EMC Sues to Stop HP From Hiring Storage Exec - EnterpriseStorageForum.com
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EMC Sues to Stop HP From Hiring Storage Exec

HP (NYSE: HPQ) has lured away EMC's (NYSE: EMC) top data storage executive, but EMC is suing to stop the move.

David Donatelli, a 22-year EMC veteran and president of the EMC Storage Division, will become HP's executive vice president for Enterprise Servers, Storage and Networking, effective May 5. He will report to Ann Livermore, executive vice president of the Technology Solutions Group at HP, and lead the development of HP's server, storage and networking solutions.

But he'll have to surmount legal obstacles before he can assume his new post. Reuters reported late today that Donatelli has filed suit to nullify a non-compete clause in his employment agreement, while EMC has sued to enforce the agreement.

"Mr. Donatelli's key employee agreement with EMC contains a non-competition clause and other protections that we intend to enforce," an EMC spokesperson told Enterprise Storage Forum.

HP's Enterprise Storage and Server (ESS) business unit had fiscal year 2008 revenue of $19.4 billion — more than the $14.9 billion in sales that EMC logged last year. The unit contains Business Critical Systems, Industry Standard Servers, StorageWorks, ESS Infrastructure Software and Blades, and will now also include the HP ProCurve Networking business. Marius Haas, senior vice president and worldwide general manager of HP ProCurve, will report to Donatelli.

"As the future of computing moves toward converged platforms of servers, storage and networking, this combination accelerates the drive for efficiency and innovation, as well as increases the value customers receive from HP's infrastructure solutions," HP said in a statement.

Donatelli, 44, replaces Scott Stallard, who is retiring from HP after 34 years.

"[O]ur initial sense is that this could involve succession planning behind EMC CEO Joe Tucci," Stifel Nicolaus analyst Aaron Rakers wrote in a research note this morning. "We view this as a surprising and somewhat negative announcement out of EMC."

EMC has named Executive Vice President Frank Hauck, an 18-year EMC veteran, to fill Donatelli's role on an interim basis. EMC said tersely that Donatelli "has resigned from EMC to pursue another opportunity."

Tucci said in a statement that the company "has built one of the deepest, most accomplished executive management teams in the IT industry. Additionally, we're fortunate to have the world's largest and most talented team of storage professionals advancing our lead in the marketplace."

Hauck, 49, has served as EMC's Chief Information Officer, executive vice president of Global Marketing and Customer Quality, and head of worldwide sales and services. Hauck was also Executive Vice President of Products and Offerings, overseeing Enterprise Storage Research and Development and Worldwide Manufacturing Operations.

"We're extremely fortunate to have a seasoned leader with Frank's credentials, industry track record and company-wide respect to lead EMC's storage business," Tucci stated. "Frank's extensive knowledge of EMC's information infrastructure business, his long-standing relationships with our customers and his focus on operational excellence are great advantages for EMC."

Enterprise Strategy Group analyst Brian Babineau said he thinks EMC will look inside the company for a permanent storage chief.

"EMC has some insiders that know the storage business very well," Babineau said. "I would be very surprised if they brought in an outsider. Frank may work to groom one of his — and former Donatelli — direct reports."

EMC has moved aggressively in recent years from its core data storage business into other IT and data center markets, including server and network management and its VMware (NYSE: VMW) server virtualization subsidiary. But at HP, Donatelli will have a chance to oversee the hardware side of those businesses too.

The move comes just two weeks after EMC launched the new high-end Symmetrix V-Max — HP OEMs its high-end storage offering from Hitachi — and it also comes as HP faces new competitive pressure from Cisco's (NASDAQ: CSCO) move into the server market.

And both HP and EMC face new competition from the proposed merger of Oracle (NASDAQ: ORCL) and Sun Microsystems (NASDAQ: JAVA).

Illuminata analyst John Webster said all those cross-currents are at work in Donatelli's move — and then some.

"Donatelli was in a position to see a lot of this going on," said Webster. "That's why I think his departure is something of a watershed moment for the storage industry as well as EMC. Storage ain't what it used to be over at EMC — the 'industry leader.' In the world of integrated, real-time data centers, virtualized everything, and compute clouds, storage blends into the fabric. Perhaps Dave sees this coming and is now in a position to ride the wave."

On the issue of the non-compete agreement, Webster said that EMC "can, and has in the past with cases that cross jurisdictional boundaries, brought suit in federal court and won. So he's not off the hook I think by any means. Some others think the EMC suit was filed to scare other EMC executives away from following Dave to HP. I have no doubt that Dave will want to bring in some of his own people."

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