Lenovo, IBM to Close $2.1 Billion Server Deal Oct. 1
Lenovo officials implied that issues around revenue and inventory may have contributed to the deal price dropping from the original $2.3 billion to $2.1 billion at close, though they added that due to the "quiet period" leading up to earnings reports, they could not go into much detail. However, they did say that with the deal closing, any fear, uncertainty and doubt (FUD) that rivals like HP may have stirred up over the past 10 months can now be more forcefully answered. HP officials on Twitter on Sept. 28 took a couple of more jabs at Lenovo and IBM, questioning whether Lenovo can "keep pace w/IBM's product support" and whether the companies' "happy partnership" will suffer once IBM and Lenovo "are essentially competitors." Yang and Smith said IBM's strong brand and the IBM engineers and other employees who will make the move from IBM to Lenovo will give Lenovo a solid starting point for growing the business. "One of the reasons we will succeed is our commitment to providing the most advanced and secure x86 technology available," Smith said. "We can say this with great confidence because the IBM x86 System x business is coming over intact, including the IP, the vaunted security practices and the trusted executive team."Smith noted that Lenovo sells technology to almost every Fortune 100 company, saying that customers demand high levels of security. Lenovo is continually upgrading security policies and practices, he said. "Even more, it's no secret that Lenovo and IBM worked proactively to secure clearance from government agencies around the world," Smith said. "Our success in all of these rigorous reviews presents the most credible, and strongest, endorsement of Lenovo's corporate character, commitment to security, transparency and trustworthiness." The Lenovo executives, when asked during the conference call, would not say whether job cuts will follow the merging of IBM's x86 business. Smith said the company's goal is to make the Enterprise Business Group profitable and efficient.
Security has been a key focus over the past 10 months. U.S. lawmakers have been vocal about their suspicions regarding China and digital espionage, and are increasingly concerned about Chinese companies—such as Lenovo, Huawei Technologies and ZTE—being used as gateways by the Chinese government to gain access to U.S. networks. Lenovo and IBM had to satisfy the Committee on Foreign Investment in the United States (CFIUS)—a governmental interagency group that reviews the acquisition of domestic companies by foreign entities for national security purposes—before gaining approval for the deal.