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EMC DELVES FURTHER INTO SOFTWARE MARKET with VMware PURCHASE

In an apparent move to broaden its business plan, the EMC Corp purchased software company VMware for $635 million.

The company has been working toward less dependency on storage systems while increasing reliance on software as a result of the waning profitability of hardware.

The VMware purchase, however, is something of a stretch for EMC, as its two earlier software acquisitions, Legato and Documentum, are involved in data storage. VMware makes software that allows users to run different operating systems at the same time. This type of software is generally called a "virtual machine."

Such low-cost server computers are increasingly common in corporate data centers, and VMware's software increases their efficiency, yielding further cost savings. The VMware purchase moves EMC into the market for server software at the heart of the data center.

Once all three acquisitions are incorporated into EMC's business, the company looks to make more than half of its money from software and services.

Just how far EMC can extend its reach into data-center computing is uncertain. Its goal is to use virtualization software to make servers and storage systems work more smoothly and efficiently. But in pursuing that strategy, EMC will confront larger companies with long experience and large services divisions, like HP and especially IBM. The services capability, they add, can be crucial for solving the complex computing problems that large companies increasingly encounter these days.

Indeed, VMware is a leader in a technology that is regarded as an important building block in making computing a more flexible and easily managed pay-as-you-go utility. Its industry partners include IBM, HP and others.

The company, with 370 people, will have revenues of nearly $100 million this year, and it has been profitable for nearly two years. It has been a magnet for skilled computer scientists.

The EMC deal was the best way to give VMware the additional resources it needed for rapid growth with the fewest conflicts that might hamper the business. Other companies were interested in VMware, including IBM and HP. Last year, Microsoft made an offer for VMware, but the Silicon Valley company turned it down, partly out of concern that Microsoft would make VMware a Windows-only product.