EMC agree to buy rival company

EMC Corp, the world’s third-biggest maker of data-storage systems, agreed to buy software rival Legato Systems Inc. for $1.3 billion in stock, to sell more higher-profit programs and rely less on sales of machines.

EMC, which has a plant employing 1,200 people in Ovens, County Cork, will pay 0.9 share for each Legato share, the companies said on EMC’s Web site.

That values Legato at $10.57 a share, 16% above the company’s $9.10 close yesterday. but later fell back to $11.40 down 34 cents in late trade.

Unprofitable Legato’s programs analyse, manage and recover data on corporate computer systems.

The company will be Hopkinton, Massachusetts-based EMC’s 10th software purchase since January 2000.

Chief Executive Joe Tucci aims to increase EMC’s share of sales from software to 30% by 2005 from 22% in the first quarter.

Steven Roth, an analyst at the John Hancock Technology Fund, which owns about 1 million EMC shares among the $460 million it invests, said: “Legato offers EMC a solid piece of software, a huge customer base - I think about 31,000 - and a good sales force.”

EMC, which had gained 91% this year, fell 37 cents, or 3.2%, to $11.37 in New York Stock Exchange composite trading.

Sales of data-storage software fell 6% to $4.7 billion last year, their first annual decline, as demand for machines that run such programs sank 15% to $20 billion, market researchers Gartner Inc. and IDC said.

Software prices also dropped, Gartner said.

Legato gets 75% of its sales via re-sellers and the rest from selling directly to customers.