HP raised its cash offer by $3 to $33 per share, beating Dell's $32-a-share offer and ending an escalation of bids that many analysts said had gone too far.
3PAR shares closed up 2.5 per cent at $32.88 on the New York Stock Exchange on Thursday. They had mostly traded around $10 this year, until Dell announced its initial $18 per share bid in mid-August.
The deal values 3PAR at over eight times sales, and many analysts said that was too high for a company that has barely ever made a profit since it was founded in 1999. Multiples above five are considered lofty in technology deals.
Others, however, say 3PAR is worth it. The company competes with bigger rival EMC Corp in data storage, considered 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 cut costs.
Such technology is seen increasingly crucial as emails, online video and electronic business transactions put a strain on corporate data centers. HP's vast and global sales force could quickly turn 3PAR into a bigger, more profitable business, some said.
"Do I think it was an extremely rich valuation? Absolutely. But I think, given that it's all cash, it shouldn't take too long for it to be accretive," said Stifel Nicolaus & Co analyst Aaron Rakers. "The question is, what kind of revenue synergy assumptions are they making?"
HP's aggressive bidding also showed it had no intention to be sidelined from deals in the absence of a CEO. Mark Hurd resigned last month as chief executive in a scandal surrounding inaccurate expense reports related to a female marketing contractor.
More deals, bigger players
Last month was an unusually busy August for dealmaking, the busiest in over a decade, as low interest rates, high cash piles and low stock-market values encouraged companies to strike deals.
Announced deals and offers during the typically slow month of August surged to $262 billion worldwide, according to Thomson Reuters data.
The latest deal also comes as large technology vendors like Dell, HP, International Business Machines Corp and Cisco Systems Inc, are seeking to diversify and become one-stop shops for their clients' various technology needs.
HP, with $115 billion in annual revenue compared with Dell's $53 billion, was always seen as the likely winner.
Macquarie Research analyst Richard Choe said the deal, while expensive, underscored HP's strong cash position. The company ended its third quarter with $14.7 billion in cash and cash equivalents.
But Dell was also more persistent than many had expected. Dell and HP each made four public bids for 3PAR.
Dell said it is entitled to a $72 million payment from 3PAR for breaking their merger agreement. Dell shares ended Thursday up 2 per cent at $12.36, while HP shares closed up 1.2 per cent at $39.68.
"We took a measured approach throughout the process and have decided to end these discussions," Dave Johnson, in charge of Dell's corporate strategy, said in a statement.
Wedbush Securities analyst Kaushik Roy, who had been critical of how much the bidders were willing to pay for 3PAR, said it was better for Dell to buy another company.
Rivals like EMC and NetApp Inc may be expensive, but other players in the storage space include Compellent Technologies Inc, CommVault Systems Inc, and Isilon Systems Inc. Roy said Dell could also buy Brocade, which sells data storage and network equipment gear.
Shares in Brocade rose 7.9 per cent, Compellent rose 18.6 per cent, CommVault rose 5.2 per cent and Isilon rose 3.5 per cent.
Bidding wars are rare in the technology sector.
In the last notable bidding war in the tech industry, EMC Corp 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 advised 3PAR in the latest negotiations.
JPMorgan Chase & Co advised HP, and Credit Suisse Group AG advised Dell.