US Government May Not Approve Sale of IBM PC Unit

andy1307 writes "Xinhua, among others, quotes a Bloomberg report saying the Committee on Foreign Investments in the United States, or CFIUS, might block the sale of IBM's PC unit to Lenovo over national security concerns. CFIUS is made up of 11 U.S. agencies, including the Department of Justice, the Department of Homeland Security, and is chaired by the Treasury Department. They are concerned Lenovo employees might be used to conduct industrial espionage. The Bloomberg story said members of CFIUS were focusing their attention on an IBM facility in North Carolina of the United States. The same article says IBM hasn't produced its own PCs for several years and that the bulk of its production is done by manufacturing partners, largely in China. In the past, CFIUS has blocked the sale of Global crossing to Hutchison Whampoa because it would have meant Chinese control of the undersea cable communication network."

Business ought to be left alone

[Dancin_Santa (265275)]

There is very little good that come out of government meddling in the affairs of private companies when no one is being harmed. IBM wants to sell, Lenovo wants to buy. No harm, no foul.

The Chinese are not the Red Menace they are made out to be. If anything, they are about as far from Red as you can get. More a yellowish-tan... But they are capitalists through and through.

It's funny, the land of freedom and capitalism is taking steps that would make a communist plutocracy proud.

Re:Business ought to be left alone

[vladd_rom (809133)]

>> IBM wants to sell, Lenovo wants to buy. No harm, no foul.

There is no connection between the first sentence and the second. In order to determine if there is any harm or not, a lot of factors need to be considered, mainly related to whether or not a company will increase what economists call "market power" and will get closer to a monopol status.

>> It's funny, the land of freedom and capitalism is taking steps that would make a communist plutocracy proud.

There is such a term in economy called "market power", which describes companies that have key resources and strategic positions on the market. In those cases, the "invisible hand" of offer and demand, that balances prices on the market, no longer works, because a firm is clearly advantaged compared to the others and in a position to get a monopoly status (Does Microsoft ring any bells? :) ). In those cases, the government is expected and does regulate economic activity in order to re-balance the market.

I'm not saying that this is the case here; however, simply adjusting the balance doesn't mark this approach as communist. Depending on your position on the political spectrum, you might find this implication of government into the market more or less suitable. Still, no matter that, it is still far away from communist.

Re:Business ought to be left alone

[AvidLinuxUser (573832)]

Oh, they (government) really stopped Microsoft.

More likly Microsoft reads slashdot too and is worry about IBM having more power in the linux market in China so Bill called his friends in the White house and Justice department.

Re:Business ought to be left alone

[B747SP (179471)]

There is very little good that come out of government meddling in the affairs of private companies when no one is being harmed

You're exactly right, when no-one is being harmed! There's a very good reason for the gummint to meddle in this affair though: national security. You guys (ie: America) have a lot of tight restrictions on export of technology to try to keep a lid on The Bad Guys(tm) advancing their technology too quickly and becoming more of a military threat than they might otherwise be.

Now I'll

Re:Business ought to be left alone

[gunnk (463227)]

I have a ThinkPad T41 on my desk right now. I flipped it over and found:

"Made in China"

Whether or not IBM sells its PC business to Lenovo, the technical information is already in China as is the actual manufacturing. So if our "national security" concerns are about the transfer of technical knowledge then it's too little-too late. If the concern is about having our important technology manufactured by a potential adversary, then it is also too little-too late.

This looks more like meddling for the sake of flag-waving to me...

Re:Business ought to be left alone

[DNS-and-BIND (461968)]

Nah, the Chinese didn't grease the right people. These big government deals are all about graft, and who gets it. In the Jiang Zemin/Clinton era, times were happy...the Chinese paid, and the U.S. responded with whatever they wanted...satellite technology, nuclear secrets, influence in elections. However, the new administration of Hu Jintao evidently forgot to pay off the right people, and now the whole deal is in jeopardy. Play ball, people!

Re:Business ought to be left alone

[dunkelfalke (91624)]

well, usa has been the only country getting mad at others and invade in the last years.

Re:Business ought to be left alone

[nounderscores (246517)]

The point is that you have at least two known psychopaths with shotguns in a room full of other people of dubious morality. The room is getting rapidly hotter and you are running out of food. There was an escape stairwell, but it's dangerous, broken and expensive to fix.

