A deal which would see the Chinese Lenovo buy IBM's server business might be in trouble because of Big Blue's biggest clients.
IBM has been selling its servers to the Pentagon and FBI for many years and this means the deal has some security concerns. Lately, the US has been banning Chinese hardware firms from government contracts fearing that there will be backdoors which will spill all their secrets.
Now according to Bloomberg the deal is going to receive some close scrutiny from the Committee on Foreign Investment in the US, which investigates national-security risks of foreign acquisitions of domestic companies.
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$2.3 billion deal
Beijing-based Lenovo announced the $2.3 billion IBM purchase in January and it was widely believed that regulators would not have a problem with the Thinkpad maker. After all Lenovo sailed through a similar process when it bought Big Blue's PC business in 2005 and it re-assured the right people that it was not a security threat.
However, times have changed. Acquisitions of US businesses by Chinese buyers are rising, and there is a concern in Washington over Chinese stealing US technology. There is also a perception that the Chinese are installing backdoors into the hardware they sell. This has prevented Huawei scoring some lucrative contracts, even though the only backdoor found in its hardware was proven to be installed by the NSA.
Lenovo has said that it will not have access to the Secret servers because IBM will continue maintenance on the equipment for at least five years.
US officials will examine any use of the servers in critical infrastructure, such as chemical plants and electric-utility companies. These machines tend to have a much longer life and are not upgraded so often and so might require a longer service contract to be negotiated.
IBM servers are embedded in telephone networks operated by AT&T, Verizon Communications and Sprint which could also worry regulators.