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Lenovo's Motorola, IBM server buys will likely get strict U.S. security review

Matt Hamblen | Feb. 3, 2014
Beijing-based Lenovo Group's plan to buy Google's Motorola Mobility unit and an IBM server division for a combined $5.2 billion will likely face strict and lengthy national security scrutiny by an inter-agency committee of the U.S. government, two Washington attorneys who are veterans of the review process said Thursday.

CFIUS has become "a lot more aggressive with its reviews" in recent years, Brewster said.

Part of the analysis that CFIUS will make of the Lenovo deals involves how vulnerable are the U.S. businesses being acquired, Salladin said.

Public companies do disclose that they are filing for a CFIUS review, but CFIUS is not likely to comment. A CFIUS review can last up to five months, Brewster said.

In 2012, China-based Huawei Technologies and ZTE came under U.S. government scrutiny for selling networking servers in the U.S.

The U.S. House Intelligence Committee said in a report that the firms posed a threat to national security because they could have been influenced by the Chinese state government to undermine U.S. security. Committee members advised American companies to find other vendors.

That recommendation was derided by many analysts as political, and not necessitated by a security need.

Both ZTE and Huawei now sell mobile phones in the U.S. in relatively small numbers, compared to Samsung and Apple.

Some analysts believe Lenovo's purchase of Motorola will get a green light from U.S. officials. There doesn't appear to be cryptography technology involved in the Motorola handsets, and there's a healthy and competitive market for various smartphones and cell phones in the U.S., said Avi Greengart of Current Analysis.

"I can't imagine why [government regulators] would object," Greengart said.

Chetan Sharma, an analyst at Chetan Sharma Consulting, did wonder whether the Motorola deal will gain U.S. approval, especially following Canada's opposition to the bid by Lenovo for BlackBerry, based in Waterloo, Ont.

He also noted that Lenovo was allowed to buy the IBM PC business in 2005 but that was before the Snowden leaks and the recent rise in concern over network security and privacy issues. "There is some precedent [for approval], but times have changed in the last 10 years," Sharma said.

Lenovo didn't comment on the expected security reviews.

 

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