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3PAR bounces on takeover chatter

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The cost of acquiring exotic disk-array maker 3PAR Data went up by nearly 12 per cent today on a slow holiday news day when a report in Barron's, the weekend stock-rag companion to the Wall Street Journal, suggested that 3PAR was ripe for the picking.

3PAR, which was founded by two server engineers from Sun Microsystems back in 1999 and is one of the originators of clustered disk arrays based on x86 and then x64 servers, has been shipping products since 2004. The company was one of the innovators in thin provisioning, virtual copy, and remote booting, to name a few.

As the Barron's report put it, 3PAR is on track to have around $195m in sales, has no debt, and enjoys $104m in cash and equivalents, making it an excellent takeover target. What the report did not say - and which investors on Wall Street seem to not have checked as well - is that in the trailing four quarters, when 3PAR pulled in $187.1m in sales, it also has lost $3m. And in the past five fiscal years ended in March, the company has lost money every year. But sales have grown steadily for its exotic disk arrays, and the company seems poised to turn profitable, provided the technical features and deal-making from the competition - EMC, IBM, and Hitachi - do not crush 3PAR out of existence.

IBM has already bought XIV, so an acquisition by Big Blue seems unlikely. Oracle is working on owning Sun Microsystems, and Larry Ellison already has a chunk of Pillar Data, so Oracle doesn't seem to need 3PAR, either. The 3PAR products might have a fit with HP, which lacks its own clustered product at the high end and which might want to have its own product to sell instead of rebadging gear from Hitachi Data Systems. It's also possible that server maker and storage wannabe Dell might want to have its own kit, too, so 3PAR could be a piece in its enterprise plans.

No one is suggesting that 3PAR is the subject of a takeover bid, of course, but the stock reacted as if there were rumors, jumping 11.4 per cent on Monday to $11.45, giving 3PAR a market capitalization of $636.6m and a takeover price that would probably fall somewhere between $800m and $1.2bn - if you believe the chatter down on Wall Street today.

That's a lot of dough to shell out, but the disk business is poised to grow again if the global economy recovers (as it seems to be doing by some measures). Getting a big company like HP or Dell behind 3PAR's technology could double, triple, or quadruple its sales in a relatively short time, perhaps making it worth the cash and - equally importantly - keeping 3PAR from falling into the hands of systems enemies. ®

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