You are one of those two shotgun toting psychopaths. You've already shot at least one person to prove a point (but nobody liked that guy anyway) and your colleague has done likewise a few times as well. People in the room are very worried about you.

Do you:

a) Become repentant of your sins and mend your ways and then tell the other psycho to do likewise?

b) Blow the guy's head off, before he shoots you or somebody you like?

c) Talk to him quietly while waving your gun around to stop other people in the room getting ideas? I mean, if the two of you team up you could eat all the other people in the room and not go hungry, right? Yeah, let's eat them.

I know that this view of the world is really screwed up, but if you look at world events, I think that this is the world that our leaders see.

So it begins

[scapermoya (769847)]

The last-ditch efforts of a superpower that will hate being #2 when when China gets its act together in the next generation or two.

#2?

[Savage-Rabbit (308260)]

Hardly #2, but the USA is nevertheless waking up to the fact that China is catching up technologically at a much faster rate than anybody had expected. Soon enough the Chinese will have reached a point where they can threaten the USA militarily using Chinese developed technology based on technological transfer from Russia, W-Europe and the USA it self. Greedy corporations outourced work to China and with they exported the technology China needed to develop better and better military hardware. This sort of a panic reaction is simply a belated reckonition of this development. Expect the Chinese to field Submarines, Tanks and a Stealth aircraft capable of competing with the F-35 within the next 20 years or so and its surface fleet will become a serious challenge to the USN in the Pacific.

Laissez-Faire?

[JulianOolian (683769)]

I thought the US were supposed to be the laissez-faire free marketeers of the world?

If China was blocking US participation in their markets on these grounds, I've little doubt the US would be taking the matter to the WTO (and winning).

Re:Laissez-Faire?

[antifoidulus (807088)]

China does this type of stuff to US products in China all the time. They have a ton of "non-tarriff" barriers. The reason the US has yet to make a major challenge to them in the WTO is that:
a. They are good at buying politicians(*Cough* Clinton *cough*) and
b. They are a major(if not the foremost) consumer of American debt. Dubya can't run his tax cut and spend government without them, so the US doesn't really make any challenges to them in the WTO.

We will see what China has to say about this

[antifoidulus (807088)]

China can always threaten to stop buying up US debt. That would mean a large spike in interest rates in order to make buying US debt more attractive to investors. It would probably also mean a tax hike, something that Dubya would like to avoid at all costs.
Cheney may have said that deficits don't matter, but sooner or later, he will learn that giving the largest dictatorship on Earth a large voice in your government is a bad idea. (Esp. when you are supposed to be promoting "freedom" and "democracy")

Re:We will see what China has to say about this

[andy1307 (656570)]

It would probably also mean a tax hike, something that Dubya would like to avoid at all costs.

Wouldn't it be something that the Chinese would like to avoid at all costs..a tax hike for the largest consumer market for their products will be like a tariff on their exports.

Re:We will see what China has to say about this

[Hognoxious (631665)]

debt is not equity, it does not give you any control per se, although having a large part of someone's debt obviously makes them listen to you ;)

Agreed on the debt != equity point but there's an old saying: If you owe the bank fifty thousand dollars, you've got a problem. If you owe the bank fifty million, the bank has a problem.

The US could devalue (could?!?) its currency, effectively shrinking the value of those IOUs (I mean bonds). In an extreme case, it could simply not pay and tell them to sod off; Russia and Argentina have done this before and got away with it.

Long Term cost of devaluation

[alexhmit01 (104757)]

The US has NEVER defaulted on a debt payment (post Civil War, might have during that). One of the smart things Clinton did during the government shut-down was violate all sorts of government accounting rules to get the debt payments out.

As a result, US Debt is considered 0-risk. It is the ONLY debt instrument in the world that is considered zero risk. Even other government debt has a small implicit risk premium in it.

Right now, the US raises money at no risk premium. If the US defaulted or increased the money supply (which would cause massive inflation and force the markets to devalue its currency... devaluation as policy requires a peg, normally to the dollar), the would cause the US to start paying a risk premium.

All of a sudden, you would have 10%-15% inflation from oversupply of money, and the US risk premium going up to 5%, for example, and now government bonds pay 15%-20%... How much do you think that your mortgage needs to be now? 25%, 30%?

Basically, the US CAN get out of its mess with massive printing of money, but the results would be catastrophic.

