Deutsche Bank lays out some of the shifts and names what it believes are the 11 most likely acquirers, calling those companies the Big 11. The bank’s Big 11 are: Apple, Cisco, Dell, EMC, Google, HP, IBM, Intel, Microsoft, Oracle and Qualcomm. They were selected because of their size, their cash balance and their willingness to make strategic acquisitions. The report talks about which companies each might acquire, but it also gives a wealth of data on the companies which comprise the Big 11 that any startup looking for a buyer on the software and infrastructure side might find worthwhile.

In addition to the information on buyers, the report goes on to explain why many deals today are valued at multiples that are so much higher than the potential revenue of the company (HP’s buy of 3PAR is a prime example of this trend):

On the other hand, the multiples paid for these companies go counter to typical expectations for valuations. All of these deals were priced at considerable premiums to forward estimates. The implication is that the larger companies believed that there were strategic benefits far in excess of the smaller companies’ near-term prospects. A common criticism of acquisitions holds that management teams of large companies try to buy revenue and earnings to offset far lower growth rates in their core businesses. This does not appear to be the case with these deals. We see this as confirming our thesis that large companies are looking to buy technology and product synergies. In all of these deals, we see larger companies either significantly building up weak product lines or looking for the ability to bundle new features into existing equipment.

Some of the 50 targets mentioned are:

  • Salesforce.com (s crm )
  • VMware
  • Adobe
  • Citrix
  • Research In Motion
  • Riverbed Technology
  • SAP
  • Atheros
  • Skyworks
  • f5 (sffiv)
  • Juniper

Each are on the list of potential candidates for different reasons associated with improving the quality and speed of delivering web-based applications and services from a cloud-based infrastructure to a multitude of devices. However, there are plenty of startups and private companies that are pioneering new technologies in these areas which are also fair game. The report doesn’t go into the content side of the business where companies like Google, Facebook, Apple, Disney, etc. are fighting for features and services to expand their reach and platforms.

Since we’re living through an enormous period of potential disruption thanks to technology, the giants in the industry find themselves playing a game of musical chairs as they seek the best seat at the table for the future. Startups and larger public companies that will help those giants fill out their offerings before the music stops are under the microscope and perhaps at the top of their valuations.”

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Article from SF Gate.

“Hewlett-Packard Co., Oracle Corp. and IBM Corp. are leading an acquisition spree that has propelled the value of U.S. technology deals 24 percent to more than $50 billion this year and broken down decades-old barriers between industries.

The companies are using purchases to become one-stop providers of products from computers to software to networking gear, rather than focusing on a niche. A plunge in computing-industry stocks last week, spurred by concerns that demand is slowing, makes some companies more affordable.

HP, Oracle, IBM, Cisco Systems Inc. and Dell Inc., with a collective $100 billion in cash, have said they plan to keep making acquisitions. Buyers will probably scoop up targets in areas such as storage, software and security, helping them cater to corporate customers building data centers to handle a Web traffic boom, said Charles King, principal analyst at research firm Pund-IT in Hayward.

“A lot of tech leaders are repositioning themselves,” said Drago Rajkovic, head of technology mergers at Barclays Capital in Menlo Park. “Tech merger and acquisition activity is going to remain very strong this year and going into next year.”

Companies have announced $51.9 billion worth of technology and Internet takeovers in the United States this year, up from $41.8 billion in the same period in 2009, according to data compiled by Bloomberg. The buyers are pursuing a vision of cloud computing, which lets customers store their software in massive data centers, rather than in the computer room down the hall. Record low borrowing costs have helped spur the deals.

To build up its data-center technology, Hewlett-Packard agreed to spend $2.35 billion last month for the money-losing Fremont storage maker 3Par Inc., after an 18-day bidding war with Dell more than tripled 3Par’s stock price. Shares of other potential targets, such as Riverbed Technology Inc., Isilon Systems Inc. and Fortinet Inc., have each climbed more than 25 percent since the bidding for 3Par was made public.

Project California

Cisco’s expansion into computing hardware has put pressure on HP, IBM and Dell, the leaders in that industry, to respond. Cisco, the world’s biggest maker of networking equipment, introduced its own line of servers in March 2009. The effort, originally code-named Project California, is beginning to gain acceptance from big customers, says Dominic Orr, chief executive officer of one of Cisco’s networking rivals, Aruba Networks Inc.

“That’s creating a lot of nervousness,” Orr said. “Nobody wants to be Californicated by Cisco.”

The acquisitions are a boon to the largest investment banks. Goldman Sachs Group Inc. has advised companies in more than 30 percent of U.S. technology deals this year, according to data compiled by Bloomberg. Morgan Stanley and Barclays Capital ranked second and third.

