EMC To Buy Documentum In $1.7 Billion Deal

The stock transaction is expected to be worth about $1.7 billion, the companies said.

EMC, a leader in data storage, expects the purchase to bolster its information lifecycle management efforts, according to a statement.

"Information is one of the most strategic assets in any organization and EMC technology has helped store, manage and protect vast amounts of information for our customers. Software is central to our strategy for delivering comprehensive information lifecycle management solutions that allow customers to select the appropriate levels of availability, protection and speed of access at every point in the information lifecycle," said Joe Tucci, president and CEO of EMC, Hopkinton, Mass., in a statement published on EMC's Web site.

Tucci points out that EMC, Documentum and Legato together achieved more than $2 billion in license and support revenues over the last 12 months. EMC bought Legato, a maker of storage management software, earlier this year.

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EMC is struggling to derive more of its revenue from software and is facing heat in this area from Veritas. "They've always said they want 30 percent of revenue from software by 2005, so this fits," said Jeff Matthews, general partner of Ram Partners, a Greenwich, Conn., hedge fund. "This plus Legato puts them at 28 percent by 2005 and it's a good time to be consolidating in the industry because business in general seems to be turning around."

Documentum shareholders will get 2.175 shares of EMC common stock for each share of Documentum. Based on the $14.45 per-share closing price of EMC on Oct. 13, the total would be about $1.7 billion.

Documentum will operate as a software division of EMC in its current Pleasanton, Calif., headquarters and be headed by Dave DeWalt, Documentum's CEO, according to the statement.

Documentum itself has not been immune to M&A fever. Last year it acquired Cambridge, Mass.-based eRoom Technologies.