Lenovo executives expect its $2.3 billion deal to buy IBM’s x86 server business to close by the end of the year despite national security concerns among U.S. regulators that reportedly have slowed the process.
At a press conference July 2 in Hong Kong after the company’s annual shareholders’ meeting, Lenovo CEO Yang Yuanging reportedly said that the PC maker is still on track to complete the IBM deal as well as Lenovo’s $2.9 billion acquisition of Motorola Mobility from Google.
“There is no change to the plan,” Yang said, according to The Wall Street Journal. “We are still confident that we can complete the two transactions by the end of this year. We are making very good progress in obtaining approvals for the deals.”
Lenovo, which last year surpassed Hewlett-Packard as the world’s top PC vendor, started the year by announcing the deals for IBM’s low-end server business and mobile handset maker Motorola. The acquisitions will be part of Lenovo’s larger strategy to take leadership roles in most areas of computing, with the hope that the deals would give the company the same boost in servers and mobile devices that its acquisition of IBM’s PC business in 2005 did.
However, the Lenovo-IBM deal has run into national security concerns over such issues as cyber-espionage and hacking that have become the norm in U.S.-China relations. U.S. lawmakers for several years have expressed national security concerns about such Chinese companies as Huawei Technologies and ZTE; the officials worried that their products could contain backdoors that would allow Chinese officials access to U.S. networks and sensitive data. Those concerns were heightened when the United States recently indicted five Chinese military officials for allegedly hacking into the computer systems of U.S. companies.
Chinese officials have responded to U.S. actions as well as reports about the U.S. National Security Agency using American tech products to spy on other countries by saying they are reviewing tech companies with operations in the country—one of the largest and fastest-growing tech markets in the world—and ordered all state-owned companies to stop doing business with U.S. consulting firms.
More recently, the Chinese government has targeted such major U.S. tech companies as Cisco, Microsoft and IBM; banned Windows 8 from government computers; and reportedly asked banks to remove IBM servers and replace them with systems built by Chinese companies.
Reports in April indicated that IBM’s deal with Lenovo—which is based in Beijing—was getting close scrutiny from U.S. agencies around issues of national security. Government agencies, including the Department of Defense and the FBI, buy x86 servers from IBM, as do the largest telecommunications companies, such as AT&T and Verizon Wireless.
During his talk with reporters, Yang disagreed with the idea that Lenovo’s products should generate national security worries in the United States.
“The U.S. government … and U.S. Army are all our clients,” he said, according to Reuters. “There has been no issue and we will keep this tradition.”
In June, IBM and Lenovo said they were Committee on Foreign Investments in the U.S. CFIUS is a governmental interagency group that reviews for national security purposes the acquisitions of domestic companies by foreign entities, and the group’s approval is necessary before such a deal is closed.