EMC to buy Legato for $1.3B

Computerworld - EMC Corp. today announced plans to purchase storage software vendor Legato Systems Inc. in an all-stock deal worth $1.3 billion. The purchase is designed to plug a gap in EMC's storage backup software offering and eventually help it offer an integrated storage product that manages the entire life cycle of data, from creation to archive.
EMC CEO Joe Tucci called Mountain View, Calif.-based Legato a "strong fit" for his company because of its 31,000 customers and its 500-person sales and support staff. That, he said, will help EMC push overall software sales so that it represents 30% of overall revenue.
Software sales currently account for 23% of Hopkinton, Mass.-based EMC's overall revenue, which is dominated by its line of high-end storage servers and services.
Tucci said Legato will be operated in Mountain View as a software division of EMC and led by David Wright, Legato's current chairman and CEO. Legato's marketing and service will remain focused on its own products.
Wright said EMC and his company share many of the same customers and channel partners. "We suffer from one thing, and that's lack of resources," said Wright, referring to Legato's lack of research-and-development funds and ability to push sales to a higher level on its own.
Over the past three years, EMC has been on a buying spree, acquiring nine storage software companies in an attempt to reposition itself from a hardware-only company to a storage "solutions" company that can offer customers a complete storage architecture, from arrays to hierarchal storage management software.
Last week, EMC announced that it would purchase BMC Software Inc.'s flagship Patrol Storage Manager product, which monitors and reports on storage use (see story).
Tucci said he would outline plans at an Aug. 6 analyst briefing in New York to integrate EMC's backup and recovery software, EMC Data Manager (EDM), with Legato's flagship Networker product. Current EDM customers will receive a free upgrade to that integrated product. Those products will eventually be offered with Networker.
The deal will bring EMC's and Legato's research and development teams together under EMC's Open Software Operations division, headed up by former CTO Mark Lewis.
Legato will add about 1,500 employees to EMC's workforce of 17,200, and though Tucci said there would be some consolidation, "this is not a transaction made or broken on the cost side. The synergies are on the revenue side."
EMC currently holds only 2% of the backup and recovery software market, and Legato has 8.1% of that market, according to Gartner Inc. in Stamford, Conn.
Veritas