Defense Media Network

HP Battles Dell for Acquisitions, Defense IT

In its recent winning battle with Dell Corp. for the right to acquire data storage company 3PAR for $2.35 billion, Hewlett Packard engaged in a high profile power struggle that underscores the growing dogfight between the two big computer companies over defense technology.

Though HP won the bidding war, Dell certainly drove up the price for 3PAR. On Aug. 27, 2010, Dell actually announced 3PAR had agreed to accept the Texas computer maker’s offer of $27 a share, or about $1.8 billion. Just five days later, Dell ceded the purchase to HP, a company whose stock is worth three times that of Dell’s.

Though mostly known for its work in the civilian world, 3PAR does have several defense-related clients. Industry analysts noted that HP and Dell have moved aggressively to grow their federal civilian and military sales in the past 18 months through major acquisitions.

The idea behind those earlier mergers, observers note, was to help HP and Dell move away from their dependence on hardware sales while simultaneously nailing down some of the billions in federal spending on information technology, particularly as it relates to the Pentagon.

In May 2008, HP paid $13.9 billion for EDS, the company founded by computing services pioneer and former presidential candidate Ross Perot. As a result, HP now ranks 12th on the list of IT vendors tracked by the industry trade journal Washington Technology. That was up from 39th place in 2008.

HP recently announced that the Air Force selected the Silicon Valley company as a “preferred technology provider.” A new five-year blanket purchase agreement (BPA) with the agency could be worth as much as $800 million, the company said.

The company announced in early July it had signed a Continuity of Services Contract with the U.S. Department of the Navy, valued at more than $3 billion if all options are exercised. Under the program, the Navy will transition the comprehensive IT services presently provided under the Navy Marine Corps Intranet to the Next Generation Enterprise Network, HP said.

For its part, Dell spent $3.9 billion in September 2009 to acquire Perot Systems, which Ross Perot founded in 1988 after General Motors had earlier acquired EDS. Dell now outranks HP on the top 100 list; Washington Technology lists it as the 11th largest federal IT provider.

However, the rankings here are the reverse of the situation with HP, the trade journal’s statistics show – Dell didn’t get as big a bounce from the purchase. In 2008 Perot ranked 41st while Dell far outstripped it at 15th place. The rankings were unchanged in 2009.

On its webpage for military services, Dell says it is an expert at delivering “IT solutions for achieving net-centric operations.” Dell lists several solutions the company provides, including military ruggedized laptops, but does not detail recent Pentagon contracts.

Meanwhile, HP’s purchase of 3PAR moves the firm into the rapidly expanding market for data storage caused by the explosion in content brought on by the Internet. It also gives the technology juggernaut more offerings in a field known as virtualization, the practice of running several “virtual” machines from a single server.

Key 3PAR defense-related customers are the Army, which uses it for distributed learning, and Lawrence Livermore National Labs, utilizing the equipment to support fusion research. The company also supplies its technology to the NASA Ames Research Center and to CACI, a provider of defense, homeland security and intelligence services.

Separately, HP recently announced it is spending $1.5 billion to acquire ArcSight, Inc., a security and compliance management company. ArcSight counts the Defense Information Systems Agency and the Department of Homeland Security as key federal clients.


Michael A. Robinson has written articles for some of the nation's more prestigious publications. As...