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EMC Seals Deal for Legato Systems

EMC officially sealed the deal on its bid to buy information lifecycle management (ILM) software specialist Legato Systems for $1.3 billion, or roughly 106 million shares of EMC stock, based on the closing price for both companies' stocks on July 8.

The closing paves the way for the Hopkinton, Mass.-based provider of storage hardware and software to focus on its recently announced $1.7 billion bid for Documentum, a move designed to fatten EMC's storage assets with enterprise content management.

EMC has a vision of matching networked storage with ECM to deliver an ILM strategy that manages data from cradle to grave, adding an integrated dimension analysts say competitors such as HP, IBM and Hitachi Data Systems (HDS) lack.

"We've spent the last 100 days developing a bullet-proof integration playbook and are prepared and excited to move forward as a combined company," said Joe Tucci, EMC's President and CEO in a statement. "The synergies between EMC and Legato's products, distribution, people and culture have accelerated our ability to create the ultimate information lifecycle management company."

Legato stockholders approved the acquisition Monday and the required regulatory approval processes have been completed. EMC will operate Legato Software as one of its divisions, which will be based at the company's current headquarters in Mountain View, Calif. David B. Wright, the concern's former CEO, is president of the Legato division and also serves as an EMC executive vice president.

As far as fusing the two companies, care is being taken to strike a delicate balance. Wright's executive team will oversee the new division's sales, marketing, alliances, services, and human resources. Legato sales and distribution channels will be run independently from EMC, including a long-standing deal with EMC rival HP, and selling focus will remain the same.

The EMC development team responsible for backup and replication management software will join with Legato's R&D group to form one software development group led by EMC Senior Vice President Mark Sorenson, who will report to both Wright and Mark Lewis, EMC's Executive Vice President of Open Software Operations.

EMC's Lewis provided some additional details about the process of integrating Legato, which makes archiving software and some ECM products, on a conference call Tuesday, noting that a multi-year product roadmap is in place for every Legato item, including transferred EMC products.

Though Lewis was loathe to provide specific numbers beyond the fact that Legato earned $80 million in revenue from the time EMC announced its intentions to buy July 8 to Oct. 20, but he noted that roughly 150 jobs would be eliminated due to duplicate positions in G&A and other areas.

He also stressed that EMC hit the ground running with its integration scheme for Legato from the get-go, with more than 10 cross-functional and company teams working on integrating the two entities, including 150 workers; over 300 tasks concluded on the first day, such as IT system redundancies. Both concerns also developed more than 75 risk assessment and management contingencies for post-close issues.

Just as Oracle executives did with the database vendor's plans to acquire PeopleSoft, Lewis made it clear that current Legato customers should not anticipate a change in their business relationship with the acquired company "unless the customer wants it to." Shoring up trust of new and existing customers, Lewis said, is important for EMC.

Lewis also stressed that now that EMC is on the cusp of acquiring some $3 billion worth in intellectual capital and such to build out its software portfolio, assuming the Documentum deal closes, that EMC will focus on delivering software as a service more than ever. Should it manage to acquire Documentum, EMC will have just about everything it needs for a full ILM suite, which will enable it to help customers manage every type of structured and unstructured content.

EMC made a chart available over Web cast that broke down the particulars about how the company planned to layer its existing storage assets with the information and content management from Legato and, it hopes, Documentum.

Lining the bottom of the stack are EMC's network storage platforms, such as Symmetrix DMX followed by its Centera infrastructure layer. Directly atop those layers lies the information management, both content and data capsules. This is the Legato/Documentum layer. These three layers are sandwiched by storage management software and services, which EMC is placing increasingly more emphasis on.

The next slide detailed examples of the services it plans to provide and a snapshot of how those services will be delivered, including those for content (compliance), applications (clustering), data management (backup, replication) and delivery (virtualization) and platforms (SAN management). Lastly, Lewis showed what EMC and Legato software products would be paired to serve all of those functions to access, manage and recover data from its inception until its disposal.

Asked about how EMC's recent aggressive moves might change the climate of rivals such as VERITAS, who often sell point solutions, Lewis affirmed EMC would drum up promotions to lure customers from VERITAS, which is going through significant changes itself with its company-wide move to utility computing.

"We will continue to be very aggressive in the market place against our competition," Lewis said. "Fundamentally, our strategy here is not really look at toe-to-toe battles with straight-on backup or replication solutions.. it's about replication and backup our coming together. We won't be buying separate pieces of software [to compete]. We believe we have a bigger picture campaign that can be very successful here with market share."