EMC To Buy Legato For $1.3 Billion

The deal announced early Tuesday would give Hopkinton, Mass.-based EMC a sales staff experienced in selling software, a market that EMC has said it will pursue to lessen its reliance on the less profitable hardware business.

EMC chief executive Joseph Tucci said he has been discussing a deal with Mountain View, Calif.-based Legato for some time, but wanted to get EMC in the black and reorganize management before making a move.

"The only time a company should do an acquisition is when their own house is totally in order," he told The Boston Globe on Monday night. "With our return to growth and profitability, now we're at a time that we have management talent and capability to handle it."

Under terms of the agreement, Legato stockholders will receive 0.9 of a share of EMC stock for each share of Legato stock. Based upon the EMC closing stock price of $11.74 on Monday, the transaction is valued at about $1.3 billion.

The deal is subject to approval by Legato's shareholders and regulators, and is expected to be completed before the end of the year.

EMC started in 1979 as a reseller of memory chips, and now is a world leader in high-end data storage.

In February, EMC vowed to use some of its cash to expand its software business to 30 percent of its revenue by 2005. The company has acquired three software companies since 2001 as well as the storage software business of BMC Software Inc. last week.

Legato chief executive David B. Wright is expected to stay on as president of the Legato business unit, EMC said. Legato, which employs 1,500 people, was expected to see sales grow to $316 million this year from $262 million last year.

EMC intends to operate Legato as a software division of EMC at Legato's current headquarters.

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