IBM-Lenovo server deal pulled into US-China cyber row

US authorities stall deal while ‘security concerns’ addressed

Tags: ChinaIBM (www.ibm.com)Lenovo GroupUSA
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IBM-Lenovo server deal pulled into US-China cyber row IBM’s deal with Lenovo is on hold while US authorities ask for assurances over security concerns. (Getty Images)
By  Stephen McBride Published  June 26, 2014

IBM's prospective $2.3bn sale of its low-range server division to China-based Lenovo may have become the latest casualty in the escalating row between Washington and Beijing over cyber espionage claims.

According to The Wall Street Journal, the deal is on hold while the Committee on Foreign Investment in the United States (CFIUS) investigates security concerns over possible remote manipulation of IBM servers, which feature heavily in US critical infrastructure and in high-security facilities such as the Pentagon.

IBM and Lenovo have clubbed together to try to assuage fears and IBM has pledged to continue support of its servers for some time after the sale is complete.

IBM sold its flagging ThinkPad business to Lenovo in 2005 for $1.75bn and Lenovo continued to use the IBM brand for three years. Eventually, after adopting its own brand, the vendor rose to dominate the global PC market in unit shipments.

Purchase of IBM's server business will allow Lenovo, which has already made strides in the smartphone market, to diversify further, into data centres and cloud services.

The stalling of the deal is the latest in a series of diplomatic barbs between the US and China over mutual distrust surrounding IT security. After US prosecutors issued indictments against five Chinese military officers, China responded with a number of actions that directly impacted the US technology sector, such as the banning of Microsoft Windows 8 on government computers and subjecting "foreign" companies' hardware to more stringent review. IBM was singled out, as its servers sit at the heart of the infrastructures of many Chinese banks.

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