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US investigates IBM and Lenovo $2.3b server deal over Chinese spying fears

IBM’s deal to sell its server business to Lenovo could be in trouble after US security worries surfaced relating to maintenance contracts that may ultimately derail the multi-billion dollar deal.

Related: Lenovo bags IBM’s server hardware business for record breaking $2.3b

Wall Street Journal sources revealed that the US government is looking at security issues surrounding IBM’s x86 servers that are used in the nation’s communications networks as well as inside data centres that support Pentagon computer networks.

US security officials and members of the Committee on Foreign Investment in the US [CFIUS], which oversees deals with national security implications, worry that servers may be able to be accessed remotely by Chinese spies or hackers once the deal has gone through.

The crux of CFIUS’s concerns is the maintenance of the servers and to this end IBM has said it will continue to provide maintenance on the x86 servers “for an extended period” after the sale. This has done little to allay CFIUS concerns and the fear is that once maintenance is down to Lenovo it could be compromised by Chinese agents.

Lenovo faced similar problems back in 2005 when it bought IBM’s personal computer business and in that case the CFIUS eventually ratified the deal. This wasn’t the end of it as the US military warned Defence Department officials of security incidents involving the devices and they were later banned on classified networks in the US and abroad.

Lenovo proposes that the maintenance be handled like it was for the 2005 deal where IBM was contracted to do so for the first five years and the contract has been renewed several times since. Another branch being explored is that the US will halt buying x86 servers and instead look elsewhere in the US for another server supplier.

Related: PC giant Lenovo posts record revenue and profits

IBM’s deal to sell its server business to Lenovo is worth $2.3 billion [£1.35 billion] and the WSJ goes on to state that even though both sides are working hard to address CFIUS concerns, the agreement is likely to be approved.