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U.S. Committee OKs IBM-Lenovo Deal

IBM's bid to sell its personal computing division to Lenovo passed muster with a U.S. government group, removing a major barrier to a deal that has faced worldwide scrutiny because of Lenovo's ties to the Chinese government.

The Committee on Foreign Investment in the U.S. (CFIUS) approved the $1.25 billion exchange ahead of the March 29 deadline it imposed, paving the way for IBM and the Beijing-based computer manufacturer to go forward with the transaction, according to IBM spokesman Clint Roswell.

IBM and Lenovo expect to seal the deal in the second quarter of this year.

"With the review by the U.S. government complete, IBM and Lenovo are moving quickly to integrate the two companies and expect to finalize the transaction in the second quarter, as planned, while continuing to provide customers with world-class PC products and services," said Stephen Ward, general manager of IBM's Personal Systems Group, in a statement. Ward will serve as the chief executive officer of Lenovo

Just two months ago, things weren't looking as rosy for the deal, in which IBM still maintains an 18.9 percent stake in Lenovo. The Chinese government also has a stake in Lenovo.

Members of CFIUS, along with the Department of Justice (DoJ) and Department of Homeland Security, reportedly expressed concerns that Chinese spies could work undercover at U.S. IBM manufacturing plants.

Press reports, citing unnamed sources, said Lenovo would gain access to IBM's contracts, including its vendor status with the U.S. General Services Administration for government computers, which also reportedly raised concern among committee members.

The condition had committee concerned that Chinese spies could use their knowledge for China's military gain, according to Bloomberg. As a result, the news service reported that Lenovo might be barred access to IBM's U.S. government contracts and also may have to restrict employee access to some of IBM's sensitive research facilities in Research Triangle Park, North Carolina.

These issues were raised despite a blessing from the Federal Trade Commission and surveys conducted in which customers were found to favorably view the exchange.

The CFIUS approval comes a week after Lenovo announced its new management team, which will be led by Ward and consist of a combination of senior executives and technology managers from IBM and Lenovo.

Lenovo will move its headquarters to New York. IBM will provide sales support and demand generation services for Lenovo products through its enterprise sales force of 30,000 workers. Lenovo products will also be sold through IBM PC specialists who will join Lenovo.

Despite the popularity of its ThinkPad line, IBM's move to shed its sluggish PC division is the latest in a string of efforts to focus more on selling to the enterprise, while shedding underperforming units. IBM earlier sold its NetVista manufacturing operations and its hard drive business.