After losing out to Hewlett-Packard in a bidding war for 3PAR, computer maker Dell today revealed that it is in advanced talks to acquire mid-range data storage firm Compellent Technologies, for $876 million in cash.

Dell said that it and Compellent have entered into an exclusivity agreement to negotiate a merger agreement, in which Dell would acquire all of the outstanding common stock of Minnesota-based Compellent at $27.50 per share.

The offer represents a discount of 18 per cent over Compellent's closing price yesterday.

The unprecedented bidding war in September 2010 for 3PAR (See: HP knocks out Dell for 3PAR with $2.4-bn bid) a virtual data storage company that barely made a profit in its 11-year existence, had sent the stock price of data storage companies in the US skyrocketing.

HP won 3PAR on 2 September with an offer that was at a 348 per cent premium to the $9.65 per share price of 3PAR prior to Dell's first bid, made on 16 August 2010.

The Compellent stock, which was quoting at $12.75 in July, shot up by 140 per cent in August 2010 and soared even higher this week to $33.65 on speculation that Dell was making a play for Compellent.

But both Dell and Compellent have agreed that the stock price is unjustified and have settled for $27.50 per share, which is nearly in line with Compellent's price, which today fell $4.61 to $29.04 after Dell revealed its discounted offer.

Compellent, provides Fluid Data storage solutions that automate the movement and management of data at a granular level, enabling organisations to constantly adapt to change, slash costs and secure information against downtime and disaster.

Its patented, built-in storage intelligence delivers significant efficiency, scalability and flexibility. With an all-channel sales network in 35 countries, Compellent is one of the fastest growing enterprise storage companies in the world.

Compellent reported revenues of $125.28 million last year, which is less than 1 per cent of the $52.9 billion revenue Dell generated last year. Compellent also has less than 1 per cent of the market share in the US in the data storage sector.

Texas-based Dell, the world's third-largest PC maker after HP, is forced to look at mid-range data storage companies to expand its data-centre offerings as all large companies have already been acquired by its competitors.

But Dell has a reseller's agreement with the world's largest data storage company, EMC Corporation, for selling EMC's midrange Clariion line, which is in direct competition with Compellent's systems.

Last month, EMC increased its stranglehold in the mid-range data storage product line by acquiring Isilon Systems Inc, a network attached storage systems company, for $2.25 billion in cash. (See: EMC to buy network attached storage systems firm Isilon Systems for $2.25 billion)

Analysts feel Dell should be better off with acquiring Compellent than selling EMC's mid-range systems. Their reseller's agreement expires in 2012.