The finalization of the IBM bid to sell its x86 server unit to Lenovo may all come down to maintenance of machines owned by the government and in the critical infrastructure domain.
IBM announced the sale of its x86 server business — which includes System x, BladeCenter, Flex System blade servers and switches, NeXtScale, iDataPlex and associated software, blade networking and maintenance operations — to Lenovo for $2.3 billion in January.
The deal has significant implications for the channel, as thousands of IBM partners and employees will be transferred to Lenovo when the deal clears. It will also rewrite the server market segment, taking a significant hunk out of IBM’s leadership in the server market and propelling Lenovo into the top five server vendors.
The U.S. government – particularly military and intelligence agencies that use IBM products – are concerned the transfer of technology to Chinese control could expose networks to security breaches. The Committee on Foreign Investment in the U.S., the congressional body that oversees mergers and acquisitions with security implications, is concerned data and networks could be compromised if Lenovo is given the maintenance of government systems.
The cyber and national security concerns are so great that IBM and Lenovo agreed to refile their sale review application to give regulators and congressional committees more time to inspect the deal.
And that’s where IBM and Lenovo’s 2005 deal could provide the solution. The same security concerns were raised when Lenovo bought IBM’s ThinkPad division. IBM retained the maintenance work for five years, ensuring that Americans would provide hardware repairs and software maintenance.
IBM’s retention of maintenance services, a contract that Lenovo has renewed at least twice and IBM continues to perform, was enough to assuage most government security concerns. However, Lenovo personal computers are still banned from some military and sensitive networks.
Some analysts and market observers believe similar assurances will help clear the deal for approval. The caveat is how much current tensions between the U.S. and China over corporate and government espionage will weigh on the decision. Some government officials openly point to Lenovo’s close ties and partial ownership by the Chinese government as evidence that it could pose security issues. However, the leaks by former NSA analysts Edward Snowden reveal the U.S. government was involved in similar activities against China and other countries.
Competitors aren’t letting the dark cloud over the IBM-Lenovo deal go to waste. Hewlett-Packard, current the world’s second largest server vendor, formally launched a program to attract affected IBM partners to its ranks, saying Lenovo isn’t a good home for solution providers who need a broad spectrum of technology and support. Dell says it’s receiving a lot of interest from IBM partners looking for safe haven from the Lenovo transfer.
When it all comes down to it, the IBM-Lenovo deal will weigh on who touches the machines rather than whose logo is on the bevel. At the current pace, the sale may not clear before the end of 2014.
This article originally appeared on Channelnomics.
