UPDATE 1-IBM says $2.3 bln server sale gets regulator approval

Fri Aug 15, 2014 5:45pm EDT

(Adds background on IBM and server business sale)

By Marina Lopes

Aug 15 (Reuters) - International Business Machines Corp said on Friday that U.S. regulators had approved the $2.3 billion sale of its low-end server business to Lenovo Group Ltd, as the company continues its shift to more profitable software and services like cloud computing and data analytics.

IBM has already divested $16 billion in annual revenue over the past decade from low-margin businesses like personal computers and printers.

The approval by the Committee on Foreign Investment in the United States came despite CIFUS members' concern, first reported by the Wall Street Journal earlier this year, that IBM servers used in the Pentagon's networks could be accessed remotely by Chinese spies and compromised.

Lenovo has been through the secretive CFIUS process three times before and has won approval each time, according to a source familiar with the process.

CFIUS, an interagency group chaired by the Treasury Secretary, reviews deals that could bring U.S. businesses under foreign ownership and is required by law to assess any transaction involving a state-owned firm.

Lenovo said in a statement that it remains on track to close the IBM server deal by the end of the year.

Analysts say Lenovo will likely find it easier than IBM to sell the x86 servers to Chinese companies as Beijing tries to localize its IT purchases in the wake of revelations about U.S. surveillance. (Reporting By Lehar Maan in Bangalore and Marina Lopes in Washington D.C.; Editing by Maju Samuel and Tom Brown)

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