Legent Corporation

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Legent Corporation

575 Herndon Parkway
Herndon, Virginia 22070-5226
U.S.A.
(703) 708-3000

Public Company
Incorporated: 1989
Employees: 2,400
Sales: $442 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

One of the largest software companies in the world, Legent Corporation develops and markets software to facilitate the management of enterprise-wide computer systems. Legent offers more than 130 products designed to increase the efficiency, reliability, and security of distributed management in the areas of systems, network, application, and data management. Marketed to large manufacturers, major financial institutions, and government agencies, Legent’s products work across mainframe, work station, and client/server platforms.

Legent was formed in 1989 by the merger of Duquesne Systems and Morino Associates, two leading providers of systems management software for mainframe computers. Separately, the companies had both exhibited notable growth: during the 1980s, each had revenues increase by 50 percent and earnings by 60 percent. Combined, they offered 40 types of prepackaged software, including popular programs that automated software development and that made mainframe data bases more efficient. After the merger, analysts expected Legent’s sales to grow 39 percent, to $173 million in 1990, and to continue to rise by 30 percent annually for several years thereafter.

The two companies’ former heads began by sharing the decision making, with Morino’s Mario M. Morino as chairman and Duquesne’s Glen F. Chatfield as chief executive. Merging the companies’ disparate management systems proved difficult; Chatfield wanted to retain Duquesne’s centralized, conservative management, whereas Morino endorsed his former company’s dispersed management. Unable to resolve their differences, the two agreed to drop their titles and take staff jobs. Joe M. Henson, a Legent director, took over as chief executive officer in November of 1989. Within a few months, Chatfield had resigned his staff position, although he remained a director of the company.

Henson’s first job was to complete the consolidation of the two companies, a job that took 14 months from the time of the merger. “It’s been no piece of cake,” Henson told Business Week in 1990. With the merger completed, he then concentrated on the company’s growth, which he intended to maintain at a high rate through acquisitions. He had already promoted that strategy as a director of the company when, in August 1989, he approved Legent’s acquisition of Business Software Technology for $47 million in stock. With $3 million in profits on $14.7 million in sales that year, the company sold for a substantial sum. However, Henson told Business Week, “You’re talking big-time payoff.” He expected Business Software Technology, a leader in application management, to make $30 million in profits on $100 million in sales within a few years. Henson planned to execute similar acquisitions in the next few years, using stock rather than cash to buy other small software companies poised for large growth.

Until 1991 Legent offered software products for mainframe computers exclusively. With the company’s acquisition of Spectrum Concepts that year, it moved into the larger arena of distributed computing. Spectrum’s key product, the XCOM 6.2, gave Legent the most advanced product of its kind yet on the market. The software connected disparate systems, both to one another and to the IBM host processor, allowing information to be distributed among heterogeneous platforms. The acquisition contributed to the 20 percent rise in Legent’s revenues in 1991. Although its growth did not reach the 30 percent expected by some analysts, Legent revenues did grow to $208 million.

Until the acquisition of Spectrum Concepts, Legent’s organization reflected its history of mergers, with three divisions that corresponded to the original Morino, Duquesne, and Business Software Technology companies. An unwieldy system, it was changed in 1991 to one based on function. The company created four business areas: systems management, which focused on the delivery of data center and distributed systems management solutions; networking, which provided complete applications necessary to run a distributed network; applications management, which developed software for managing the applications and databases involved in distributed computing; and services, which not only supported the company’s products but also eventually offered management consulting services in system resource planning.

In 1992, Legent vastly accelerated its growth by merging with Columbus, Ohio-based Goal Systems International Inc., a leading provider of data center management, network performance, and software distribution products. The combined enterprise, still operating under the name Legent, stepped into line behind IBM and Computer Associates International Inc. as the third largest supplier of mainframe systems software. Legent’s staff jumped from 1,200 to 2,000, and its customer base grew from 4,500 to 10,000. Combining the operations of the companies was expected to take two to three years.

Legent’s latest merger required combining not only two hierarchies, but also two products lines which overlapped in critical ways. Both companies had popular mainframe products in automated systems operations (ASO) and in automated output management. ASO products automatically respond to mainframe system messages and handle routine console tasks, and automated output management products facilitate the distribution of printed reports and allow end users to view reports on line. Rather than choose one product in each area, gradually phasing the other out, Legent combined the competing products. A “core” product was chosen from each overlapping pair, to which key features of the “losing” product would be added. This method ensured that existing customers would not give up any functional investments they had already made in the previous versions. New customers would presumably have the best of what made the previous versions popular. The new superset products stood a good chance of dominating both the ASO and the automated output management markets.

