Most of the market was in my camp, which is why the stock was trading around $10. In the days after Dell's $18 bid for 3Par, there were snickers about the steep price they were paying -- a whopping 80% premium, which made Intel's(INTC - commentary - Trade Now) recent take-out of McAfee (MFE - commentary - Trade Now) at a 60% premium seem like a bargain.
That 80% premium for 3Par has turned into a 200% premium with HP's most recent bid. Most of us don't know too many 200% bids, so we have no basis for comparison. We do know, however, that most 50%-plus premium acquisitions end up destroying value at the acquiring firm.
I don't know 3Par's product offering in depth, but it seems clear that Dell is motivated to do the deal in order to beef up its storage offering to compete with International Business Machines (IBM - commentary -Trade Now), EMC Corporation (EMC - commentary - Trade Now) and Hewlett-Packard, while HP is trying to keep Dell on the outside looking in.
Some have said that 3Par is a "pimple" for both HP and Dell, meaning that the company is so small that it doesn't matter that each is paying so much. That's really not true. They've both got 3Par up to a $2 billion market cap, giving it a cool 236x enterprise value-to-EBITDA ratio. That's not insignificant for a $90 billion HP and a much smaller $23 billion Dell. Also, remember that HP has only $14 billion of cash and Dell has $12 billion of cash. 3Par will be meaningfully dilutive to whichever company wins.