EXHIBIT 99.1
October 25, 1995
Members of the Board of Directors
McDATA Corporation
310 Interlocken Parkway
Broomfield, CO 80021-3464
Gentlemen:
We understand that McDATA Corporation, a Delaware corporation (the
"Company"), EMC Corporation, a Massachusetts corporation ("Acquiror"), and EMC
Merger Corporation 1995, a Delaware corporation and wholly-owned subsidiary of
Acquiror ("Sub"), propose to enter into an Agreement and Plan of Merger dated
as of October 25, 1995 (the "Merger Agreement"), pursuant to which Sub will be
merged with and into the Company, which will be the surviving entity (the
"Merger"). Pursuant to the Merger, as more fully described in the Merger
Agreement, we understand that the outstanding shares of the common stock of
the Company, $.001 par value per share (the "Company Common Stock"), not held
as treasury stock by the Company or owned directly or indirectly by Acquiror,
will be converted into an aggregate number of shares of the common stock of
Acquiror, $.01 par value per share (the "Acquiror Common Stock"), equal to the
quotient of (i) $180,000,000 plus the Net Quick Assets Amount (as defined in
the Merger Agreement) divided by (ii) the average per share closing price of
the Acquiror Common Stock as reported on the New York Stock Exchange over the
ten (10) trading days immediately preceding the closing date of the Merger
(the "Consideration"). Up to ten percent (10%) of the Consideration is
subject to cancellation to cover potential indemnification claims of Acquiror
under the Merger Agreement for breaches of the representations, warranties and
covenants of the Company contained therein ("Indemnification Claims").
You have asked for our opinion as to whether the Consideration to be
received by the stockholders of the Company pursuant to the Merger is fair to
such stockholders from a financial point of view, as of the date hereof.
In connection with our opinion, we have, among other things: (i)
reviewed certain publicly available financial and other data with respect to
Acquiror, and certain financial and other data with respect to the Company
provided to us by its management, including the consolidated financial
statements for recent years and interim periods to July 1, 1995, in the case
of Acquiror, and September 29, 1995, in the case of the Company, and certain
other relevant financial and operating data relating to Acquiror and the
Company made available to us from published sources, in the case of Acquiror,
and from the internal records of the Company and Acquiror; (ii) reviewed a
draft dated October 20, 1995 of the Merger Agreement provided to us by the
Company; (iii) reviewed certain historical market prices and trading volumes
of the Acquiror Common Stock as reported on the New York Stock Exchange; (iv)
compared the Company and Acquiror from a financial point of view with certain
other companies in the networking and storage computer industries that we
deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of selected recent business combinations of companies in
the networking and storage computer industries that we deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of the Company and Acquiror certain
information of a business and financial nature regarding the Company
and Acquiror, furnished to us by them, including financial forecasts and
related assumptions of the Company and Acquiror; (vii) made inquiries
regarding and discussed the Merger and the draft of the Merger Agreement and
other matters related thereto with the Company's counsel; and (viii) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have assumed and relied upon the
accuracy and completeness of the foregoing information and we have not assumed
any responsibility for independent verification of such information. With
respect to the financial forecasts for the Company and Acquiror provided to us
by their respective managements, we have assumed for purposes of our opinion
that the forecasts have been reasonably prepared on bases reflecting the best
available estimates and judgments of their respective managements at the time
of preparation as to the future financial performance of the Company and
Acquiror (including, in the case of the Company, the estimates and judgments
of its management relating to the Company's relationship with IBM that are
reflected in such forecasts) and that they provide a reasonable basis upon
which we can form our opinion. With respect to the forecasts for the Company
provided to us by its management, for purposes of our analyses, we have
projected future financial performance of the Company for a period of two
years beyond its management's forecast period. In preparing such projections,
we have used assumptions more conservative than those used by the Company's
management in preparing its projections. We have discussed the adjusted
forecasts and related assumptions with management of the Company and they have
acknowledged our use of such adjusted forecasts and assumptions in arriving at
our opinion. We have also assumed that there have been no material changes in
the Company's or Acquiror's assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements made available to us and that there will be no
Indemnification Claims. We have relied on advice of counsel and independent
accountants to the Company as to all legal and financial reporting matters
with respect to the Company, the Merger and the draft of the Merger Agreement.
We have assumed that the Merger will be consummated in a manner that complies
in all respects with the applicable provisions of the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and all other applicable federal and state statutes, rules and
regulations. In addition, we have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of the assets or
individual properties of the Company or Acquiror, nor have we been furnished
with any such appraisals. Finally, our opinion is based on economic, monetary
and market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have further assumed, with your consent, that the Merger will be
consummated in accordance with the terms described in the draft of the Merger
Agreement without any amendments thereto, and without wavier by the Company or
Acquiror of any of the conditions to their respective obligations thereunder.
In the ordinary course of our business, we actively trade the equity
securities of Acquiror for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
Based upon the foregoing and in reliance thereon, it is our opinion that
the Consideration to be received by the stockholders of the Company pursuant
to the Merger is fair to such stockholders from a financial point of view, as
of the date hereof.
This opinion is furnished pursuant to our engagement letter, dated
February 14, 1995. This opinion is addressed to the Board of Directors of the
Company only and is not intended to be and shall not be deemed to be a
recommendation to any stockholder as to how such stockholder should vote with
respect to the Merger. This opinion may not be used or referred to by the
Company, or quoted or
disclosed to any person in any manner, without our prior written consent. In
furnishing this opinion, we do not admit that we are experts within the
meaning of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
MONTGOMERY SECURITIES