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  • 12/24/2004
    3:00 PM
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EMC 'Paying Too Much' for Smarts

Analyst says $260 million in cash is almost twice what EMC should have paid for the OSS firm
Acquisitive storage system vendor EMC Corp. (NYSE: EMC) is paying too much for OSS vendor System Management Arts Inc. (Smarts). (See EMC Gets Smarts).

At $260 million, EMC is paying 4.5 times annual revenues for the fault management company, as Smarts says it will hit about $60 million in sales in 2004.

That price is way higher than could have been expected, says Patrick Kelly, a partner at consultancy OSS Observer.

"Assuming Smarts's current revenue growth rate is sustainable for the next three years, it should have been valued at between $140 million and $170 million," reckons Kelly.

"Obviously EMC thinks it can help Smarts lift the pace, but I have my doubts," adds the analyst.


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