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Instant Insight |
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EMC Acquires LEGATO EMC and LEGATO Systems today announced a definitive
agreement for EMC to acquire LEGATO in a stock transaction valued at
approximately $1.3 billion. According to EMC, LEGATO’s strengths in
heterogeneous information protection and recovery, hierarchical storage management
(HSM), automated availability, and email and content management will
complement EMC’s focus on heterogeneous storage management and significantly
enhance its greater storage solution and service offerings. Further, LEGATO’s
software-focused sales expertise, channel partner relationships, and service
capabilities are expected to complement EMC’s distribution strategy. Under
the terms of the agreement, Legato shareholders will receive 0.9 of a share
of EMC common stock for every share of LEGATO common stock. Upon completion
of the acquisition, EMC intends to operate LEGATO as a software division of
EMC led by David B. Wright, LEGATO’s current chairman and CEO. Net/Net For what the calendar says is the traditional IT
industry’s quietest season, EMC has been doing whatever it can to keep things
interesting, with last week’s announced partnership with BMC (along with the
purchase of BMC’s PATROL Storage Manager) followed by this week’s more
formidable acquisition of LEGATO. How much more formidable? The first deal
included a significant agreement by BMC to support EMC’s ControlCenter as its
storage management solution of choice, but only brought 50+ actual storage
customers into the EMC fold. With approximately 31,000 customers and 400
channel partners, LEGATO is generally ranked just behind leader Veritas among
ISVs in the storage backup and recovery market, and offers a wide range of
other heterogeneous storage management solutions. In other words, when this
deal is consummated, EMC will have broadened its already considerable
footprint in storage management software and service offerings, bolstered its
efforts in delivering solutions for managing heterogeneous storage environments,
and notably extended both its sales and channel programs. While the deal looks good for EMC, what does it mean
for LEGATO and other players in the storage management market? The fact is
that over the past two years, a sluggish economy and stalled IT spending have
devastated many IT vendors and consultants, and led to wide ranging consolidation
across the industry. At the same time, hardware vendors from systems players
such as IBM and HP to specialists like EMC have made a concerted push into
the infrastructure software space, seeing it as a key to survival as industry
standardization continues to gut hardware profit margins. The result is that
while hardware vendors continue to work with ISVs like Veritas, LEGATO, and
many others, their own in-house software efforts often compete with and take
market share from their partners’ solutions. That dynamic has decimated many
smaller ISVs, and placed continuing pressure on even the largest players. By
joining with EMC, LEGATO should enjoy a synergistic relationship that should
both offer the company entry to new classes of enterprise customers and
provide EMC a host of new solutions and access to a large number of smaller
organizations. Additionally, the tenor of today’s announcement suggests that
EMC sees LEGATO’s holistic model of information lifecycle management (ILM) as
highly complementary to its own product and service lines. But if a partnership is good news for some vendors,
is it seldom greeted happily by their competitors. For enterprise systems
vendors which are pursuing their own storage software strategies, the
EMC/LEGATO deal means that an already tough opponent has gotten measurably
tougher. The combination of capabilities offered by EMC/LEGATO is well able
to go toe-on-toe with IBM/Tivoli’s storage solutions, and leaves HP’s own
storage software products looking somewhat anemic in comparison. We were also
interested to note that EMC is following a behavioral model similar to IBM’s
management of The real winners here are enterprise customers. EMC’s aggressive software strategy has helped the company broaden its influence among existing customers while extending its reach into new areas. Additionally, EMC’s recently renewed strategic partnership with Dell has provided the company entry into a mid-market that once considered EMC out of reach. LEGATO should both complement EMC’s strategic efforts and help to extend them further among LEGATO’s thousands of customers. Overall, we see this deal as great news for the principals, good news for customers, and lousy news for the competition. In the world of acquisitions and mergers, it seldom gets better than that. |