IBM, Lenovo deal passes U.S. security review

International Business Machines Corp. and Lenovo Group Ltd. of China said Wednesday they have won clearance from a U.S. national security oversight committee for Lenovo to acquire IBM's personal computer business.

An IBM executive said the high-level U.S. committee had given the deal its unanimous consent -- the final external approval needed -- putting the $1.25 billion PC sale on track to close in the second quarter as originally planned.

"We were able to get unanimous agreement from the members of the committee," Stephen Ward, the general manager of IBM's Personal Systems Division, said in a telephone interview.  Ward is to become chief executive of Lenovo, which is headquartered in Beijing, once the deal closes.

The merger of the IBM PC business with China's biggest PC maker -- the first merger ever of a major U.S. corporation and a top Chinese one -- will create the world's third largest PC maker and one strongly positioned in several fast-growing markets.

The deal met unexpected resistance when some U.S. lawmakers began decrying the loss of a U.S.-based PC maker to China, and officials whispered that Chinese nationals working for Lenovo in the United States might act as industrial spies.

Ward said terms of the approval are confidential, but that no compromises were required of IBM or Lenovo over the location of Lenovo facilities in sensitive research areas, nor were limits put on Lenovo's ability to sell PCs to U.S. agencies.  "I don't think we made any compromises at all," Ward told Reuters.

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Rival PC makers such as Dell Inc. and Hewlett-Packard Co. have been seeking to woo corporate PC customers away from IBM by citing the regulatory overhang as well as uncertainty over Lenovo's future PC product strategy.

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Industry experts say that underlying the cross-border combination of the two companies is a belated recognition of the fact that most PCs -- including IBM's machines -- are already largely produced in the greater China region.

IBM plans to keep a 19 percent stake in Lenovo after the merger, allow Lenovo to use its PC brands for five years, and retain service, financing and support operations for PCs.