EMC to get SMARTS

Storage giant snaps up network management innovator.

EMC Tuesday joined a slew of vendors doing some last-minute technology shopping when it announced its plans to acquire network management vendor SMARTS for $260 million in cash.

EMC says the deal, expected to close in the first quarter 2005, will equip the storage vendor with SMARTS' (Systems Management ARTS) intelligent event correlation and automation technology.

"SMARTS will give EMC the ability to see what's happening where, what the impact of it is and why it matters," said Howard Elias EMC's executive vice president of corporate marketing and office of technology. "EMC will be able to understand the inter-relationships of IT beyond storage."

EMC offers customers storage networking and infrastructure management products. The company competes with the likes of HP and IBM, as well as Veritas, Hitachi and Dell. SMARTS' InCharge software suite offers a range of applications that address network, systems and application management issues. The company's software automatically detects "symptoms" of problems to determine the exact cause of a network performance issue, such as a slow server or down device. The software could be integrated into EMC software to better detect, isolate and remediate performance problems in storage-area networks.

Much like competitor Veritas, which two years ago snapped up IT automation vendor Jareva Technologies and management software maker Precise Software, analysts speculate that EMC is attempting to broaden its technology scope to include other elements of the IT stack. The company could also be improving its ability to automate IT across multiple platforms.

"To do storage management well, you have to be able to take action beyond storage," says Mike Karp, a senior analyst with Enterprise Management Associates. "Just like Veritas, EMC took a technology inventory and realized HP and IBM can see beyond storage, and EMC knew if it wanted to be a serious competitor in enterprise storage, it needed to expand its capabilities as well."

SMARTS, with 2004 revenue expected to be just more than $60 million, says its business will grow better under EMC's wing. EMC in October reported third quarter earnings of about $218 million, and at the time, reported its 2004 revenue to date at more than $2 billion.

"We are at a growth inflection point with our technology, and we can build better products faster as part of EMC," said Shaula Alexander-Yemini, SMARTS founder and CEO.

The acquisition, which will bring SMARTS' 300 employees into EMC's Software group, is also in line with another trend, analysts. Frank Gens, vice president at IDC, says large IT vendors are working to build, develop or acquire an all-in-one platform to offer customers. Companies such as IBM, HP, Sun, Computer Associates, Symantec, Veritas and now EMC are aggressively trying to become the all-in-one IT provider for enterprise customers - and if they can't do it all now, they will acquire the technology or partner to deliver it.

"Vendors are competing to offer dynamic infrastructure platforms so you see a lot of systems vendors buying technology to address customer needs across the IT domains," Gens says.

EMC, of Hopkinton, Mass., will integrate SMARTS, of White Plains, N.Y., into its software group, take on the company's 300 employees and continue to support some 4,500 SMARTS customers. EMC doesn't expect any financial losses in 2005 due to the acquisition and will begin product integration following the close of the deal.

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