What's the story?
After HP increased its all-cash offer yet again, Dell tried another boost, including some stock swapping and a long-term distribution deal. 3PAR declined, and now the storage industry is turned on its head once again.
I have argued that Dell needs 3PAR a lot more than HP does, but there's a limit for everything, and HP has more resources. Dell now has to turn elsewhere for the cloud-friendly storage solutions that made 3PAR both famous and valuable; it may even develop its own high-efficiency storage management systems.
In that respect, the 3PAR drama looks a lot like the similarly uneven tug-of-war between NetApp
A room with a view
I spoke to Rackspace
"Servers are turning into complete systems these days," he said, "and that includes having storage solutions for every machine you sell." Complete packages like these reap higher margins than just selling one or two pieces of the puzzle, which explains why everyone is getting into this business model now. This acquisition is "a natural fit" for both Dell and HP, in Moorman's view.
The downside is that whoever wins -- in this case, HP -- risks jeopardizing existing relationships with other storage vendors like EMC and NetApp. That's exactly what happened to Cisco Systems
What's going on?
That said, Dell is far from dead in the water. While 3PAR was and is the indisputable leader in the thin-provisioning game, the other large storage vendors are plunging into this market with verve and enthusiasm. If Dell can't own a technology of its own, it will still be able to find a partner for bundling this kind of functionality into its complete-system packages. Margins may be slightly lower, but Dell is used to hanging out in that space. It'll do all right.
In fact, Dell could even be considered the winner in a backhanded-compliment sort of way. If HP intended to drive prices up on its longtime rival, the company misjudged Dell's capacity and willingness to pay, and took the process one step too far. Now HP is on the hook for nearly twice the price tag that Dell had envisioned when the bidding war started. It will take a lot of incremental storage sales to make up for that investment. Moorman said that's certainly achievable, but it won't be easy.
The IT industry is indeed changing before our eyes, and a field full of traditional "coopetition" is transforming into a smaller group of larger players, all in head-to-head rivalry instead. That's how Moorman sees it, and I agree wholeheartedly.
"Is it good or bad for us?" he asked. "Who knows?" Only time will tell, but you're free to hypothesize in the comments below.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. Rackspace Hosting is a Motley Fool Rule Breakers selection. The Fool has written a bull call spread on Cisco Systems. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. You can check out Anders' holding and a concise bio if you like, and The Motley Fool is investors writing for investors.
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