History 1999: Legato Acquires Data Recovery Specialist Ontrack

In the storage management industry, independent companies Legato and Veritas are both enjoying considerable and simultaneous internal and external growth spurts. Not a quarter goes by where one or the other fails to announce a new acquisition.

This time, it’s Legato Systems that has just acquired Ontrack Data International for around $134 million, or roughly 3x to 4x Ontrack’s total sales for this year.

To be completely accurate, although it amounts to the same thing, Ontrack will merge with and be absorbed by Legato’s wholly-owned subsidiary, Lasso Acquisitions, which will continue as a 100% subsidiary, under the name Ontrack Products Division, Inc.

This is the 6th in a series of acquisitions by the Palo Alto, CA-based software company, after Innovus Technologies (1/96), Software Moguls (8/98), Fulltime Software (4/99), Intelliguard (4/99), and Vinca (7/99).

For Legato, it is crucial that the company attain a critical size in its market, which is drawing more and more participants, and more important yet, catch up with Veritas, more than 2.5x larger in terms of revenues.

Ontrack, founded in 1985 by Control Data veterans Michael Rogers, John Pence and Gerry Stevens, made its debut with a software utility called Disk Manager, which allowed users to manage more than 32MB on a HDD drive – at the time the maximum capacity limit on MS-DOS – and was installed on nearly 65 million drives throughout the world.

Beginning in 1987, the company focused primarily on data recovery services, in which it is a world leader, and which still constitutes the core of its business, accounting for 75% of sales in the first 9 months of 1999, compared to only 5% for software.

Lately, however, the company has been putting the accent on software, especially since it acquired Mijenix for $7 million last July, with several utilities in its portfolio (Zip- Magic, FreeSpace, Powerdesk Utilities 98, Fix-It Utilities 99), now regrouped with other tools in a new package called SystemSuite 2000 ($60) as a complete solution.

If Legato’s interest in Ontrack’s software activities is understandable, it remains to be seen whether or not the company will hang onto the latter’s cleanrooms, one in the UK, one in Germany for European disk recovery, an activity far removed from storage management software.

For the moment, the plan is to set up a separate division, most likely retaining the Ontrack name, for data recovery. Expect also some reorganization of the two companies’ sales forces in several countries where they now overlap.

This article is an abstract of news published on issue 143 on December 1999 from the former paper version of Computer Data Storage Newsletter.