International Business Machines Corp.'s (IBM) efforts to focus on its higher margin businesses continued on Friday as it disclosed that US regulators have approved its plans to sell its low-end server business to the Lenovo Group.

IBM will sell its servers, which are made in Shenzhen, China for $2.3 billion, Bloomberg reported. It added that these products, which link computers on corporate networks, are viewed as commodities in the information technology sector.

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This transaction is a continuation in IBM's divestment of low margin business over the past few decades that have seen the computer hardware giant surrender its personal computer and printer lines in favour of more profitable software and services like cloud computing and data analytics. On the other hand, Lenovo will further grow its share in the computer hardware market segment, added Bloomberg.

Reuters reported that the deal was approved by the Committee on Foreign Investment in the United States, which had earlier raised concerns that government security may be compromised since IBM's servers used in the Pentagon could be accessed remotely by China's intelligence operatives.  It explained that the CFIUS is an interagency body that reviews the sale of US businesses to foreign groups or assess transactions involving a state-owned firm.

Bloomberg reported that IBM's commitment to continue maintenance of servers used by US agencies for the next five years was crucial in securing government approval. This allayed concerns that a Chinese multinational might be able to access sensitive government information.

Reuters said it was the third time Lenovo had successfully gotten the green light of the CFIUS. Lenovo and IBM went through a similar approval process when the latter bought the former's personal-computer business.

In a statement, IBM welcomed the development saying it was good news for the two companies and their employees and customers, while Lenovo said in another statement that it expects to finalize the deal before the year ends

Tagscyber espionage