Unlike IBM, Lenovo to manufacture some System x servers in U.S.

Lenovo stresses security on eve of IBM closing


Lenovo officially acquires IBM's x86 server business Wednesday, promising a seamless transition for its customers, while taking some new security-focused steps.

The $2.1 billion acquisition of IBM's x86 server line gives Lenovo immediate standing as the world's third-largest vendor in this market after Hewlett-Packard and Dell.

For its customers, Lenovo officials said that IBM will continue to provide hardware and software support for at least five years, an arrangement similar to the one made after Lenovo's acquisition of IBM's PC division in 2005.

About 7,500 IBM employees are affected by the move. Company officials, on a conference call today, said they are committed to bringing in all the employees, but will be seeking "efficiencies" going forward. IBM workers in China protested the acquisition fearing the loss of their jobs.

IBM doesn't manufacturer the x86 servers lines acquired by Lenovo, which includes System x, in the U.S., according to Lenovo officials. That will change under Lenovo's ownership.

Lenovo intends to manufacture servers for its North American customers from two facilities, one a PC production facility it open last year in North Carolina, and the other a Lenovo plant in Monterey, Mexico.

Lenovo is also putting greater emphasis on security, and is creating a security committee and the position of security director.

The deal was approved by the Committee on Foreign Investment in the United States (CFIUS), which is charged with determining the effect of transactions on national security. Lenovo, based in China, faced a similar review with its IBM PC acquisition.

Jay Parker, Lenovo's North America president, in an interview, said it behooves the company to have the best security possible and to be as transparent and open about its practices.

The hiring of Lenovo's security director is imminent, said Parker, and he couldn't disclose the name just yet. "I don't think there will be any questions regarding [this person's] credentials, background or expertise on the topic," he said.

The security committee and director will also ensure CFIUS compliance, and includes a program that will give federal agencies the opportunity to review Lenovo's security practices, Parker said. "That gives our federal customers an added level of comfort."

Since Lenovo's acquisition of IBM's PC division, the company has done more than $1 billion in business, which includes its existing server line, with the federal government, Parker said.

Part of the reason for the visible security focus may be to help Lenovo remain above the fray that has followed U.S. and Chinese tensions over allegations of network intrusions and cyber-spying.

Lenovo officials said the company expects to reach $5 billion in server revenue in the first year, but said they could not yet disclose current revenue.

Sergis Mushell, a Gartner analyst, said there will be plenty of opportunity for Lenovo in China and Asia-Pacific generally, where much of the market is served by white box vendors and no-name brands.

For North American customers, Mushell said, "we have yet to see what the reaction will be," but the PC line wasn't negatively affected by IBM's earlier move.

Copyright © 2014 IDG Communications, Inc.

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