Security May Threaten IBM, Lenovo Deal

IBM's decision to sell its computing business has reportedly worried U.S. regulators. According to Bloomberg News Services, regulators are citing "security issues" as a primary factor in taking a closer look at the $1.75 billion merger.

The primary concern with the deal is that Chinese nationals could presumably use IBM's North Carolina facilities as a possible "base" for espionage activities. The source that leaked the information to Bloomberg was not disclosed.

If approved, the deal would merge Lenovo with IBM's computing division. While IBM would still hold an 18 percent stake in the merged company, it would be primarily owned by its Chinese suitor. The Committee on Foreign Investments in the United States, or CFIUS, is the government organization that will be further looking into the deal.

CFIUS has blocked mergers with foreign companies in the past, most notably the proposed merger between Global Crossing's telecommunications business with Hong Kong based Hutchison-Whampoa.

Roger Kay, analyst with IDC says the situation has been overblown. He told eWeek Monday that "one possibility is there is a typical Washington politician suspicious about the deal, about technology, and who s just questioning the deal without knowing what's at stake."

IBM was not immediately available for comment.