Getting high

3PAR fever: Consumers may still be deleveraging, but at big corporations it’s liquidity galore. How else to explain the curious case of the bidding war over 3PAR, a data storage company coveted by Dell and Hewlett-Packard? There’s no sound mathematical rationale for the 3PAR frenzy, which has now reached $2 billion with HP’s third counter-offer to Dell.

Only a highly creative financier with a spreadsheet and a bong could justify the valuation on HP’s latest bid – the sixth for the company in three weeks. HP is offering $30 a share – more than three times 3PAR’s $9.65 undisturbed price as of Aug. 13. Plus, HP will pay a $72 million termination fee if it clinches the deal.

Let’s put that into Excel and smoke it. Assume HP – or Dell for that matter – really can pump up the sales volume of 3PAR by stuffing it through its distribution pipeline. Consensus estimates compiled by Thomson Reuters show the company is already expected to improve sales from $195 million last year to $460 million by 2014.

Say 3PAR’s new owner can supercharge that growth, doubling sales to $920 million instead, while maintaining projected operating profit margins of 11 percent. That gives earnings before interest and tax of just over $100 million. Taxed at 30 percent and discounted, that suggests a return on HP’s all-in investment of just around 3 percent.

That’s way below 3PAR’s cost of capital. Of course, HP might argue it’s not a bad use of a portion of the cash sitting on its balance sheet. It’s certainly a better return than five-year Treasury bills are offering. And maybe the inclusion of 3PAR’s kit to its offering will help it sell all sorts of other goods and services.

The trouble is, shareholders of CEO-less HP and direction-seeking Dell might see things differently and have better ways to deploy the cash they effectively own. HP’s owners have lopped more than $5 billion off the company’s market value this week. That says plenty about how they view HP’s creative use of their capital.