VARs High-Five EMC-Legato Deal

By shelling out $1.3 billion in stock, EMC President and CEO Joseph Tucci will buy his company a robust storage software channel that fulfills his ambition to transform EMC into a hardware-independent storage software vendor.


• Backup and recovery software: For 2002, Legato had 8.1 percent market share vs. 2 percent for EMC, Gartner found
• E-mail and messaging management: Legato acquired OTG Software a year ago and was integrating OTG's content manage
• About 500 customer-facing personnel
• About 400 channel partners
• Distributors: Arrow, Bell Micro, Ingram Micro and Tech Data for data protection; Mackin Imaging and Optical Laser for content and e-mail managemen
• About 75 percent of Legato sales were indirect (including OEM)
• Channel-neutral direct-sales structure
• Channel chief is Executive Vice President and COO David Beamer, who reports to Chairman and CEO David Wright

Legato's distribution channel includes 400 partners and 500 field sales representatives, Tucci said. EMC plans to keep that channel intact by setting Legato up as a separate business unit.

The deal also intensifies a rivalry between EMC and Veritas Software, Tucci said. "Clearly, the acquisition of Legato is going to propel us [EMC and Veritas] faster into being competitors."

Solution providers for both Legato and EMC, such as Dimension Data and Cambridge Computer Services, said the synergy between the two vendors, particularly with the addition of Legato's entry-level and midrange backup solution, will benefit them and their customers.

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Marc Duvoisin, national director of enterprise servers and storage at Dimension Data, Atlanta, expects more service opportunities. EMC will also bring its channel improved HSM solutions, technology that Legato acquired from OTG a year ago, Duvoisin said.

In addition to picking up Legato's NetWorker backup application, EMC also gains Legato's content management products, said Deena Berton, CEO of Waltham, Mass.-based Cambridge Computer Services, which recently started working with EMC's Centera fixed content storage arrays.

But there is some trepidation regarding the move. Steve Pazol, president of Professional Consulting Services, a solution provider in Chicago, raised the question of whether EMC will sidestep the channel. And he believes third-party vendors that integrated Legato's products might have to find a new partner.

Berton disagreed. The acquisition should not affect her company's ability to compete in heterogeneous environments against software-only vendors such as Veritas and Computer Associates International, she said.

EMC plans to lay out its data life-cycle management software strategy in August. With Legato's e-mail archiving and content management products, no other software maker has "more pieces" in the information life-cycle management segment than EMC, Tucci said.

JEFF O'HEIR & STEVEN BURKE contributed to this story.