EMC buys Legato for $1.3bn
Published: 08 Jul 2003 13:27 BST
EMC will purchase California-based Legato for its storage-management software. This is the latest in a string of deals expanding EMC's storage systems management software portfolio. EMC bought Astrum Software in April for its storage-management software.
Storage management software, which helps companies that buy EMC hardware handle their data, is becoming an important point of differentiation between EMC and its storage rivals, which include Hewlett-Packard, Hitachi, IBM and Sun Microsystems.
Legato's products include backup and recovery applications that give companies the ability to archive data such as email .
While storage hardware can be improved by increasing its data capacity or by beefing up components to prevent failures, management software that allows different types of hardware to work together or that makes data more accessible is often what wins customers because it helps companies gain a return on their storage investments.
"This combination is all about improving the access, management and protection of an organisation's core asset-information through its complete life cycle," Joe Tucci, EMC's chief executive, said in a statement.
EMC will pair its own software with Legato's, Tucci said.
The deal may create a wrinkle for HP and others that have licensed Legato software.
The $1.3bn value affixed to the deal is based on EMC's closing price of $11.74 on Monday. Under terms of the agreement, Legato shareholders will receive 0.9 of a share of EMC's stock for each share of Legato stock.
The deal values Legato shares at $10.56, a 16 percent premium over Legato's closing price on Monday.
EMC expects the deal to close in the fourth quarter, the company said.
Separately, EMC updated on Tuesday its revenue forecast for the second quarter. The company expects its revenue to be toward the high end of its previously stated range of $1.425bn to $1.475bn. Earnings per share should be 3 cents to 4 cents per share, compared with its previous forecast of 3 cents per share, the company said.
Ultimately, EMC will take a charge for current research and development at Legato during the quarter in which the transaction closes. EMC said it still expects to report a net profit in each quarter this year. The company also expects the Legato purchase to add to its bottom line in 2004.
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