Audience: Management EMC to pay $1.3 billion or Legato

Data storage vendor EMC Corp. has agreed to buy Legato Systems Inc., a maker of storage management software, in a stock transaction valued at US$1.3 billion, according to the companies.

The acquisition is intended to boost EMC’s position in the market for information storage systems, in part by strengthening its software offerings for helping customers to manage heterogeneous storage environments, the Hopkinton, Mass.-based vendor said in a statement. Its major rivals include IBM Corp. and Hewlett-Packard Co.

Alan Freedman, research manager, infrastructure hardware with IDC Canada Ltd. in Toronto said, “there were a lot of rumblings in the market a while back” so the purchase is not too surprising, and the combination will provide “a very strong offering.”

Freedman said the purchase is a good move for EMC since the acquisition will allow it to offer a more complete storage solution and avoid opening itself up to the likes of IBM, which was often brought in as a third party to beef up the software side of an end-to-end storage solution.

One industry insider added that Legato does not have a large presence in Canada so exactly what this means to the Canadian market will take some time to sort out.

An EMC Canada company spokesperson said decisions will be finalized in Q4, though there are rumblings that Legato’s worldwide support centre will be taken over by EMC Canada’s Burlington, Ont.-based employees.

EMC has stated previously that its growth depends on providing better management for businesses with multiple storage platforms and its planned acquisition of Legato fits that need, said Claus Egge, program director for IDC in London.

“Legato is certainly an important player in this area,” Egge said, adding that he expects the software company’s products to be strengthened because of EMC’s place in the industry. He predicted that EMC’s management framework products would be among the first to be integrated with Legato’s software.

EMC CEO Joe Tucci, in a conference call, cited three main reasons for acquiring Legato. First is Legato’s “cutting-edge technology.” Second is the company’s 31,000-strong customer base worldwide. And third is its “solid” distribution network including 500 sales and service people and 400 channel partners.

“While we have extensive product offering, we also have some gaps,” Tucci said. Legato has products to fill these gaps, particularly in the area of data management software and in storage infrastructure software, he said.

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