HOWEVER, your comment about the bank is 100% on, and I believe it is the current financial strategy. Continue to buy products from China for "worthless" sheets of paper (paying 4%-4.25% interest), then slowly increase the money supply and inflation to 4.5% or 5%, and inflate your way out of the mess. All of a sudden, the money is devaluing faster than your interest payments, tax revenues go up, and debt repayment is less painful.

Many countries played games like this, but it is normally to buy capital goods and other means of production... we've used it for consumer spending, which is why we may be in a bind.

Mild inflation is nice, but reasonable (5%) inflation) wouldn't kill us, and might be a way out of our mess.

Alex

Why IBM need to sell

[Ev0lution (804501)]

Bad news for IBM if it's blocked, because if you look at the full year report* it's clear why they're so keen to get rid of it.

Personal Systems Group made $162 million off turnover of nearly $13 billion, that's a 1.2% margin. Software group made $4.5 billion from a $15 billion turnover. Hell, WebSphere MQ Series made several times the profit of the whole PC business, and that's a team of maybe 200 people. CICS made even more. From IBM's point of view, Personal Systems Group isn't worth the effort or the risk.

*http://www.ibm.com/investor/financials/quarterly/ 4q04earnings.phtml [ibm.com]

When did this happen?

[g0hare (565322)]

Computers are all made in China anyway! We don't build cars in America, we don't grow food in America, we don't even do tech support in America, we don't make steel in America, we don't make clothes in America and we're busy moving all our jobs that pay well overseas! When exactly did this kind of behavior become a "national security problem?" instead of good business? I mean I know all those people who used to make textiles in the South all just went right out and got themselves a degree after the mills closed - what, you say they weren't smart enough to do that?

Then WHAT THE HELL is left for them to do when all those jobs are gone except cook meth in their trailers? Or become religious terrorists?

This is like

[cyberkahn (398201)]

sticking your finger in the leaking dike or singling out a grain of sand from the beach. It's already too late. We have exported a majority of our technology to China already, which of course is being copied, therefore, saving China billions in R and D. America's greed has sold itself out.

Before you flame me, yes, I am a patriotic American, however, I am not blind to what is happening. America is going down the path of Rome. Just give us more bread and circuses. Football is more important than academics. Money is more important than ethics.

Topic rang an ancient bell...

[shanen (462549)]

[One of the key figures is already missing...]

George B.: Condi! Nice to see you. What's happening?
Condie R.: Sir, I have the report here about the new leader of China.
George B.: Great. Lay it on me.
Condie R.: Hu is the new leader of China.
George B.: That's what I want to know.
Condie R.: That's what I'm telling you.
George B.: That's what I'm asking you. Who is the new leader of China?
Condie R.: Yes.
George B.: I mean the fellow's name.
Condie R.: Hu.
George B.: The guy in China.
Condie R.: Hu.
George B.: The new leader of China.
Condie R.: Hu.
George B.: The Chinaman!
Condie R.: Hu is leading China.
George B.: Now whaddya' asking me for?
Condie R.: I'm not asking you, I'm telling you. Hu is leading China.
George B.: Well, I'm asking you. Who is leading China?
Condie R.: That's the man's name.
George B.: That's who's name?
Condie R.: Yes.
George B.: Will you or will you not tell me the name of the new leader of China?
Condie R.: Yes, sir.
George B.: Yassir? Yassir Arafat is in China? I thought he was in the Middle East.
Condie R.: That's right.
George B.: But Yassir's a leftie. Then who is in China?
Condie R.: Yes, sir.
George B.: Yassir is in China?
Condie R.: No, sir.
George B.: Then who is?
Condie R.: Yes, sir.
George B.: Yassir?
Condie R.: No, sir.
George B.: Look, Condi. I need to know the name of the new leader of China. Get me the Secretary General of the U.N. on the phone.
Condie R.: Kofi?
George B.: No, thanks.
Condie R.: You want Kofi?
George B.: No.
Condie R.: You don't want Kofi.
George B.: No. But now that you mention it, I could use a glass of milk. And then get me the U.N.
Condie R.: Yes, sir.
George B.: Not Yassir! The guy at the U.N.
Condie R.: Kofi?
George B.: Milk! Will you please make the call?
Condie R.: And call who?
George B.: Who is the guy at the U.N?
Condie R.: Hu is the guy in China.
George B.: Will you stay out of China?!
Condie R.: Yes, sir.
George B.: And stay out of the Middle East! Just get me the guy at the U.N.
Condie R.: Kofi.
George B.: All right! With cream and two sugars. Now get on the phone.
Condie R. (into phone): Rice, here.
George B.: Rice? Good idea. And a couple of egg rolls, too. Maybe we should send some to the guy in China. And the Middle East.

