EMC Moves Further Into Software With $1.3 Billion Legato Buy

EMC (EMC Quote) agreed to acquire Legato Systems(LGTO Quote) for about $1.3 billion in stock, adding a portfolio of software products to manage its storage servers.

Hopkinton, Mass.,-based EMC also said it expects second-quarter earnings to meet or exceed by a penny its previous estimate of 3 cents a share, and for revenue to be at the high end of its $1.425 billion to $1.475 billion range. Analysts polled by Thomson First Call were forecasting earnings of 3 cents a share and revenue of $1.459 billion.

Legato's software specializes in so-called heterogeneous information protection and recovery, hierarchical storage management, automated access, and email and content management. EMC hopes the acquisition will speed its ability "to deliver the industry's most complete information lifecycle management solutions." EMC has long been trying to emphasize the software elements of its product offerings and move away from perceptions it is a storage hardware company, a sector that is crowded with low-cost competitors selling increasingly similar products.

Legato shareholders will get 0.9 of an EMC share for each Legato share held, or about $10.57 worth of stock based on EMC's Monday close. On the Instinet premarket session, Legato was recently trading up $1.05, or 11.5%, to $10.15, while EMC slipped 44 cents, or 3%, to $11.30.

Legato's shares had a near-death experience in August 2002 when they fell as low $1.68, a level from which they've been steadily rising until closing Monday at $9.10 each.