IBM, Lenovo discuss security worries prior to sealing server deal

By Sumit Passary, Tech Times | June 27, 2:01 AM

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Reports suggest that the x86 server business deal between IBM and Lenovo is raising red flags with U.S. government officials. However, a Lenovo spokesperson suggests that the deal will close by the end of this year.
(Photo : ChrisDag)

Security issues raised by the U.S. government officials over the x86 servers are said to be worrying officials and affecting the deal between International Business Machines (IBM) and Lenovo.

In January this year, IBM announced that it will sell its x86 server business to Chinese company Lenovo. However, the deal has not yet received a green signal from U.S. officials who are scrutinizing security issues related to the x86 servers.

In a statement issued during the announcement of the deal, Lenovo suggested that the company acquired the x86 server business from IBM in a bid to increase profitability and grow the business in the long term.  

"This acquisition demonstrates our willingness to invest in businesses that can help fuel profitable growth and extend our PC Plus strategy," said Yang Yuanqing, chairman and CEO, Lenovo, in January this year. "With the right strategy, great execution, continued innovation and a clear commitment to the x86 industry, we are confident that we can grow this business successfully for the long-term, just as we have done with our worldwide PC business."

A Wall Street Journal (WSJ) report cites people familiar with the matter and says that the x86 servers are currently being used in the country's communications networks. Moreover, the x86 servers are also used in the data centers, which support Pentagon's computer networks.

The WSJ report suggests that U.S. security officials and members of the Committee on Foreign Investment in the U.S. (CFIUS), which is a panel that analyzes deals with possible implications to national security, are concerned that if IBM sells its x86 business to a Chinese company then the servers may be accessed by Chinese spies or hackers remotely. The people familiar with the matter also say that the U.S. government officials are worried that server security can be compromised via server maintenance.

This is not the first time that Lenovo is acquiring a part of IBM's business. In 2005, Lenovo acquired IBM's PC business. However, the deal was later rebuked by some U.S. government officials.

"CFIUS ultimately approved Lenovo's PC deal, but the U.S. military later alerted Defense Department officials to security incidents involving the PCs, and the State Department banned their use on its classified networks in the U.S. and abroad, according to current and former officials," per the WSJ.

The $2.3 billion x86 server deal is considered by some market observers as one of the biggest by a China-based company in the U.S. technology industry. Both the companies are looking forward for the deal to close as early as possible. A Lenovo spokesperson suggests that the deal is on track and is likely to be closed by the end of this year.

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