IBM-Lenovo deal under scrutiny

Federal lawmakers have cast a deeper shadow on IBM's proposed sale of its PC business to China's Lenovo, saying federal regulators need more time to investigate possible security risks.

In a letter sent on Tuesday to Treasury Secretary John Snow, three high-ranking members of the House of Representatives urged the Treasury Department's Committee on Foreign Investment in the United States to conduct a full investigation of the proposed sale.

According to the letter, signed by Reps. Henry Hyde, R-Ill., chair of the International Relations Committee; Duncan Hunter, R-Calif., chair of the Armed Services Committee; and Don Manzullo, R-Ill., chair of the Small Business Committee: "First, this transaction may transfer advanced US technology and corporate assets to the Chinese government. Second, this transaction may transfer licensable or export-controlled technology to the Chinese government. Finally, this transaction may result in certain US government contracts with or involving [personal computers] being fulfilled or participated in by the Chinese government."

IBM announced last December that it planned to sell its PC business to Lenovo, which, under its former name Legend, became China's biggest PC maker and has slowly expanded its business to other regions. Under the terms of the proposed deal, valued at $1.75bn, Lenovo would take over the daily operations of IBM's PC business and would also be able to use IBM PC brands such as ThinkPad for five years. IBM would take an 18.9 per cent stake in the new Lenovo, which would reincorporate in the United States.

News agency Bloomberg reported earlier this week, citing unnamed sources, that the deal was being examined by the Committee on Foreign Investment, which reviews acquisitions of US businesses by foreign corporations. A Treasury Department representative declined to confirm any investigation is taking place or otherwise comment on the matter, citing federal security rules.

Normally, the committee would have until the end of January to either approve the Lenovo deal or pass it along for further investigation and presidential clearance. The three representatives said that's not a realistic deadline, however, as the merger announcement was made while Congress was on holiday recess.

"Given the important issues at stake, Congress and other federal agencies need more time to evaluate the process and provide comments on the sale," according to the letter.

IBM spokesman Ed Barbini said the company had filed required notices with the Committee on Foreign Investment and "is following all the normal and routine procedures in the review of this transaction".

The Lenovo deal cleared one of its first regulatory hurdles earlier this month when the Federal Trade Commission indicated it would not raise any antitrust objections.