IBM, Lenovo Ask U.S. Government Regulators For Extension On x86 Deal

IBM partners say they are not concerned over IBM and Lenovo's request to U.S. government regulators Tuesday for more time to review the $2.3 billion blockbuster sale of IBM's low-end server business to Lenovo.

Beijing-based Lenovo and IBM, Armonk, N.Y., requested more time from the Committee on Foreign Investment in the U.S. (CFIUS), the national security agency that is reviewing Lenovo’s planned purchase. According to news reports, both companies are asking for the extension to give regulators more time to scrutinize the deal as tensions between the U.S. and China have escalated over the past several months.

Lenovo released a statement Wednesday saying that the deal is on track.

’Our efforts with IBM and global regulatory bodies remain on track. Our timeline is still the same as it was at the announcement: Following clearance and approvals, we expect the deal to close by the end of the year. We will not further discuss any regulatory processes out of respect for the confidentiality of the proceedings,’ wrote Lenovo.

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IBM, in a statement to CRN, said, "Both IBM and Lenovo support the CFIUS process and have been through it successfully before, and we look forward to a positive outcome."

Meanwhile, some IBM partners that sell x86 servers say they believe the extension doesn’t indicate any possible problems or delays with the proposed sale.

’I don’t see this as a bad sign at all. I think it’s what is expected when two giant multinational companies are trying to come to agreement on a multibillion-dollar sale,’ said Tom Hughes, director of alliances for the Technology Solutions Group of Ciber, a Colorado Springs, Colo.-based IBM partner. ’We don’t see this as a big deal. I’m still hopeful the transaction will be completed sooner than later.’

Chris Pyle, president and CEO of Champion Solutions Group, a Boca Raton, Fla.-based IBM partner, also said the extension didn’t concern him.

’For companies that are on the fence whether to stick with IBM or not, yes, this will accelerate them moving their business to Cisco UCS or other platforms,’ Pyle said. ’But for us and what we are hearing from our IBM reps, we are confident that both companies are on the right track and things are moving in the right direction.’

The extension likely indicates both IBM and Lenovo are facing heightened scrutiny over the acquisition, say experts close to the matter.

On May 19 the U.S. accused five Chinese military officials of cyberespionage against American companies. Meanwhile, last week China government officials accused the U.S. government of cyberspying using Cisco and IBM hardware inside financial institutions. China is pressuring banks to remove IBM and Cisco equipment with local brands. IBM and Cisco both denied the accusations.

In an interview with CRN last month regarding regulatory concerns over the IBM and Lenovo deal, Adalio Sanchez, general manager of IBM's System x business, said, ’It's a global company headquartered out of Hong Kong, of Chinese and American origins. Over 60 percent of Lenovo's shares are publicly traded and not controlled by any one country or any one individual. Lenovo has undergone three successful CFIUS reviews and has won approval by the U.S. government for use within federal agencies. Hopefully, they will give their seal of approval on IBM's x86 divestiture to Lenovo.’

Sanchez said Lenovo has had three previous acquisitions cleared by U.S. regulators, most notably the sale of IBM’s PC division to Lenovo in 2005.

PUBLISHED JUNE 4, 2014