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.
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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