IBM and Lenovo server deal said to be 'in limbo'

Concerns that US government systems may be compromised cast a shadow over the sale of IBM's server division

IBM's move to offload its x86 server business to China-based Lenovo is now said to be "in limbo", according to The Wall Street Journal, because of concerns that Chinese intelligence agents may be able to remotely access servers.

The new development comes less than a month after reports that the deal was facing delays while it was scrutinised by the Committee on Foreign Investment in the US (CFIUS), an inter-agency committee within the US government tasked with reviewing takeovers of US firms for potential risks.

At the time, IBM and Lenovo stated that they were confident that the deal was still on track for completion by the end of 2014.

However, The Wall Street Journal has now reported that US security officials and members of CFIUS have raised concerns that the takeover may lead to Lenovo servers being accessed remotely by Chinese spies or compromised through maintenance processes.

Specifically, the concerns relate to IBM servers used in communications networks and in data centres that support operations at the Pentagon.

US security officials are also said to have concerns regarding the transfer of technology for clustering servers together as part of Lenovo's acquisition of the IBM server business.

The report goes on to state that Lenovo has proposed that maintenance of IBM servers should be handled in the same manner as with its takeover of IBM's desktop and laptop division back in 2005. As part of that agreement, IBM continued to deliver maintenance service for existing customers for five years after the purchase.

According to The Wall Street Journal, CFIUS is concerned that if IBM's contract for the servers were to lapse and the maintenance services revert to Lenovo, this may give Chinese intelligence agencies an opportunity to compromise servers, perhaps via carefully crafted software updates.

Yet the report also states that the deal is ultimately likely to be approved, despite these concerns. IBM and Lenovo are working hard to try and address CFIUS concerns, it said.