Legato Makes Gains with New CEO, CFO

Legato Systems Inc. took the first steps this week to return itself to credibility, naming David Wright as president and CEO and Andrew Brown as chief financial officer, analysts said.

Wright replaces Lou Cole as president and CEO, but Cole will remain as Legato's chairman. Prior to joining Legato, Wright was president and CEO at Amdahl Corp., a Sunnyvale, Calif.-based computer service, hardware and software division of Fujitsu Ltd.

Brown, former CFO of Milpitas, Calif.-based storage hardware and software maker Adaptec Inc., replaces Stephen Wise, who resigned in July.

Analysts said the change in senior management will help Legato gain confidence with users, investors and Wall Street.

Bringing in outside senior executives will restore credibility to Legato, said Randy Kerns, an analyst at Evaluator Group Inc. in Englewood, Colo.

The Mountain View, Calif.-based storage software maker was rocked earlier this year when it restated its financial earnings for 1999 because "a small number" of its sales force entered into side agreements -- some unauthorized -- with resellers worth approximately 10 percent of the company's US$71.3 million fourth-quarter sales.

The Securities and Exchange Commission began investigating Legato's finances. Wall Street hammered Legato's stock, dropping it from a high of $67.75 per share in early January to as low as $8.78 in August. The company's stock slowly rebounded to $11.56 per share this week.

"Wall Street and [Legato's] user base will view the appointments as a positive because it's a new CEO with new vision," said Steve Duplessie, an analyst at the Enterprise Storage Group Inc. While Legato's climb back won't be easy, "a lesser company would have been wiped out by these actions. Legato has loyal customers and good, solid products," such as NetWorker, multiplatform backup software and Celestra, serverless backup software, Duplessie said.

Brown said he was concerned about the financial situation but that he believes Legato "dealt with it swiftly and had a high level of integrity" with it.

But Legato's problems weren't related to its financial issues, said John Webster, an analyst at Illuminata Inc. in Nashua, N.H. It's been slow to respond to market requests for products, and Celestra "took an inordinate amount of time to market -- two years," Webster said. "The market demand is there; it's said serverless storage networking is the killer app, and this is it -- Celestra fits this space," he said.

Legato's been a buyout target as its stock plummeted, but analysts said that possibility has grown slim with the new management.

"We're going to grow the company and be as successful as we can be. That's what we're about," Brown said. The new management team is in the midst of planning and won't make any major pushes until next year, he said.

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