RE: Le no-no

Huh? There are IBM laptops with dedicated crypto chips? Although I don't claim to be any kind of an expert, I think this has to be wrong. Anyone know any different? What may exist is some kind of FPGA crypo code, but even that I doubt. (There's also the logical problem that the article writer seems to have missed: When one company buys another company they don't just buy that company's inventory and stuff, they buy the intellectual property. Who gives a crap if they own the chips if they also own the algorithm.) -TD

From: "R.A. Hettinga" To: cryptography@metzdowd.com, cypherpunks@al-qaeda.net, osint@yahoogroups.com Subject: Le no-no Date: Fri, 28 Jan 2005 22:48:18 -0500

http://www.redherring.com/PrintArticle.aspx?a=11201§or=Industries

RED HERRING | The Business of Technology

Le no-no

The U.S. trips up a simple plan between IBM and Lenovo. January 28, 2005

Homeland security is a cornerstone of the Bush Administration. But does halting the IBM-Lenovo deal make the United States any safer? The Committee on Foreign Investment in the United States (CFIUS) has decided to investigate the threat presented by the sale of IBM's personal computer business to China's Lenovo Group.

Industry observers want to know what it is about this deal that irks the feds. "I don't know," says Jeff Moss, CEO of Black Hat, a computer security consulting firm. "It could be the loss of any manufacturing technology, any kind of proprietary technology that IBM had; but the Chinese could take a laptop apart themselves, too."

Besides, most personal computers are already made in China-PC production is extremely commoditized, perhaps as much as transistors. "It is quite a stretch [to say] that the sale of the PC business to Lenovo would threaten American security," says Baizu Chen, a professor at the University of Southern California's Gordon S. Marshall School of Business. "Some senators want to make a noise. Eventually, this will pass. It's just transfer of ownership."

One concern may have to do more with location than technology. The Washington Post quoted a member of the U.S.-China Economic and Security Review Commission-a Congressional panel created to watch commercial relations between the U.S. and China-as saying that Chinese computer experts could use an IBM facility in North Carolina as a base for industrial espionage.

While the U.S. Treasury Department wouldn't confirm or deny the launch of the 45-day probe, IBM, which will still hold an 18.9 percent stake in the business, says it has filed the required notice with the committee and is cooperating fully. The company is confident in the process and outcome. One would hope so, given that the deal is worth $1.75 billion in cash, equity, and assumed debt.

Where are the red flags? The U.S. government must demand action if a deal impacts domestic production needed for projected national defense requirements, or the capacity of domestic industries to meet national defense requirements, or the control of domestic industries by foreign citizens. The sale of IBM's money-losing PC unit doesn't quite cut it.

It could be an issue of pride, say some-or perhaps cryptographic chips, say others. "Some of the IBM laptops have built-in cryptographic chips," says Pete Lindstrom, research director for Spire Securities. Mr. Lindstrom points out that if the intellectual property associated with cryptography is sold to a foreign country, one could potentially transfer a strong cryptographic capability to another country.

But IBM is a multinational company, with employees across the globe. Would it really be so hard for someone to access such information? In the end, it all comes down to whom you trust. Legend Holdings owns the majority stake in Lenovo, and the Chinese government controls a large chunk of Legend. A few years ago, Global Crossing wanted to sell its telecommunications network to Hong Kong-based Hutchison Whampoa. It almost did-until the CFIUS stepped in. But that's a story IBM executives would rather not think about.

-- ----------------- R. A. Hettinga The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'