UPDATE 1-VMware buying SpringSource for $420 mln

* VMware to pay $420 mln for privately held SpringSource

* Will hurt profit excl items through 2010, perhaps beyond

* VMware's biggest acquisition to date

BOSTON, Aug 10 (Reuters) - Business software maker VMware Inc (VMW.N) said that it agreed to buy privately held SpringSource for $420 million, gaining products that will add to a portfolio of programs that companies use to run data centers.

It is the biggest-acquisition to date for 11-year-old VMware, a subsidiary of EMC Corp (EMC.N) that has become one of the world's biggest software makers by selling virtualization programs that boost the efficiency of computer servers. Buying San Mateo, California-based SpringSource is part of a drive to diversify into other areas.

"We wouldn't do this transaction if we didn't fundamentally believe it would fuel growth and our strategic position with customers," said company spokeswoman Mary Ann Gallo.

She said that the deal will hurt non-GAAP profit through at least 2010.

SpringSource sells software tools that companies use to write in Java, one of the world's most widely used programming languages. They compete with products from Red Hat Inc (RHT.N).

Katherine Egbert, an analyst with Jefferies & Co., said that the programs nicely complemented with VMware's other software.

Palo Alto, California-based VMware said it will pay $362 million in cash and equity for SpringSource and assume $58 million in unvested stock and options. The company said it expects the deal to close in the third quarter. (Reporting by Jim Finkle; editing by Carol Bishopric)