By Ritsuko Ando
NEW YORK (Reuters) - Dell Inc raised its bid for data storage company 3PAR Inc to $1.6 billion, offering slightly more than bigger rival Hewlett-Packard Co which is expected to respond with an even stronger bid.
Dell's latest offer of $24.30 a share is only 30 cents a share above HP's bid, but well above its initial bid of $18 a share earlier this month. 3PAR said in a statement on Thursday that it accepted HP's latest offer.
Analysts said HP, with $115 billion in annual revenue compared to Dell's $53 billion, would likely raise its offer and would have the advantage in an escalating bidding war.
Dell's 30-cent-per-share increase showed the company's limitations, said Rodman & Renshaw analyst Ashok Kumar.
"Even though Dell has the balance sheet to step up the offer, they're probably reaching the upper limits of what they can offer," he said. "At the end of the day, Hewlett-Packard is in a better position to close the deal."
HP declined to comment on the revised Dell bid for 3PAR.
The pursuit of 3PAR comes as HP and Dell, as well as other large technology vendors such as International Business Machines Corp and Cisco Systems Inc, are trying to expand into new products and services.
3PAR specializes in high-end data storage, a key part of "cloud computing" -- an increasingly popular technology that enables computer users to access data and software over the Internet, allowing companies to save costs.
The company competes with EMC Corp as well as IBM and other data storage companies, and 3PAR's expertise in the high end made it particularly attractive.
Many analysts have said HP may be a better fit for 3PAR as its vast, global salesforce can quickly grow the company, which has barely made a profit since it was founded in 1999. Expectations of faster returns may mean it is willing to pay more, some said.
But others said Dell, which is still in early stages of expanding from personal computers, may want it even more than HP does.
"Short term, HP is in a better position to ramp it up more quickly. They have the salesforce in place to plug it in and win more deals," said Kevin Hunt, an analyst at Hapoalim Securities. "Over time, though, I think it's more important for Dell."
In the latest agreement, 3PAR said the two companies raised their termination fee to $72 million from a previous $53.5 million.
Shares of 3PAR fell about 1.9 percent to $26.26 in morning trade, suggesting investors may have expected a bolder bid by Dell.
A recent survey by Reuters of nine fund managers and analysts found that most expect another bid or two, and a final price of about $29 per share.
Bidding wars are rare in the tightly knit technology sector, where deals are often made behind closed doors.
In the last notable bidding war in the tech industry, EMC outbid NetApp last year to buy Data Domain for $2.4 billion. Data Domain was advised in that deal by Frank Quattrone, the same veteran technology banker who is advising 3PAR in the latest negotiations.
HP said on Thursday it would buy Stratavia, a private company that makes software to manage databases and has applications in cloud computing. Financial terms were not disclosed.
Dell shares rose 1.1 percent to $11.91, while HP shares rose 0.7 percent to $38.51.
(Additional reporting by Paul Thomasch; editing by John Wallace, Dave Zimmerman and Robert MacMillan)
