Former IBM cloud computing executive Jeff S. Smith begins a new job today at a major rival, Amazon Web Services, much to the displeasure of his former employer.
International Business Machines Corp., the Armonk-based technology giant, sued Smith last week in federal court in White Plains, accusing him of violating a noncompete agreement and demanding that he repay $1.7 million in stock bonuses.
Smith was among the top 65 executives at IBM when he left his job in May as chief information officer for transformation and operations.
“Were he permitted to join the senior management of AWS on Aug. 7,” declared Arvind Krishna, director of research, he “would inevitably be involved in decision-making about how best to compete against IBM and would inevitably disclose or use IBM trade secrets.”
Judge Cathy Seibel issued a temporary restraining order on Aug. 1, barring Smith, of Ridgefield, Connecticut, from starting work today at Amazon Web Services. He may not solicit customers, recruit former colleagues or disclose confidential information until a full hearing is held.
She modified the order the next day, allowing Smith to begin work on Aug. 7, in “listen and learn mode only,” for employee training.
Smith began working at IBM as chief information officer in 2014, having held a similar position for an Australian bank.
As a member of a selective leadership group responsible for transforming the company, he attended strategy sessions concerning all of IBM’s businesses.
He was privy to inside information on product costs, design specifications, performance capabilities and release plans for IBM’s next generation of technology in the intensively competitive cloud computing arena.
IBM, for instance, is planning to launch new products and services specifically designed to compete against Amazon Web Services, in the coming year.
One document he was privy to “was so sensitive and so potentially damaging were it be shared,” Krishna said, “that I directed all team members to destroy their copies.”
Smith also supervised the company’s global chief information security officer. He was a frequent speaker at industry events, the lawsuit states, and visited more than 200 customers and partners in the past 18 months.
Smith notified the company in March that he was resigning to begin working for Amazon Web Services in April, reporting directly to CEO Andrew Jassy. IBM objected, according to the lawsuit, citing Smith’s noncompetition agreement that blocked him from working for a competitor for one year.
Smith agreed to pursue other job offers, postponed his resignation to May 2 and notified IBM that he had accepted a consulting role at an Australian bank.
In June, he notified IBM that he had accepted a new offer from Amazon Web Services and intended to start work on Aug. 7.
IBM considers Amazon Web Services one of its principal competitors. IBM recently surpassed it in cloud computing revenue, the lawsuit states, making more than $15 billion in 12 months.
The lawsuit claims that Smith shared inside information with Jassy while he was still working for IBM, and that he wiped clean his company-issued phone and tablet to make it impossible to detect other communications or exchanges of information.
It was no secret that IBM was working on new technology to compete against Amazon and other cloud computing companies, the lawsuit states.
“But what that technology is, how it works, what it costs and when it will be launched are trade secrets.”
Smith is accused of breach of a noncompetition agreement, misappropriation of trade secrets and breach of fiduciary duty.
IBM is asking the court to bar Smith from working for Amazon Web Services until May 2, 2018 and to allow IBM to recover $1,714,800 from IBM shares awarded to Smith the year before he resigned.
A hearing has been scheduled for Aug. 21.
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