IBM-Lenovo No Threat

Do PCs represent a strategic technology? And are U.S. national security interests threatened by IBM's proposed $1.75 billion sale of its PC unit to a Chinese company?

It makes good political theater for congress and executive branch agencies to step in to question a major IT deal in the name of national security, but in the case of the IBM-Lenovo deal, there are two serious questions that deserve a response.

Do PCs represent a strategic technology? And are U.S. national security interests threatened by IBMs proposed $1.75 billion sale of its PC unit to a Chinese company?

World-class technology leaders such as IBM should be able to spin off operations that have moved into the realm of commodities. Further, if Congress is genuinely concerned about U.S. technology leadership and strategic self-sufficiency, there are more important targets for that concern.

The deal to spin off IBMs venerable PC unit to Lenovo may yet go through. The sale, however, is now in the hands of the Committee on Foreign Investments in the United States, an interdepartmental agency that scrutinizes international mergers and acquisitions for national security threats.

GOP congressional leaders Duncan Hunter of California and Henry Hyde and Don Manzullo, both of Illinois, pushed the committee for a full investigation, citing the potential for the Chinese government to be privy to U.S. government purchases or technology plans.

Such probes have been rare since the committee was formed in 1975, with powers having been extended to cover national security in 1988. Few cases have been probed by the committee, and fewer still have been forbidden, although in 2003 the sale of Global Crossings telecommunications business to Hong Kong-based Hutchison-Whampoa was blocked.

The national security fears stem from the link that would form between U.S. government and consumer purchases and Chinas government. Lenovo is partially state-owned, as are most companies in China. IBM will own about 19 percent of the new venture, and Lenovo will maintain operations in IBMs facilities in Raleigh, N.C.

China, the congressmen said, is still a Communist country. But its also a burgeoning economy vital to U.S. economic interests and does not pose the threat that North Korea does, for instance.

There have been cases of alleged industrial espionage tied to U.N.-Chinese joint ventures, but close scrutiny should be saved for leading-edge technologies, rather than well-established IBM-standard PCs.

IBM proposes to spin off a commodity business—a "dog," according to Israel Shaked, a Boston University business professor—that does not fit into its current business model. Millions of products, both commodities and specialized technology, are made in China. IBM PCs are both and do not present more of a threat than the others.

What is really at stake is the United States ability to be a world leader in innovation and to keep borders open for the free flow of information, technology and manufacturing. IBM PCs are being spun off to make room for new business models and new growth.

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