EMC Wins Round One in Donatelli Lawsuit
EMC (NYSE: EMC) has won the first round in its battle to keep its top data storage executive from defecting to HP (NYSE: HPQ).
A Massachusetts court yesterday temporarily barred David Donatelli, a 22-year EMC veteran, from assuming his new role as HP's executive vice president for Enterprise Servers, Storage and Networking until the two sides resolve a legal dispute over a non-compete clause in Donatelli's EMC employment agreement.
Donatelli filed suit in the more employee-friendly state of California to nullify the agreement, while EMC countersued in Massachusetts to enforce the clause.
"The court concludes that the covenant which Donatelli signed is an enforceable contract, is not unreasonably broad (at least on its face) and serves legitimate business interests of EMC," Stephen Neel, Justice of Massachusetts Suffolk County Superior Court, said in the preliminary injunction, according to Reuters.
"Donatelli's intention to work for HP in California, which has a statutory prohibition on covenants not to compete, does not warrant denial of EMC's request for injunctive relief," the judge wrote.
The next steps in the matter will be a discovery phase in the Massachusetts case and a May 15 hearing in the California suit.
"We are disappointed that the Massachusetts court saw fit to delay Mr. Donatelli's employment with HP," an HP spokesperson said. "However, the court's order is preliminary, and we are confident that Mr. Donatelli will be permitted to join HP in a leadership role once a full hearing of the issues is held. We are similarly disappointed by the lengths to which EMC has gone to impede Mr. Donatelli's efforts to seek other employment."
Donatelli's departure was something of a shocker for the data storage industry, coming just two weeks after he had shepherded the launched of EMC's new high-end Symmetrix V-Max. HP OEMs its high-end storage offering from Hitachi. As EMC's top storage official, Donatelli is also intimately familiar with the company's VMware (NYSE: VMW) server virtualization subsidiary.
In what has been a tumultuous couple of months for the IT industry in general, HP faces new competitive pressure from Cisco's (NASDAQ: CSCO) move into the server market, while 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."
Assuming he can surmount the legal hurdles to get there.
EMC has won similar battles in the past. In 2001, the company prevented Doron Kempel from going to startup SANgate Systems, and more than a year later, Kempel wound up buying an EMC research and development unit with the support of EMC. That venture Diligent Technologies was acquired a year ago by IBM (NYSE: IBM).
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