China approves Lenovo’s IBM server deal

Transaction still awaits US regulatory approval

Tags: ChinaIBM (www.ibm.com)Lenovo GroupUSA
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China approves Lenovo’s IBM server deal The Chinese Ministry of Commerce's anti-monopoly branch approved the deal over the weekend, but the proposal is still to pass muster in the US. (Getty Images)
By  Stephen McBride Published  July 6, 2014

China-based Lenovo Group has secured regulatory approval at home for its proposed $2.3bn acquisition of IBM's low-end server business, Reuters reported.

The Chinese Ministry of Commerce's anti-monopoly branch approved the deal over the weekend, but the proposal is still to pass muster in the US, where the Committee on Foreign Investment in the United States (CFIUS) continues to investigate security concerns. US security officials have reportedly expressed fears of possible remote manipulation of IBM servers, which feature heavily in US critical infrastructure and in high-security facilities such as the Pentagon.

The Lenovo-IBM deal, announced in January, would allow Lenovo to make inroads towards cloud computing. Lenovo Chief Executive Yang Yuanqing last week voiced confidence that the transaction would be closed by the end of the year along with the company's proposed purchase of Google's Motorola Mobility unit.

"We hope to complete the two deals by year-end," he said on Wednesday at Lenovo's AGM in Hong Kong. "The US government...and US Army are all our clients. There has been no issue and we will keep this tradition."

The stalling of the server deal is the latest in a series of diplomatic salvos between the US and China over mutual distrust surrounding IT security. After US prosecutors issued indictments against five Chinese military officers in May, 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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