EMC has made a £42m ($85m) offer to buy London-based IT services business Conchango.
Conchango has around 300 employees and supplies IT consulting services to customers including Tesco, Virgin Atlantic and Sky and also specialises in e-commerce websites. It is also a Microsoft Gold Certified Partner in seven competencies.
Upon closure of the acquisition, Conchango will become the foundation of EMC's European Microsoft consulting practice within EMC's consulting & solutions integration services organisation. Mike Altendorf and Richard Thwaite – co-founders of Conchango in 1991 – are expected to co-lead the European consulting practice.
The move is the latest in a long line of acquisitions by EMC over the years – more than 30 companies worth around $6bn, including VMWare and Documentum – which have seen the storage giant diversify away from its hardware roots. EMC made similar acquisitions of Microsoft consulting specialists in the US last year, including New Jersey-based BusinessEdge and Dallas-based Geniant.
Other recent acquisitions include:
March 2008 – Infra, which provides web-hosted software to automate IT management processes for enterprises
Dec 2007 – $85m – Document management vendor Document Sciences, which has 500 customers including 60 Fortune 500 companies
September 2007 – $76m – Mozy, an online data storage service
The Conchango acquisition will provide EMC with access to a healthy list of blue chip customers, to whom it can sell storage, as well as bolstering its presence in the services market.
Robin Burke, research VP with Gartner, said, "EMC has been trying to base more of its revenue on services as the storage hardware market levels off at single digit growth – somewhere around 6% annually. Meanwhile, software revenues, which continue to beat hardware revenue, have also had margins reduced in the past couple of years due to heavy competition in the market segment."
He added, "Services provides a more lucrative growth path and EMC has stated that they want to not only play in that arena but be a leader. Furthermore, EMC has considerable strength in EMEA as a hardware vendor but can certainly use additional resources in services to extend their value in Europe."
EMC has offered 23.1p per Conchango share, which values Conchango at approximately £42 million ($84m). The Conchango board has unanimously recommended the offer to Conchango shareholders and the transaction is expected to close in April.
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