EMC Corp. (NYSE: EMC) finally put Legato Systems Inc. (Nasdaq: LGTO) out of its misery with its plans to acquire the stumbling storage software player in a deal worth roughly $1.3 billion (see EMC Gobbles Legato and Behind EMC's New Software Splash).
And many on Wall Street have concluded that the deal is a clear win/win. EMC gets access to a massive installed base (31,000 customers) and a mature family of backup and email archiving software, fertile areas of growth. For its part, Legato, which has lost share to IBM Tivoli and Veritas Software Corp. (Nasdaq: VRTS), gets the backing of one of the most powerful companies in the industry.
But there are risks in any acquisition of this size and some observers have already suggested that EMC/Legato may not be quite as fruitful as the companies expect.
To be sure, these are concerns EMC CEO Joe Tucci is keenly aware of. Part of his stated rationale for waiting as long as he did (the deal has supposedly been kicking around for several months) was to make sure EMC was in a solid position first, in terms of both its financial and managerial stability. Incidentally, whispers on Wall Street are that Erez Ofer, previously executive VP of EMC's Open Software group, was moved aside in favor of CTO Mark Lewis because Ofer opposed the Legato deal (see EMC Sics Lewis on Software).
At heart, however, EMC is still a hardware company. Its quarterly earnings hinge on sales of Symmetrix. Meanwhile, one of Legato's attractive qualities is that it was hardware-agnostic. Will EMC really keep it that way, as it has pledged? Does it have the self control?
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