Diversified industrial equipment maker Emerson Electric Co. (EMR) will acquire information-technology company Avocent Corp. (AVCT) for about $1.2 billion in cash, broadening the software capabilities of Emerson's data center management and equipment business.

Emerson plans to apply Avocent's software management technology to its network power systems segment, a business that generated $6.3 billion in revenue in 2008. Energy management services and equipment for computer data centers accounted for $2.6 billion of that revenue. Emerson considers the data center market ripe for expansion and estimates the addition of Avocent will give Emerson the opportunity to pursue more than $1 billion in new data center revenue.

"We cover the data center room. We have equipment throughout the room. The game for us is to expand that market," Chairman and Chief Executive David Farr said during a conference call with Wall Street analysts on Tuesday. "We're going to expand the capabilities we have today in those data centers."

Farr expects Avocent to add about $400 million to Emerson's 2010 fiscal year revenue. He predicted the deal will dilute Emerson's 2010 earnings per share by 10 cents as the company factors in historical stock awards, the amortization of $350 million worth of intangibles and other acquisition-related costs.

Farr said he's been eyeing the purchase of Avocent for some time and had been talking with Avocent board members for about two years.

The deal, which was unanimously recommended by the Avocent board, is expected to be completed around year's end, provided the deals wins approval from regulators and Avocent shareholders. Avocent shareholders will get $25 a share, a 22% premium to Monday's closing price of $20.52. The stock was last at $25 in August 2008. In recent trading, Avocent shares were up 21% at $24.87.

Emerson's business lines for data centers include power distribution units, surge suppression systems, cooling equipment and a variety of server-rack components.

Avocent, based in Huntsville, Ala., blends server hardware, software and embedded technologies into one system that data-center operators use to monitor, manage and fix problems with their operations.

The company has been trying to boost sales of software that isn't tied to the company's computer servers. About 22% of the Avocent's $657 million of revenue last year was derived from software. Demand for servers has fallen sharply in recent quarters as companies cut back on capital spending. Sales in Avocent's management systems segment, which includes its hardware lines, declined 28% in the second quarter. For the first six months of 2009, Avocent lost $63.2 million, or $1.42 a share, as sales slipped 15% from a year earlier to $254.7 million.

Emerson shares were recently trading up 2% at $39.44. The stock is up 9% so far this year as the company has reported lower earnings in the past three quarters because of falling demand.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com