US gov't approves IBM, Lenovo deal

The US government Wednesday gave final approval to IBM to sell its PC division to Chinese PC vendor Lenovo, ending antitrust and federal security fears.

IBM Wednesday said it received final U.S. government approval to sell its PC division to Chinese PC vendor Lenovo Group, and expects to close the deal soon.

The U.S. Federal Trade Commission in early January established that the US$1.75 billion acquisition complies with antitrust laws.

But the deal confronted another obstacle: The Committee on Foreign Investment in the U.S. (CFIUS), composed of representatives from 12 agencies and chaired by the Treasury Department, decided in late January to investigate whether the Chinese government would be able to use IBM's government contacts and contracts for espionage.

CFIUS Wednesday delivered its decision, in advance of a deadline next Monday, that the merger does not threaten national security.

"We expect to close the deal in the second quarter," IBM spokesperson Clint Roswell said.

The deal creates the third largest PC maker in the world and is the first merger for large U.S. and Chinese corporations. As a result of the deal Lenovo Groups' world headquarters will move from Beijing to New York.

IBM will provide sales support through an existing sales force of approximately 30,000, and through its Web site. Lenovo products will also be sold through IBM PC specialists who will join Lenovo.

IBM Global Financing and IBM Global Services will be the preferred providers to Lenovo for leasing and financing services, and for warranty and maintenance services, respectively. However, Lenovo is allowed to use the globally recognized IBM trademark for only five years. The deal will give IBM an 18.9 percent equity stake in Lenovo.

According to IBM, the CFIUS endorsement was the last approval needed for the merger.

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Johan Bostrom

IDG News Service
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