Lenovo's deal to purchase IBM's server unit will face strong regulatory scrutiny over national security concerns from the US government, reports Bloomberg. The United States has closely scrutinized past deals in which foreign bodies proposed the purchase of a major infrastructure of telecommunications company. In this case, the use of IBM servers by the FBI, Pentagon, and US telecoms is reportedly behind the raised concern. The interagency Committee on Foreign Investment in the US will reportedly be reviewing the deal.
The US has blocked foreign purchases over national security concerns before
In addition to the use of IBM servers at government agencies, Bloomberg reports that the committee will investigate their usage within critical US infrastructure, including chemical plants and electric companies. Regulators' primary concern is likely that the purchase could allow China, where Lenovo is headquartered, to access US secrets or gain control over its infrastructure. Lenovo previously purchased IBM's ThinkPad business in 2005.
IBM tells Bloomberg that it's confident that the review will have a "positive outcome." Bloomberg reports that one term of the deal that may help Lenovo clear the purchase is a five-year contract that has IBM itself continuing to service server equipment — meaning that Lenovo wouldn't have access to it. That agreement can reportedly be extended as well.
If the deal fails, Lenovo has agreed to pay IBM a fee of $200 million, according to Bloomberg. Bloomberg doesn't seem to know how much of a risk there is of that happening, but it's no surprise that Lenovo's purchase of computer infrastructure in the US is gaining increased attention amid growing concerns over cyberwarfare, particularly from China. The US government has repeatedly hindered and blocked the Chinese company Huawei from doing business — even outside of the US, as The New York Times notes — so it would be far from unprecedented for Lenovo's deal to see regulatory trouble as well.