EMC to buy Legato

All stock deal

By Drew Cullen, 8th July 2003

Magic Quadrant for Enterprise Backup/Recovery

EMC is beefing up its open storage software portfolio with the $1.3bn all stock purchase of Legato Systems.

This is approximately six times Legato's 2002 turnover, so it's difficult to see that there will be too much opposition from Legato shareholders to the deal. Sounds expensive, but EMC reckons that the Legato transaction will be slightly accretive to earnings come 2004.

The acquisition comes as little surprise. In April 2003, The Register's Ashlee Vance reported: "The well known rumor is that Legato has already been placed in EMC's shopping cart and is next on the way to the cash register.

Legato brings to the table some well-regarded technology, especially in hierarchical storage management. EMC built its fortune and dominant position in enterprise storage on the back of proprietary hardware and proprietary software. The world is now adopting open standards, which leaves EMC's vast underbelly vulnerable. Of course, the company is so rich it can buy its way opens software dominance, buying out BMC's Patrol product one week, and showering shares like confetti on Legato shareholders the next.

Post-acquisition, Legato will operate as an EMC software division, hanging out at its current Mountain View, California headquarters. EMC intends to integrate Legato's engineering and development functions with its own, which sounds like some job losses may be coming down the line. EMC's mighty salesforce will also start flogging Legato software, which will bring much bigger distribution welly to the line. ®