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EMC's Juggling Act: Page 2 of 5

Analysts say part of EMC's problem is that it's facing declining hardware margins, as excess capacity and aggressive pricing plague the sector. As a result, sources say EMC is increasingly relying on its software business to make up the shortfall (see EMC Hammered)."The acquisition of Luminate Software is a deliberate move [by EMC] at this time to show where its focus is," said Mark Kelleher, storage analyst with First Albany Corp.

EMC's words and actions bear this out. Earlier this year, company officials stated that they expected software revenues to account for at least a fifth of EMCs total revenues for 2001. In the months since passed, EMC's acquisition of software companies has totaled more than $400 million:

Table 1: Latest EMC Software Acquisitions

Company acquired* Date Price Type of software
Softworks Inc. January-00 $192 million Storage management
Terascape Software Inc. January-00 $50 million Storage management
Avalon Consulting Group August-00 $50 million Media management for TV
CrosStor Software Inc. November-00 $300 million NAS management
Luminate Software Corp. September-01 $50 million Application management

* Note: Figures do not include the acquisition of FilePool NV in April 2001 for "under $50 million," nor the purchase of Digital Bitcasting in July 2000 for an undisclosed sum.

EMC acknowledges the strategy. "It's a balancing act right now," said a spokesperson.