EMC Splits Into Three

EMC Corp. (NYSE: EMC)announced Thursday a complete restructuring of the company, splitting into three operating units, one of which will house all the companys engineering under the leadership of one person (see EMC Trifurcates).

Most significantly, this person is not Moshe Yanai, currently head of engineering and the inventor of EMC’s flagship Symmetrix storage array. Instead, Yanai has been made a "Founder and EMC Fellow" and will report directly to CEO Joe Tucci in an advisory role, company officials said.

David Donatelli, an EMC veteran of over 10 years, will assume the new role of leading engineering for both the Symmetrix and Clariion products, as well as manufacturing.

The news follows hot on the heels of speculation that Yanai’s strong ties to the Symmetrix system, including at one time a royalty on its sales, was having too much of an influence on EMC’s product strategy (see Who Calls the Shots at EMC?).

“Having all platforms and manufacturing under one person will increase the efficiency of the organization,” says a spokesperson for EMC. “Future product deliveries, resources, and expertise will all reside in one place, simplifying the engineering procedure."“About damn time,” says Dan Renounard, analyst with Robert W. Baird & Co. Inc. “Talk about dysfunctional... They still have lots of work to do, executing this strategy, but you have to wonder why these changes weren't undertaken years ago.”

Some observers, who declined to be named, say it has taken this long because Yanai has kept such a vice-like grip on engineering. “Now that he’s been sidelined into an advisory position [a.k.a. chief beard-stroker], EMC is, at least on the surface, a more democratic place now,” says one analyst.

"They wanted to get him out of the spotlight,” says Dan Tanner, analyst with Aberdeen Group.

How much of a difference the move will have on the future development of the Symmetrix remains to be seen.

“Something had to change and this might be it,” Renounard says. Baird & Co has surveyed more than 80 large users of the Symmetrix in the past month. “There’s no question it is getting long in the tooth and, at a minimum, customer perception has changed dramatically."EMC is now offering discounts of 50 to 60 percent or more from two quarters ago, reinforcing customers views that there isn’t a whole lot of difference between the Symmetrix and products from IBM Corp. (NYSE: IBM) or Hitachi Data Systems (HDS), he says.

Analysts say another important reason for this restructuring was to improve the succession plan, ie, who takes over when executive chairman, Mike Reuttgers and Joe Tucci leave. "EMC is grooming someone to run the business now, whereas before all these VPs were running tiny little groups," said one Wall Street analyst, who declined to be named.

"It's a good move as it puts Tucci firmly in the leadership seat - when everyone has been used to seeing Reuttgers and Yanai calling the shots," he said.

Under the new structure, the other two units will be sales and professional services and software. Erez Ofer has been promoted to executive VP and will lead the software business, which includes EMC’s new Auto IS and WideSky initiatives. The success of these projects is considered critical to EMC’s future success (see EMC, Compaq Swap APIs and EMC Goes Soft).

Executive VP Frank Hauck will continue to lead EMC’s sales and professional services organization and CFO Bill Teuber has been promoted to executive VP.While the reorganization is a way for EMC to streamline its costs, collapsing over ten departments into three concise operating units may cause some jobs to become redundant. EMC has not announced any additional layoffs, yet.

EMC's stock closed up 2.46 percent at $17.10.

— Jo Maitland, Senior Editor, Byte and Switch
http://www.byteandswitch.com