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Dell to buy storage company 3PAR for $1.15 billion
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Dell to buy storage company 3PAR for $1.15 billion
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Dell Inc. Chief Executive Officer Michael Dell speaks during his keynote address at Oracle Open World in San Francisco, October 13, 2009.
Credit: Reuters/Robert Galbraith
By Ritsuko Ando
NEW YORK |
Mon Aug 16, 2010 11:03am EDT
NEW YORK (Reuters) - Dell Inc plans to buy data storage company 3PAR Inc for $1.15 billion in cash, expanding its cloud computing business to compete with other technology services companies like IBM.
Dell said it would pay $18 a share for 3PAR, an 87 percent premium over Friday's closing price. The deal would further expand Dell's presence in technology services, a business that often yields higher profit margins than personal computers but is increasingly competitive.
International Business Machines Corp has been expanding its services business, as have other rivals like Hewlett-Packard Co and Oracle Corp. Such companies have also been stepping up investment in cloud computing, or "virtualization," a technology that enables users to access data and software over the Internet and corporate networks.
Shares of 3PAR jumped 85.8 percent to $17.93 in morning trading. Dell rose 0.4 percent to $12.06.
Dell, which bought technology services company Perot Systems last year for $3.9 billion, said 3PAR's virtualization technology would help customers reduce data management costs, including hardware and energy consumption.
Dell will integrate 3PAR's products into an existing storage portfolio that also includes offerings from its joint partnership with EMC Corp and services by EqualLogic, a storage company it bought for $1.4 billion.
Dell executives said on a call that they would continue to offer EMC products, allowing customers to choose between those and 3PAR offerings. They also said they would try to further expand Dell's presence in areas like storage and data management.
The 3PAR deal is expected to close by the end of the year.
Dell said the transaction would probably add to its earnings in fiscal 2012. It plans to maintain current operations at 3PAR, founded in 1999, and invest in engineering and sales.
Dell has been struggling to boost profitability as personal computers become cheaper. The recent surge in costs of components has also hurt its margins.
(Additional reporting by Paul Thomasch; Editing by Derek Caney, Gerald E. McCormick and Lisa Von Ahn)
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