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EMC takes aim at takeover targets

EMC's Joe Tucci told analysts that the company is looking to acquire software companies in order to boost aggressive sales goals. He didn't name any names, but backup and monitoring software were mentioned as target markets.

NEW YORK -- Joe Tucci is going shopping and he's got money to burn.

The EMC President and CEO confirmed Thursday his company would start looking to acquire software companies in order to meet its aggressive software growth goals and help increase margins.

Speaking at EMC's 2002 analyst day here, Tucci said in order to reach 30% of the company's projected revenue from software the storage giant will look to dip into it's coffer of more than $5 billion to buy any number of software companies.

Tucci did not elaborate on any potential takeover targets, but did say they were looking to expand into the monitoring, replication and data mobility software markets.

"If you look where the highest growth areas in software are, backup grew about 19%, monitoring up about 37% and replication up about 35%," said Tucci. "You can expect us to go after one of those high growth areas."

There has been speculation recently that one takeover target is BMC, one of the world's largest independent software companies. A successful merger with BMC would make EMC a significant player in the datacenter and application management market, according to industry observers.

The leader of the Hopkinton-Mass. based company said there will be continued effort from within the company to develop software which is presumably taking up a large portion of the $800 million the company says it plans to spend on R&D in 2002. That figure is 14% of EMC's overall budget, up from the approximately 10% the company usually allocates.

But, in addition to acquisitions to boost its software business, analysts say EMC also needs to be more open to partnerships if it's going to remain successful.

Stephen Elliot, director, storage management, Hurwitz Group, a Framingham, Mass.-based research group, said he wouldn't be surprised to hear EMC make an announcement similar to the Hitachi/IBM deal that combines the companies' hard-disk drive units.

Last fall, EMC made a deal with Dell to resell EMC engineered hardware.

Tucci said the company is shifting it's focus to "100% networked storage" and that EMC "will lead the transition and convergence of networked storage."

Tucci said EMC would like the convergence to include AutoIS storage management strategy, a set of products and services designed to manage not only its own storage systems, but systems from competitors such as IBM, Hitachi and Sun Microsystems.

Tucci also attempted to calm concerns from investors about a sluggish EMC stock. Tucci detailed the beginning of an EMC product cycle that is centered around AutoIS and services. The cycle also includes Content Addressed Storage (CAS) -- EMC's latest offering to manage static data.

According to Tucci, there was a slowdown in the EMC stock price in 1995 just before the SRDF initiative was brought to market and he feels this is a similar start to a product cycle that he sees refreshing about every five years.

This product cycle may also be helped along more aggressively not only by the internal EMC sales force, but an increased reliance by EMC on the channel, to hit mid-to-lower sized businesses. Tucci said this is another area where the Dell partnership will be invaluable.

Elliot says broadening to segments other than the high end is a "necessary" move that will bring in new streams of revenue.

Let us know what you think about the story, e-mail Mark Lewis, Site Editor

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Mark Lewis spent a fair amount of time commenting on EMC and its storage strategy when he was head of storage at Compaq and later Hewlett-Packard. Now that he's in the EMC camp as the company's chief technology officer, he admits his position has changed -- but he says his position has shifted only because the Hopkinton, Mass.-based company's direction has changed.

EMC has continued its quest for the brass ring in storage management with its "Chapter Two" announcement regarding AutoIS last week. The company unleashed eight new or newly beefed-up software tools for storage management last week, most of which included management support for storage arrays from competing vendors.

Lewis sat down with SearchStorage.com prior to the announcement to explain how he sees this new strategy of cooperation playing out.

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