27 February 2003 Storage hardware vendor EMC has emerged as the front-runner in the race to acquire Legato Systems, the troubled storage and backup software vendor, according to the Reuters newswire.

EMC has reportedly offered $750 million for the company, a sum that other potential buyers, which include Hewlett-Packard, IBM, Sun Microsystems and Veritas, have been reluctant to match. Investment bank Merrill Lynch is handling the sale.

However, Legato’s management had expected to raise up to $1 billion from and may decide to shelve the sale if EMC cannot be persuaded to raise its bid.

EMC is widely considered to offer the best fit for Legato and EMC CEO Joe Tucci has said that the company is planning storage software acquisitions this year to help balance the company’s poor recent storage hardware sales. Tucci reiterated this strategy at a Goldman Sachs conference yesterday, but would not be drawn on the speculation linking EMC with a bid for Legato.

Legato achieved revenues of $261.9 million in 2002, but posted a net loss of $228.8 million, largely due to write-offs related to acquisitions and the cost of a litigation settlement arising from a revenue recognition scandal dating back to 1999. The company had been accused of booking sales before they had
been finalised.

Links:
‘For sale’ sign goes up at Legato (7 February 2003)
Software suppliers in the dock (June 2002)