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Yesterday, it used $50 million of its warchest to buy Luminate Software, a Redwood City, Calif., developer of performance monitoring and reporting software for storage equipment. It will be folded into EMC's engineering group and will remain in its current offices, as will its 56 employees.
"Much of the value of a storage solution, and much of the differentiation among vendors, is a result of the software," EMC spokesman Dave Farmer said.
To further emphasize the point, Farmer said EMC devotes between 70 percent and 75 percent of its research and development budget to applications projects.
EMC believes the software acquisitions and R&D spending will give it an edge over competitors such as Hitachi and IBM when customers finally return to the sector.
Just a few hours after the Luminate deal was announced, EMC warned it would likley lose money in the third quarter and would lay off more than 2,000 workers. Given the company's stellar performance in recent years, the news was shocking to many investors.
Luminate was founded in 1995 and has sold performance monitoring software for Oracle databases and Window NT/2000 operating systems. The buyout will likely be a windfall for Luminate's backers, which include The Mayfield Fund, Institutional Venture Partners and Azure Capital.
For EMC, the purchase is the seventh software buy since January 2000. The last was in April, when it spent less than $50 million in cash to buy FilePool NV, a privately held software company based in Brussels, Belgium.
The company is adding software tools to complement its data storage hardware systems to give customers a range of means to secure, file and find data.
Shares of EMC traded up 0.36, or 3 percent, to 12.96 at midday. In the last 52 weeks, the issue has ranged from 12.6 to 104.938.