US Security Panel Approves IBM Server Sale To Lenovo

IBM said on Friday that the sale of its x86 server business to China’s Lenovo has been approved by a US government panel that reviews transactions with possible national security implications.

Approval by the secretive Committee on Foreign Investment in the United States (CFIUS) means that the $2.3 billion (£1.3bn) transaction is headed toward its conclusion, IBM said.

‘Clarity and confidence’

“The approval of the… sale to Lenovo enables IBM to focus on system and software innovations that bring new kinds of value to IBM clients in areas such as cognitive computing, Big Data and cloud, and provides clarity and confidence to current x86 customers that they will have a strong partner going forward,” IBM stated.

Lenovo said in a separate statement that it expects the transaction, agreed in January, to conclude by the end of the year.

IBM is planning to divest the x86 server unit as part of a wider movement that has seen it sell off billions in annual revenue from low-margin businesses over the past decade. That includes the company’s sale of its PC business – also to Lenovo – in 2005, at which time the companies faced similar national-security questions from the US government.

Some parts of the US government particularly sensitive to security issues have since then been reluctant to use Lenovo PCs, according to the Wall Street Journal, which said the CFIUS review had been sparked by concerns that under Lenovo’s ownership servers used in the US’ communications networks and data centres, including those in the Pentagon, would become vulnerable to remote attacks by Chinese government or hacking organisations.

Servers ‘secure’

Lenovo and IBM have pointed out that x86 server systems are readily available from other suppliers, and said most such systems are already manufactured in China or contain Chinese components. Lenovo has said its products are secure.

Lenovo won CFIUS approval each of the three times it has faced a review, according to an unnamed source cited by Reuters. CFIUS is required by law to review any transaction involving a state-owned firm. The Chinese government holds a stake in Lenovo due to the fact that the state-owned Chinese Academy of Sciences owns just over one-third of Legend Holdings, which in turn holds a 34 percent stake in Lenovo.

The acquisition comes as Lenovo looks to expand away from PCs to systems such as servers and smartphones. In January the company agreed to buy Motorola Mobility from Google, after having been rumoured to be in talks to buy NEC’s mobile business.

Lenovo said last year it is looking to double its server market share over the next three years.

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