3PAR Buyout Race Changes Again (PAR, DELL, HPQ)

3PAR, Inc. (NYSE: PAR) went from a boring technology stock to a hot technology stock.  If reports are accurate, It ma get even hotter as the rival bids keep trumping each other.

CNBC has reported that Dell Inc. (NASDAQ: DELL) is on the verge of issuing a rival bid that would trump the higher counterbid from Hewlett-Packard Co. (NYSE: HPQ).  Dell started at $18.00 per share, and that was deemed to be overpaying by many market pundits.  Then H-P went with a $24.00 bid to rival Dell.  What the new bd for 3PAR will be is hard to say, but the market has decided that it is roughly $27.00 because shares rallied from $26.60 to $27.49 before coming back down to $27.00 now.

3PAR cannot be compared on its own to what the sales and earnings might be if it was a unit of one of these much larger destinations in technology.  Whatever that value is, it better be multiples of what the stock value was on its own.  3PAR earnings estimates are $0.15 EPS for Fiscal March-2011 and $0.27 EPS for March-2012.  The 2011 and 2012 revenue estimates are $235.3 million and $278.3 million, respectively.  At this rate, the forward P/E ratios on a standalone basis are 180 for next year and 100 for 2012.  The market cap of almost $1.7 billion generates multiples on revenues of 7.2 for 2011 and 6.1 for 2012.

At what point this becomes too expensive of a company depends upon who the buyer is.  Now that Cisco Systems Inc. (NASDAQ: CSCO) has adopted the Pac Man model of gobbling up every aspect of the communications space and now the data center space, companies like H-P and Dell have to adapt.  It also means they may have to pay more for a business than it is worth on the surface or more than what the business is worth on a standalone basis.  Beauty is in the eye of the beholder.

JON C. OGG