Wednesday, March 09, 2005

IBM & Lenovo PC Deal Jumps National Security Hurdle

With approval from the U.S. government in hand, IBM and Lenovo are free to complete the sale of IBM's PC buiness to China's Lenovo. The hiccup was caused by concerns about the Chinese government, a Lenovo investor, having control of technology widely used by federal government agencies, especially the intelligence and military departments.

After all is said and done, a second-quarter close is still on track. That means a state of limbo where customers get antsy is unlikely to occur, so Dell and HP are unlikely to scoop up many IBM PC customers.

The real proof in the pudding of this mega-deal will be how well Lenovo expands out of its China box, where 97% of sales currently come from. IBM's own sales force and channel pertners will also have to stay the course. The success or failure of this deal cannot be measured in a year (the agreement runs five years as IBM's PC source). Inherent competition between IBM's xSeries and Lenovo's nascent server capabilities is inevitable, and a likely source of considerable friction.

Peter S. Kastner

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