By Ritsuko Ando

NEW YORK (Reuters) - Dell Inc plans to buy
data storage company 3PAR Inc for $1.15 billion in
cash, expanding its cloud computing business to compete with
other technology services companies like IBM.

Dell said it would pay $18 a share for 3PAR, an 87 percent
premium over Friday's closing price. The deal would further
expand Dell's presence in technology services, a business that
often yields higher profit margins than personal computers but
is increasingly competitive.

International Business Machines Corp has been expanding its
services business, as have other rivals like Hewlett-Packard Co
and Oracle Corp. Such companies have also been
stepping up investment in cloud computing, or "virtualization,"
a technology that enables users to access data and software
over the Internet and corporate networks.

Shares of 3PAR jumped 85.8 percent to $17.93 in morning
trading. Dell rose 0.4 percent to $12.06.

Dell, which bought technology services company Perot
Systems last year for $3.9 billion, said 3PAR's virtualization
technology would help customers reduce data management costs,
including hardware and energy consumption.

Dell will integrate 3PAR's products into an existing
storage portfolio that also includes offerings from its joint
partnership with EMC Corp and services by EqualLogic, a
storage company it bought for $1.4 billion.

Dell executives said on a call that they would continue to
offer EMC products, allowing customers to choose between those
and 3PAR offerings. They also said they would try to further
expand Dell's presence in areas like storage and data

The 3PAR deal is expected to close by the end of the year.

Dell said the transaction would probably add to its
earnings in fiscal 2012. It plans to maintain current
operations at 3PAR, founded in 1999, and invest in engineering
and sales.

Dell has been struggling to boost profitability as personal
computers become cheaper. The recent surge in costs of
components has also hurt its margins.
(Additional reporting by Paul Thomasch; Editing by Derek
Caney, Gerald E. McCormick and Lisa Von Ahn)