SYSTEMS

MOUNTAIN VIEW, Calif.--LEGATO Systems, Inc. announced today that the Company has taken action to accelerate its long-term operating model. Through reallocation of resources and reduction in expenses, LEGATO is expected to increase operating efficiencies more rapidly than the Company previously anticipated. "At the end of last year, LEGATO turned the corner to profitability on a pro forma, non-GAAP basis. The company finds itself in the admirable position of being able to focus on further delivering shareholder value," said Andy Brown, CFO, LEGATO Systems. "The natural evolution in the markets we serve has given us the opportunity to reallocate resources and to focus on high growth areas within each one of our product sets. With these actions, we are realizing operating efficiencies throughout the organization and moving toward our long-term model." LEGATO expects to exit the fourth quarter of 2003 with pro forma, non-GAAP operating margin greater than 10% and reiterated that the Company remains comfortable with a forecast of annual revenue growth of 20% for 2003 over 2002. The Company expects to exit the second quarter of 2003 with worldwide headcount between 1480 and 1500, reflecting a 5% to 6% reduction in workforce. As a result, the Company expects to incur approximately $3 million to $4 million in restructuring charges during the second quarter of 2003. The company expects that this action will not impact its planned revenues for the second quarter of 2003. "We are experiencing growth in our messaging and content businesses that is expected to provide us a leadership position in the industry. These solutions are required by many customers in order to meet regulatory and compliance responsibilities," stated David B. Wright, chairman and CEO, LEGATO Systems. "We continue to invest in our flagship information protection products as well as our growing availability technologies. Today's actions will strengthen our abilities to meet or exceed our customer's expectations while delivering leadership in information lifecycle management solutions." LEGATO's long-term model anticipates: -- Sales and marketing expenses = 34% - 36% of revenue -- Research and development expenses = 17% - 19% of revenue -- General and administration expenses = 7% - 9% of revenue -- Pro forma, non-GAAP operating margin = 15% - 20% of revenue