EMC Buying LegatoEMC Buying Legato

Storage industry sales leader EMC Corp. said Tuesday it intends to acquire Legato Systems Inc., which has a strong presence in the backup and recovery market, in a stock swap valued at $1.3 billion. The two vendors expect to win the necessary approvals and votes to complete the acquisition by year's end.

The deal comes a week after EMC took over BMC Software Inc.'s storage-management software and customer base, and demonstrates EMC's plan to expand its storage-software product line. Legato's Networker product was a de facto standard for backup and recovery during the early 1990s; the vendor claims 30,000 installations of the system. However, competition, primarily from Veritas Software Corp., and management mistakes put Legato in the red in recent years. It has been looking for a buyer.

EMC says it plans to leave Legato alone at the start, and will retain its headquarters in Mountain View, Calif., and leave David Wright as CEO. EMC wants to keep Legato's 30,000 customers happy and take advantage of the vendor's strengths in data protection and progress in content-management software, which can be used to help companies conform to government regulations about information retention.

The acquisition means IBM's Tivoli division will be going head to head against EMC for the first time, although IBM and EMC have been competing in the storage-hardware market for years. "This acquisition gives Legato and its customers an eloquent exit strategy," says Ray Paquet, an analyst at Gartner. "A competitor like Veritas could have acquired [Legato] and killed the Networker product."