HP Wins Big With Hire of EMC Storage Exec

But analysts ask whether a non-compete clause will slow the move of Donatelli into his new job

April 30, 2009

5 Min Read
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Business isn't like professional sports. You don't get draft picks or replacement players when one company snatches away an executive from another company. Hewlett-Packard's hiring of David Donatelli, president of EMC's storage division, to head up a unit that will include servers, storage, and networking gear doesn't compare to signing a free agent or a top prospect. But the chatter and instant analysis from industry consultants and analysts is no different than what you'd hear on ESPN's SportsCenter on draft day.

The early consensus is that HP made a very good move hiring an experience storage executive who will provide leadership in an area that is increasingly important -- selling a full suite of servers, storage, and networking gear for next-generation virtualized data centers. Donatelli also brings with him intimate knowledge of the technology roadmaps that some of HP's toughest competitors have in the works. But EMC should be able to weather the blow without missing a step since it has a deep bench of knowledgeable and experience executives who can step into the job, or it could easily attract talent from outside.

One big question is whether Donatelli had a non-compete clause in his contract with EMC. Most outsiders think that somebody in his position would have such a clause and are wondering whether that might derail plans for him to start in his new role at HP next week. Several industry observers noted that courts in Massachusetts, where EMC is headquartered, tends to uphold non-compete clauses while courts in California, where HP is located, tend to take a more relaxed view. EMC did not immediately respond to a request for information on that topic. HP said "no comment."

After 22 years at EMC, Donatelli was one of the most visible and well-known executives in the storage industry. EMC put him front and center when it made major storage announcements, such as the recent unveiling of the Symmetrix V-Max, the company's new storage architecture and systems for virtualized data centers. Nobody is sure why he made the move; perhaps he was looking for a bigger challenge. His responsibilities will include the Enterprise Storage and Server business unit, which had fiscal year 2008 revenues of $19.4 billion, and HP's ProCurve Networking unit will be added to his responsibilities. EMC had annual revenue of about $15 billion last year.

For HP, Donatelli should be able to help the company as competition enters a new era. David Hill, principal of storage consultancy Mesabi Group LLC, knows Donatelli personally and calls him "excellent executive." He says HP needed to find someone to replace Scott Stallard, who is retiring, and head up the storage team at the company. "The replacement had to have a long experience directly in storage. Donatelli brings the necessary experience, knowledge, and capable decision-making skills that HP needs in the competitive wars that it is continuing to face with Cisco, EMC, IBM, and NetApp. That competitive battle is fierce and is going to continue that way. Donatelli will play an essential role in helping HP in those competitive battles," Hill says. He also says that EMC has a "deep management bench" and should have no problem finding a replacement.Charles King, principal analyst at storage consultancy Pund-IT notes that HP's enterprise group has lagged behind the company's printer and PC divisions and that HP CEO Mark Hurd was looking to beef up the business unit and its product lineup. "The ProCurve efforts and new blade server architecture are examples of this. Donatelli could provide the executive and thought leadership that the enterprise product organization badly needs," King says.

Frank Hauck, Donatelli's replacement at EMC on an interim basis, has a lot of experience, having served as the company's CIO, EVP of global marketing and customer quality, head of worldwide sales and services, and EVP of products and offerings. "EMC's executive bench is so deep that I can't see this making many waves. Net/net: I'd qualify this as a much bigger win for HP than it is a loss for EMC," King says

David Vallente, principal contributor to Wikibon, a community of IT professionals and research analysts, says he's known Donatelli since EMC was a memory company. "He bleeds EMC blood. He is the maker of the Kool-Aid. I can't remember any departure from EMC that is even remotely close in terms of being a high-profile executive," he says.

In his new job at HP, Donatelli will be in the middle of cloud computing and cloud storage and virtualized data center initiatives -- some of the hottest trends in enterprise IT. "This is a big step up for him. He will be running a business unit that is twice the size of what he was running at EMC. And there may be room for advancement for him at HP," Vallente says.

Vallente is surprised that HP was able to pry Donatelli away from EMC, but says turnabout is fair play. EMC took several executives from HP in recent years, including Mark Lewis, president of EMC's content management and archiving division, who was vice president of worldwide marketing and solutions at HP's Network Storage Solutions group until 2002, and Howard Elias, president of EMC's global services and resource management software group, who was a senior vice president for business management and operations at HP."It has been a one-way street into Hopkinton," says Vallente. "EMC tends not to lose top, high-profile players. I think this is a much bigger deal for HP than EMC. I don't see this hurting EMC or its long-terms plans. It is great news for HP. Finally, HP is bringing in people that understand storage and putting them in senior positions. HP's position has always been to sell servers and let them drag in the storage sales."

InformationWeek Analytics has published an independent analysis of the challenges around enterprise storage. Download the report here (registration required).

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