By 1992, Legent had 40 offices in 14 countries, and its rapid growth warranted new buildings in its principal locations. In April of that year, the company began construction on a new 240,000-square-foot facility in Pittsburgh, Pennsylvania. It also purchased a 130,000-square-foot building in Herndon, Virginia, and had moved its headquarters there from Vienna, Virginia, by 1993.

Legent’s merger with Goal Systems helped boost its already impressive sales growth. Legent president and CEO John Burton told Datamation, “Our average order size has risen from $30,000 to $100,000 since the merger.” The two company’s premerger revenues in 1991 equaled $364 million combined; 1992 postmerger revenues reached $446 million. Legent’s net income rose 80 percent in 1992 to $65 million.

In the early 1990s, companies increasingly chose local area networks over mainframes for their computing needs, which many saw as the death knell for mainframe software companies like Legent. However, industry analyst Rich Edwards gave a different assessment of Legent’s future to Datamation: “In contrast with the general perspective that, if mainframe system sales are not growing, then the mainframe software opportunities therefore must be limited, Legent is generating solid revenue growth through a multi-pronged strategy.”

That strategy included offering products that worked across a variety of hardware platforms, including mainframes, work stations, and client/servers. Legent also devoted increasing attention to products that facilitated the use of a variety of operating systems. The trend away from host-based computing to a client/ server model of computing created opportunities for companies able to help those making the transition. In October 1993, Legent announced a comprehensive program, called Cross Platform Environment (XPE), that was designed to help customers integrate and use systems management solutions throughout their client/server computing environments. Legent had devoted three years and $50 million to develop XPE through internal product development, strategic partnerships, technology licensing agreements, and acquisitions. Legent’s XPE initiative addresses eight systems management functions: distribution management, software administration, network problem management, resource management, distributed operations management, distributed backup and recovery, user administration, and distributed database management.

Legent’s products for distributed management were primarily acquired through its purchase of Spectrum Concepts in 1992. The XCOM product line allowed file transfers between more than 20 computer and operating system environments. The acquisition was also instrumental in Legent’s development of DistribuLink, a product that distributes both custom and prepackaged software to a broad range of hardware platforms. Legent’s acquisition of Corporate Microsystems, Inc. in September 1993 extended the capabilities of Legent’s products for distributed management. CMI provided technology for software distribution and file transfer for UNIX and IBM OS-2 platforms.

The company’s software administration products, called Endevor, help customers manage the software development lifecycle, eliminating many time-consuming manual tasks. Although Endevor products had been offered by Legent for several years, the company gained important technology to expand Endevor’s capabilities when it acquired TeamOne Systems, Inc. in 1994. The new technology will integrate configuration management capabilities across all major computing platforms. Legent acquired the technology for the network problem management area of XPE when it purchased Networx, Inc. in September 1993. The company’s problem management applications for client/server computing helped Legent move into this targeted area of expertise. Legent also offers the distributed operations management products AutoMate/XC, which manages multiple IBM and non-IBM systems, and OPS/MVS, which collects, organizes, and evaluates host-based operations information and automates mainframe system activities.

Legent’s resource management products help companies use their existing resources and personnel to their fullest by addressing the areas of capacity management, performance management, financial and asset management, storage management, and resource integration. The company introduced the performance management application Paramount in April 1993; it offered common, single-point access to critical information about systems resources and streamlined trouble-shooting and resource management tasks. An alliance with Hewlett-Packard, initiated in September 1993, is expected to integrate Legent’s Paramount with HP UNIX performance products to allow single-point management control between data centers and distributed computing environments. The alliance will also enable Legent to license, distribute, and support HP’s performance products. The company’s MICS products offer enterprise-wide data collection, analysis, management reporting, and operational reporting.

Legent introduced its first distributed backup and recovery product in November 1993, the Enterprise Storage Manager (ESM). ESM provided both local and off-site backup and recovery for LAN-based servers connected to mainframes. Phil Carrai, a Legent vice-president, said at the product’s introduction, “Many of our customers have been waiting for industrial-strength storage solutions before deploying client/server technology, and ESM provides the solution.” Legent first offered distributed database management products late in 1993 after its acquisition of Performance Technologies, Inc. and its alliance with Bridge Technology, Inc.

Legent’s revenues in 1993 were $442 million; net operating income reached $60 million, despite somber predictions for mainframe software vendors. Not only do Legent’s mainframe software products continue to sell well, but the company’s move into products for client/server computing is keeping the company abreast of changes in the industry. With 24 percent of its revenues in research, development, and support, and its commitment to gaining and refining new technology through acquisition and strategic alliances, Legent seems positioned to maintain its impressive profitability and to increase its market scope.