Storage giant EMC has announced plans to buy Palo Alto, California, software company VMWare, a move that further strengthens EMC's growing software portfolio.

The US$635 million cash transaction is expected to be completed in the first quarter of 2004, around the same time that EMC is expected to close its $1.7 billion acquisition of content management software company, Documentum.

VMWare makes virtualisation software that allows users to run multiple operating systems on the same machine.

The company has had some success selling its software to companies looking to consolidate several different applications onto the same physical machine, and has, of late, focused on developing management capabilities for its software.

The focus on systems management, apparently, caught EMC's attention. Earlier this year EMC acquired storage management software company Legato, in a stock transaction valued at $1.3 billion.

After the acquisition VMWare will continue to operate out of its Palo Alto offices, as a subsidiary of EMC.