IBM, Lenovo server deal in limbo over security worries -WSJ

Reuters

June 25 (Reuters) - International Business Machines Corp's

proposed $2.3 billion sale of its low-end server

business to China's Lenovo Group is in limbo as the

U.S. government investigates national security issues, The Wall

Street Journal reported, citing people familiar with the matter.

U.S. security officials and members of the Committee on

Foreign Investment in the United States (CFIUS) are worried that

IBM's x86 servers used in communications networks and in data

centers supporting the Pentagon's networks could be accessed

remotely by Chinese spies or compromised, the newspaper

reported. (http://on.wsj.com/1jPaRnX)

The long-expected acquisition in January came nearly a

decade after Lenovo bought IBM's money-losing ThinkPad business

for $1.75 billion, which had also faced scrutiny.

Government officials are also uneasy about the potential

sale of servers that may be clustered together to perform like a

powerful computer, the report said.

IBM and Lenovo are trying to address CFIUS concerns about

server maintenance and have said that IBM will provide

maintenance on Lenovo's behalf "for an extended period" after

the sale, the sources told The Wall Street Journal.

IBM and Lenovo have refiled their application for approval

of the deal to buy more time, Bloomberg reported earlier this

month. (http://bloom.bg/Ti6R8U)

Chinese companies faced the most scrutiny over their U.S.

acquisitions in 2012, according to a CFIUS report issued in

December.

(Reporting by Soham Chatterjee; Editing by Leslie Adler)

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