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Lenovo: No Pay Cuts After IBM Server Deal Closes

Lenovo looks to assure striking Chinese workers that the company will not slash wages or benefits once it takes over IBM's x86 server business.

Lenovo officials are saying the workers strike at an IBM factory in China to protest Big Blue's planned sale of its x86 server business to Lenovo is an internal matter for IBM.

However, they said in a statement released March 10 that Lenovo is not planning any cuts to pay or benefits for the 7,500 or so IBM employees who make the transition to Lenovo once the $2.3 billion acquisition closes later this year. The deal is still making its way through the regulatory approval process.

Hundreds of workers at an IBM plant in Shenzhen in southern China went on strike March 3 over fears that Lenovo will slash wages and benefits to help cut costs. They reportedly also are concerned that, for those who don't move over to Lenovo, the severance package being offered by IBM is too small.

While saying that the "strike at the IBM server factory in Shenzhen is an internal matter for IBM," Lenovo officials are trying to assuage fears that a transfer to Lenovo will mean pay cuts.

"The talent we are acquiring is a great asset, and key to our long-term success," they said in their statement. "Lenovo will rely on these employees to build the business after closing and looks forward to welcoming them to Lenovo in several months' time. To ensure a smooth transition Lenovo is committed to provide opportunity for all employees from IBM's x86 server department who transfer to Lenovo, without any reduction of their wages and benefits."

The two companies announced the deal in January. The acquisition of IBM's low-end server business will vault Lenovo into the number-three spot in the global server space, behind Hewlett-Packard and Dell. Lenovo officials hope to mirror the success the company saw from its $1.25 billion acquisition of IBM's PC business in 2005. Lenovo is now the world's largest PC vendor.

The 7,500 IBM workers who will come to Lenovo are in more than 60 countries and are in such areas as product development, manufacturing, sales and marketing, Lenovo officials said.

"Part of the reason Lenovo is acquiring IBM's x86 server business is to gain the tremendous talent and experience of its workforce, strong from top to bottom," they said in the statement. "Lenovo is buying IBM's x86 [server] business intact and Lenovo is similarly committed to following the IBM x86 server product roadmap."

According to a report in the Shanghai Daily newspaper, as the strike entered its eighth day, IBM had fired 20 protestors for "disobeying company orders, absence without leave and gathering together during work times." The newspaper reported that IBM has refused to negotiate with the strikers.