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U.S. to review IBM-Lenovo sale

Posted: 02 Feb 2005 ?? ?Print Version ?Bookmark and Share

Keywords:lenovo? pc?

The U.S. House of Representatives has thrown a potential monkey wrench into the $1.25 billion sale of IBM's Personal Computer Division to China's Lenovo Group. Republican congressmen Henry Hyde and Don Manzullo of Illinois and Duncan Hunter of California have sent a letter to the Treasury Department asking it to review the national-security implications of the deal.

The deal will be reviewed by the interagency Committee on Foreign Investment in the United States, operating under the provisions of the Exon-Florio Act. Under the legislation, the president has the authority to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States.

Procedurally, the Foreign Investment Committee, which is chaired by Treasury Secretary John Snow, will conduct a 30- to 45-day review of the IBM-Lenovo deal and provide a recommendation to the president. However, such sales are rarely scuttled. The only time that happened was in 1990, when the first President Bush pulled the plug on the sale of an aircraft-parts manufacturer to China.

Reportedly, IBM officials have already met with committee representatives to outline the terms of the Lenovo deal. IBM officials weren't available for comment.

However, it's believed that IBM will emphasize that any security concerns raised by the deal are largely theoretical. True, IBM has long had a healthy business selling PCs to the U.S. government. But desktop computers are commodity items made from standard parts, and it's considered unlikely that agents of the Chinese government could use them for espionage.

Asked last December whether he thought the Feds might take issue with buying PCs from a company that is partially owned by the Chinese government, Donn Atkins, IBM's top channel executive, said he fully expects the company to continue competing for government business.

Indeed, reports are circulating that Rep. Manzullo may be more concerned with the global economic implications of the deal, which may end up moving additional U.S. jobs offshore. IBM's sale of the PC unit to Lenovo Group will create a mammoth organization that will tote up annual revenue of $12 billion and shipments of 11.9 million units once IBM's $9.6 billion yearly PC business is factored in.

Lenovo's shareholders formally approved the deal earlier this week in Hong Kong.

Alexander Wolfe, VARBusiness

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