[With apologies to Abbott and Costello--"Who's on First?"]

Totally

[t_allardyce (48447)]

Frankly im outraged, I think everyone here needs to write to their congressman or something. Also I have absolutely no idea what the story is about, thats the most confusing paragraph ive ever read. IBM PC's are national secuirty risks? Blocking sales? Something about communist China? I wish the government was this concerned with oil company ownership.

Re:Hidden Agenda ?

[shanen (462549)]

Well, you obviously have something against IBM, but your "facts" are totally bogus. The lack of evidential links is obvious enough.

IBM support is not going anywhere. It's profitable and has a very high reputation. The main concern on the IBM side is whether or not Lenovo will stay with IBM after the transition period.

Dell does not sell IBM ThinkPad computers. The only thing I can imagine you are talking about is some kind of really screwy deal where Dell salesmen are playing some kind of marketing middleman game. Of course, in that case, I can quite well understand why it would be in Dell's interest to foul things up as long they thought they could blame it on someone else. That would also explain the rolling heads, come to think of it.

Re:Hidden Agenda ?

[af_robot (553885)]

For your information:
IBM DO NOT repair its PC's - all service duties lays on IBM business partners. If your company wants to get IBM business partner status to sell IBM's PC/Servers then your should have your own service center.
IBM only provides service centers with spare parts and repair informations/trainings.
All currently produced IBM PCs will be repaired in IBM Business Partnes service centers for a long time - IBM currenty offering service pack for 3+ years.
Btw: How many "laptop problems" did

Re:Hidden Agenda ?

[B747SP (179471)]

The real story is that the government has millions of IBMs bought in the past two years that are now just so much scrap due to lack of support.

With respect, those millions of IBM PCs were scrap the moment they left the factory.

Every time I say something bad about IBM PCs on slashdot, an IBM employee with mod points mods me down as a Troll. I don't understand why, but hey, I'll try again...

I'm responsible for a fleet of around 100 personal computers - some desktops, most laptops. In years past, there was a corporate rule that said "Must Buy IBM" (they gave us a 'free' teaching lab worth of computers, we sold out, something, something)... So a significant magority of that fleet of computers are IBM PCs. P3-500, P3-650 and early P4 desktops, and a lot of 600E, 600X, and T21 laptops.

All of the IBM equipment, without exception, has failed at three years of age, plus or minus two months. The desktops have two failure modes: either the power supply just dies, or the brittle plastic bracket that holds the power switch inside the case breaks and falls off. You can generally jury-rig a solution for the brittle plastic, but the power supplys are made from unobtanium - exactly the physical opposite of an otherwise identical power supply that Gateway and many others used - and so you simply can't replace a power supply short of paying IBM prices for spares.

The 600 series stinkpads have a single failure mode: The battery charging circuit fails at precisely three years of age. If that damned blinking orange "I'm not working" light doesn't drive you mad, the fact that your laptop is now a desktop will!

The T21 laptops have two failure modes: either someone farts in the general direction of the grossly under-engineered screens and they either break, or just go a terrible pink colour, -or- the mini-PCI slot fails, and you lose modem and ethernet. Motherboard replacement.

Now these failures aren't one or two machines. These are all machines. They all fail that way.

Now you can't tell me that these failures aren't in the product by design.

By comparison, I have old P1, P2, and P3 gateway and Dell machines lying around everywhere, and those damn things just won't die!!!! I still have one old P1-60 gateway box with about 120Mb RAM in it running FreeBSD, MySQL, Apache and stuff, and with an uptime of about 2 years. It won't go away!!!

Nah man, this IBM stuff... it has the technical potential to be good stuff, but whilever they keep designing that shit to fail at three years of age, I'll not ever buy it.

Re:Hidden Agenda ?

[af_robot (553885)]

Now these failures aren't one or two machines. These are all machines. They all fail that way.

Well, I don't believe you. We have an IBM service center in our company I can judge personally how many failures were caused by IBM's "bad design".
IBM PCs had only ONE critical problem - leaking capacitors on desktop motherboards, but it is not IBM fault - many vendors also had that problem.

btw: In some cases IBM service centers can repair your failed PC's under ECA even if it is out of a warranty. Leaked capacitors usually fixed under ECA.