Industry

08/18/2014 - IBM Server Sale to Lenovo Passes U.S. Test


By George Stahl, The Wall Street Journal

Government Agency That Screens Sensitive Deals Ends Review on $2.3 Billion Pact

International Business Machines Corp. said the agreement to sell its low-end server business for $2.3 billion to Chinese computer maker Lenovo Group Ltd. has passed the U.S. government panel that screens deals with possible national-security implications.

IBM said the Committee on Foreign Investment in the U.S. has concluded its review of the company's sale of x86-based server business.

"The parties now look forward to closing the transaction," IBM said in a news release Friday.

IBM says CFIUS has ended its review of the company's $2.3 billion server sale to Lenovo. Above, IBM's offices in New York. Zuma Press In a separate statement, Lenovo said the deal has completed the regulatory process in the U.S. and is on track to close by the end of the year.

The deal, struck in January, has remained in limbo as the U.S. government investigates security issues around IBM's x86 servers, which are used in the nation's communications networks and in data centers that support the Pentagon's computer networks, The Wall Street Journal reported in June.

The concern is that the servers could be accessed remotely by Chinese spies or hackers or compromised through maintenance, The Journal reported.

Lenovo and IBM say x86 servers are a low-end technology made by other U.S. companies, and that the majority of the servers, including IBM's, are made in China and contain Chinese components. Lenovo also has said that its products are reliable and secure, and that its only objectives are commercial ones.

Lenovo faced similar security questions when it bought IBM's PC business in 2005. Although the PC acquisition was approved by regulators, some sensitive arms of the U.S. government have shied away from using Lenovo products.

For Lenovo, the acquisition could help it compete better against Hewlett-Packard Co. and Dell in servers; meanwhile, for IBM, a sale comes as its hardware business is eroding and the company looks to exit low-margin businesses.

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