Little storage player 3Par Data is suddenly the envy of many, as it gets caught up in a massive bidding war between Dell and HP which have caused its share price to nearly double in a period of a week.
What gives? Well, virtualization and data centers, in a nutshell. As traditional enterprise spending slows, data centers continue to grow like mad, fueled by Internet services, social networking, and “cloud computing.” It turns out that storage and virtualization services — 3Par blends both of these — are crucial to this high-growth area of computing.
A recent Infonetics report indicates that data-center growth is driving purchases of niche equipment plays such as data-center Ethernet switches, “purpose-built” blade switches, Storage Area Network (SAN) “convergence,” WAN optimization, and application delivery controllers. 3Par focuses on the SAN market, where it take a physical storage network and segment it to be allocated to different applications — a process know as “virtualization.”
What’s funny about 3Par is the deal was so far off the radar. The stock had chopped in a narrow range for months before suddenly popping with the bids (no insider trading here). It’s a small-cap tech stock that goes seemingly unnoticed for months and months, only to suddenly become the toast of the town with daily headlines on Bloomberg and the Wall Street Journal.
What’s it all mean? Well, it means good things for networking and virtualization players who are occupying many of these niches: That would include players such as Blue Coat Systems (BCSI) and Riverbed Networks (RVBD) in WAN optimization, VMWare (VMW) and Citrix (CTXS) in virtualization, and F5 Networks (FFIV) in application delivery. These are the companies that are takeover bait for the giant tech companies such as HP, Dell, Cisco, and Microsoft. The only problem is many of these stocks have already benefitted from the data-center buying spree and have climbed rapidly. They are not hidden stories like 3Par.