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Who Calls the Shots at EMC?

A rumored royalty scheme for top engineers raises questions about EMC's product strategy

Storage networking behemoth EMC Corp. (NYSE: EMC) blames the economy and the competition for its recent gloomy prospects (see EMC Bombs Big-Time and EMC Posts Q3 Loss). But former executives say a compensation scheme involving the companys top-ranking engineers could be a key factor in declining sales.

Several former senior executives at EMC, who declined to be named for this article, have informed Byte and Switch that Moshe Yanai, VP of engineering at EMC and the inventor of its Symmetrix flagship storage array, has received a cut of Symmetrix sales for over a decade. And they maintain that the arrangement has thwarted EMC’s ability to create new hardware for a tougher market.

EMC officials refused to comment on the past or present status of any compensation arrangements for Moshe Yanai or his staff.

Yanai, a former tank division commander in the Israeli army, joined EMC in 1987, where he built the first Symmetrix. He is the author of 18 patents, all of them now part of EMC’s closely guarded intellectual property. And he remains the sole person responsible for the design and development of the Symmetrix line today.

Back in 1991, when the first Symmetrix launched, sources say Yanai cut a royalty deal with Dick Egan, the company’s founder, that granted him a percentage of the sale of Symmetrix units. At one point, they say, Yanai’s cut was one percent of all Symmetrix annual sales, paid in cash and stock.

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