Lenovo's $2.3 Billion IBM Deal Inches Closer To Approval

Chinese anti-monopoly regulators Friday approved Lenovo's $2.3 billion deal to buy IBM's x86 server business and Google's Motorola division on Friday. Partners were not surprised and say they are anxiously awaiting U.S. regulators' final approval.

"Not much of a surprise here, given Lenovo is China's big red star," said Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based solution provider who is both a Lenovo and an IBM premier partner. "The bigger question is U.S. regulators. We are anxiously waiting for this deal to be approved so we can get off the fence and see the fog of this transition lift."

Specifically, the Chinese government's Ministry of Commerce was the agency that approved the deal, which gives Lenovo IBM's low-end server business that includes x86 servers, blade networking and maintenance operations. Lenovo and IBM unveiled the deal in January.

Related: Dell Exec: Campaign To Go After IBM Business Is Working

The IBM deal has been facing increased scrutiny among U.S. security officials and members of the Committee on Foreign Investment in the United States (CFIUS). Last month, it was reported U.S. regulators are concerned "Chinese spies" may be able to access the Pentagon's servers and weaken national security.

Meanwhile, both IBM and Lenovo executives are bullish the deal will be closed by the end of the year, despite reports of intensified scrutiny in Washington over cybersecurity issues. Lenovo CEO Yang Yuanqing told shareholders last week, "The U.S. government ... and U.S. Army are all our clients. There has been no issue and we will keep this tradition," according to Reuters news article.

Both IBM and Lenovo have acknowledged that efforts by competitors to spread FUD regarding the x86 sale have hurt IBM’s market share. IBM, for its part, has launched its own campaign to help fight the uncertainty called "Winning In Transition," which includes a dedicated website.

"Hewlett-Packard has been ratcheting up the doom and gloom on this deal," Grosfield said. "While concerns persist, we are very confident the two companies will build on their previous ThinkPad transition experience [and] the acquisition will go off with minimal hiccups."

It's been about a decade since IBM sold its struggling ThinkPad PC unit to Lenovo for $1.76 billion. At the time, IBM and Lenovo partners complained of confusing pricing and bidding processes and customer confusion over branding and ownership of technology.

"My IBM business is strong," Grosfield said. "This time around our customers get it. They have confidence that IBM and Lenovo are very aligned on technology and research and development. And so are we," he said.

PUBLISHED JULY 7, 2014