It all looked tied up on August 16th when Dell signed an agreement to acquire 3PAR, a leading global provider of highly-virtualised storage solutions with advanced data management features, including dynamic tiering and thin provisioning, for multi-tenant cloud-computing environments. The transaction is valued at around  $1.15 bn, net of 3PAR’s cash.

On Monday however, Hewlett-Packard, started its bidding war at $1.6bn, or $24 a share, 33% higher than Dell's offer.  3PAR CEO David Scott (left) is a former HP executive. 

Big corporate companies need  to store vast amounts of data, ranging from video clips, e-mail, and reports and to customer records and presentations.

In the US, the data storage wars started with EMC, outbidding NetApp to buy Data Domain for $2.3 bn. Storage companies like 3Par and Data Domain are attractive because they come to the rescue of large corporations at a desperate time.

Data stored continues to double about every 18 months, says Deni Connor, principal analyst at Storage Strategies. Now “the amount of storage needed by these companies is getting out of control.”

Data Domain and 3Par, which both went public in 2007, are part of storage companies development aimed at profiting from mastery of new data manipulation techniques. With gross margins above 60%, 3Par would provide a boost to both H.P at 23%, and Dell at 18%.

Storage companies tend to create tight links between software and hardware, which allows them to sell bundles rather than a stand-alone product to customers and to innovate at a quick clip, said Garth Gibson, a computer science professor at Carnegie Mellon University. These trends, along with the importance of data, have helped storage systems win out over computer servers in importance.

Dell and HP already have experience of adding storage  to their portfolios as Dell acquired EqualLogic for $1.4bn in 2007 and HP LeftHand Networks  for $360m a year later.

Analysts now point to companies like Compellent, CommVault and Isilon Systems as beneficiaries of the storage acquisition wave. Shares of all three companies were up more than 10% on Monday on the back of HP’s bid for 3Par.

Footnote Dell bid back successfully

3Par had accepted the Dell raised buyout bid of $1.52bn when the computer maker topped the offer from HP. The offer is $24.30 a share in cash up from Dell's previous offer of $1.13bn. HP's  $1.5bn on Monday was $24 per share. Dell retaliated with $27 per share only to be outbid again by HP's $30 per share. Dell has until September 1st to counter-offer or conceed defeat

The deal is subject to government approvals and other closing conditions but expected to close before year end.