The price HP paid for 3Par was about 10 times the company’s revenue over the past four quarters. The premium reflected a growing urgency to use acquisitions to fuel growth and underscores the dearth of affordable runners-up.

“The public markets are pricing in premiums that, frankly, are going to prevent some deals from happening,” Cisco Senior Vice President Ned Hooper, who handles corporate business development, said. “The companies that are winning in the market are responsible players.”

Oracle, the world’s second-largest software company, snapped up almost 70 companies in the past five years. In January, it bought Sun Microsystems Inc., marking a foray into computer hardware. Last month, it used the acquisition to introduce high-end servers designed to run Oracle programs faster than competing machines.

Oracle CEO Larry Ellison has pledged to acquire more hardware companies, especially in the chip area. While HP and Dell use processors from Intel Corp. in their servers, Oracle plans to build out Sun’s proprietary chip technology.”
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Article from SF Gate.

“Hewlett-Packard, the world’s largest PC-maker, has offered to buy Fremont’s 3Par Inc. for about $1.6 billion, topping Dell‘s bid for the maker of data-center equipment and software.

The bid of $24 a share in cash is 33 percent higher than Dell’s offer, HP said Monday in a statement. Dell offered $18 a share in cash, or about $1.15 billion, for 3Par on Aug. 16.

HP and Dell are using acquisitions to challenge Cisco Systems and IBM in the market for data-center products and services, which generate higher profits than desktop and laptop computers. 3Par sells hardware and software that make it easier and cheaper for companies to store information. Its stock rose past HP’s offer, signaling that some investors expect a bidding contest.

“One of the growth areas in technology is in the enterprise storage space,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York. “3Par’s products fit well in there. It’s an easy way to gain product breadth.”

HP said on a conference call that it has been working on the proposed acquisition since before the departure of Mark Hurd, who stepped down as HP’s chief executive officer on Aug. 6 after an investigation found he filed inaccurate expense reports to conceal a personal relationship with a marketing contractor.

The offer is HP’s second bid for 3Par, Dave Donatelli, who heads HP’s storage and server division, said Monday. The PC-maker has been in talks with 3Par for “some period of time,” he said, declining to comment further.

David Frink, a Dell spokesman, declined to comment. John D’Avolio, a spokesman for 3Par, didn’t immediately comment.

HP’s offer values the unprofitable 3Par at almost 2 1/2 times its worth before Dell’s bid, and at more than eight times its sales of $194.3 million in the year ended March 31. 3Par’s revenue rose 5.2 percent from 2009, and it has about 670 employees.

“It’s a very exorbitant price,” Levington said. It probably doesn’t make economic sense for Dell to counter, he said.”

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Here is an article from WSJ Venture Dispatch.

“3Par’s IPO in November 2007 was held up as yet another strong offering during a year that saw 74 venture-backed companies go public. The IPO, which priced above market estimates at $14 a share and saw a 13% gain on opening day, also was billed as a big exit for venture capitalists.

But the market soon tanked, bringing down 3Par’s stock with it – by spring-time it was fluctuating between $6 and $9, and its venture investors were nowhere near exiting this company. Typically, VCs begin unloading some shares once the 180-day lock-up period ends, but with the stock-market in flux, three of 3Par’s main venture backers mostly stayed put.

Nearly three years later, Mayfield Fund, Menlo Ventures and Worldview Technology Partners still own significant chunks of 3Par stock, and that patience may pay off mightily – thanks to the bidding war between Dell and Hewlett-Packard.

Last week, Dell agreed to acquire 3Par for $1.13 billion, or $18 a share, but Hewlett-Packard has swooped in with a $24-a-share offer that values 3Par at $1.6 billion. The bidding has caused 3Par’s stock to rocket upward to more than $25 today, finally bringing the stock above its IPO price.

This is especially good news for limited partners in Mayfield Fund and Worldview Technology Partners, which first invested in 3Par in 1999. Together, these three firms and a number of others invested a total of $183 million into 3Par over the years.

Prior to these buyout offers, 3Par’s venture investors were left with a difficult choice between selling out for liquidity now or waiting for better returns down the road. Menlo Ventures, which led the company’s 2004 recapitalization, and Worldview Technology Partners, which first invested alongside Mayfield Fund in the 1999 Series A round, have both held onto their entire stakes and today own 13.4% and 12.2%, respectively. These investors declined to comment or did not respond to requests for comment.

Mayfield Fund, which was at the time of the IPO, the company’s largest shareholder, has been slowly selling its stake in the business over the last two years at prices ranging between $9.22 and $12.30, which was near the price prior to the announcement from Dell. That firm currently owns about 9.9% of 3Par.”

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