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China approves Lenovo's purchase of IBM's x86 server business

But American suspicion lingers on
Fri Jul 04 2014, 15:37
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CHINESE AUTHORITIES have approved the proposed takeover of IBM's x86 server division by Lenovo, six months after the deal was announced.

Governments on both sides of the deal have viewed the $3.2bn acquisition with suspicion because of perceived security risks involving the potential for espionage.

While the Chinese approval clears a significant hurdle for the deal, there are still more obstacles to come as US regulators continue to consider the deal, which might take the rest of the year as the Committee on Foreign Investment in the US (CFIUS) examines potential implications for critical US government technology infrastructure.

Similar investigations were undertaken when other Chinese technology companies such as ZTE and Huawei first attempted to increase their presence in western markets.

Approval of the Lenovo deal on the Chinese side might spark further suspicions in the US. In May, Chinese government officials started pushing banks to replace IBM servers with locally produced ones and last year prohibited Lenovo from supplying servers to western intelligence organisations.

Approval of the deal could therefore be viewed as a sign that the Chinese government might have realised that it has an opportunity to use Lenovo's IBM servers to spy on key American interests such as defence systems and financial infrastructure.

Chinese paranoia about western technology stretches beyond IBM. The country's officials recently banned Microsoft's Windows 8 operating system from government departments, claiming that it steals data, with Chinese state television reporting, "Whoever controls the operating system can control all the data on the computers using it."

Or perhaps everyone is just being a bit paranoid. µ


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