Tuesday, August 24, 2010

3Par - your blogger needs a brain transplant

I have just done a huge amount of work on virtualization (see the recent "geek" posts here and here and here and the post on Dell).  I worked out where Dell was going on virtualization and understood that HPQ was likely to play "catch-up".  (This surprised me - I was stunned how far Dell had travelled.)

I understood the 3Par acquisition - and knew that HPQ was also lacking in this area and thought that Dell was (cleverly) leaving Hewlett Packard strategically challenged.  I also put a small short on HPQ because of this.

So - having got all that way it never occurred to me Hewlett Packard would overbid Dell for 3Par.  

Going long 3Par was an easy bet.  Its downside was protected by Dell's cash bid (which would completed as the deal was important to Dell and Dell could finance it with cash on balance sheet).  The upside was an overbid by HPQ.  It was a bet with very nice risk-return characteristics.

And I did not do it.  

Politely that is "lack of execution" - but I should stop making excuses.  One word for that one: dumb.

 

John

11 comments:

Anonymous said...

I had the same thought. But it gets worse. I work in the storage industry and had worked out about 2 years ago that HP was very likely to acquire one of PAR, CML, or ISLN, most likely PAR. I bought shares of all 3 on the acquisition premise (overweighting PAR). Late last year, I lost patience with the acquisition premise and gradually liquidated all the shares for modest gains. Doh! Not just PAR, but also ISLN has gone up over 300% recently. Should have held on -- I don't often sense a personal edge over the broader market.

John Hempton said...

All that research is so you have an edge over the market. DO NOT GIVE IT UP LIGHTLY.

Off-the-scale dumb. Just idiotic.

J

Ted K said...

Woooo horsey!!! Made a wrong turn.... Self-flagellation is two blocks past our stop. Don't try to blame that on me either you damned horsey.

Red said...

Don't be so hard on yourself, you got to learn all about the l33t tech speak.

Anonymous said...

You just did not follow through on an investment that, after the fact, was a sure thing. That is life, other opportunities will come so be prepared for the next sure thing.

Develop a checklist or a procedure whereby you fully rationalized your decision before you go on to other activities.

Nick said...

That checklist idea is a MUST.
See the benefits it has had for the airline industry, healthcare industry etc... :).

It should be so simple to draw up an ever-evolving checklist.
Particularly important would be the "learnings from previous mistakes".

Since human capital is all we having, maximising the return on that time should be our top priority!

Ben said...

Actually, what was dump was HP's bid for 3Par. At the end of the day, these other names like Isilon and Compellent are very similar - HP could have bought them at a more reasonable price.

Nick said...

Please tell me you still put the trade on and took advantage of the next two bids?

The rationale from your post was still true at the time you wrote it!

Anonymous said...

Don't be so hard on yourself. Who would have thought that HP, with a temporary caretaker CEO in charge and execution strategies in turmoil with Palm and other things still needing to be digested, would have the appetite for yet more?

Dell probably thought HP was out of the running and that their initial bid (80% premium) was rich enough to discourage competing bids (ha).

3PAR spent five full days flatlined, trading under 18.1 (and some of that time trading under 18.0), so nobody else saw it coming either.

Anonymous said...

http://webcache.googleusercontent.com/search?q=cache:xcJFDDVVT74J:www.businessinsider.com/google-shuts-down-popular-blogger-john-hempton-after-publishing-controversial-post-2010-1+bronte+capital&cd=5&hl=en&ct=clnk&gl=us

Anonymous said...

On the accounting side, if you look at their Quarterly revenue, you will notice the company has very little cash sales.
Another weird thing while revenue increased by $5M sep 09/dec 09, and decreased by $ 8M dec09/march10, their AR only increased by $2M and by $1M for the same period...Did the company collect any cash from Q3 09 revenue?
It really seems some voodoo accounting is going on!

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.