Data storage company EMC has agreed to buy Legato Systems,
a maker of storage management software, in a stock transaction
valued at $1.3bn (£790m).The acquisition is intended to boost EMC's
position in the storage systems market, in part by strengthening
its software offerings for helping customers to manage
heterogeneous storage environments. EMC's major rivals include IBM
and Hewlett-Packard.
EMC also predicted strong financial results
for its second quarter ending 30 June. It said revenue would be at
the high end of its earlier prediction and that earnings would meet
or slightly exceed its previous forecast.
EMC has stated previously that its growth
depended on providing better management for businesses with
multiple storage platforms and its planned acquisition of Legato
fits that need, said Claus Egge, programme director for analysts
IDC in London.
The acquisition is subject to customary
closing conditions, including approval from Legato's stockholders
and regulatory approvals, EMC said. It expects to complete the deal
in the fourth quarter of 2003.
If the deal is approved, EMC will operate
Legato as a software division of EMC and will be led by David
Wright, Legato's chairman and chief executive officer.
EMC last April purchased storage resource
management software provider Astrum Software. Last week, EMC said
it would acquire the rights to BMC Software's discontinued Patrol
Storage Manager technology.
Expanding the company's software holdings is a
shrewd move, according to Egge. He added that IDC sees strong
growth in the storage software business, while demand for storage
hardware has slowed.
Under terms of the agreement, Legato
stockholders will receive 0.9 shares of EMC common stock for each
Legato share they hold. Based on EMC's closing stock price of
$11.74 on 7 July, the deal is valued at approximately £790m, the
company said.
John Blau writes for IDG News Service