8 July 2003 Storage hardware giant EMC has today announced the acquisition of Legato Systems in a $1.3 billion deal — six months after speculation about the takeover first surfaced.
But EMC has been forced to pay a full price to secure the deal in the teeth of competition from Hewlett-Packard, Sun Microsystems and Veritas, Legato’s main rival in the storage software sector.
Legato had been put up for sale at the beginning of the year with an asking price of between $800 million and $1 billion. EMC had initially offered some $750 million and was then reported to be reluctant to increase its offer.
EMC has tried for a long time to build up its storage software portfolio with mixed success. Although it achieved first quarter revenues of $99 million from open system storage software, that represented just 7% of total sales.
In a bid to increase that figure faster it has become more active in the mergers and acquisitions market.
Since 2000, it has made a series of small acquisitions and last week acquired BMC Software’s Patrol Storage Manager to extend the open systems capabilities of its Control Center storage management framework.
The Legato purchase is by far EMC’s biggest software acquisition to date. The company is the world’s third largest vendor of enterprise back-up and recovery software, with some 31,000 customers and revenues in 2002 of $261.9 million.
However, it has struggled financially since 2000 when a revenue recognition scandal forced it to restate several quarters of results. The company was later forced to pay $88 million to settle a subsequent stockholder lawsuit.