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Sven Olsen (Blog) - June 21, 2006 11:36 AM

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6 comment(s) - last by othercents.. on Jun 23 at 12:27 PM

Lenovo then and now, ripped from internal documentation

Lenovo might not be all you think it is

I am not usually one to chime in about political matters, but I have been following the Lenovo-US Government debate for some time. Last week we published an article with regard to the percentages of state shareholders in the company. As of June 2006, the exact shareholder percentages (according to Lenovo internal documentation) are as follows:

Public shareholders 34.7%
Legend Holdings Limited 42.0%
IBM 13.2%
Texas Pacific Group, General Atlantic LLC and Newbridge Capital LLC 10.1%

Legend Holdings, as many of us know, is the parent company for Lenovo. 65% of Legend Holdings is owned by The Chinese Academy of Sciences and the other 35% is owned by the Employee Shareholding Society of Legend Holdings. Make no mistake, Legend Holdings is a state owned enterprise (SOE). For all intents and purposes, the Chinese Academy of Sciences -- a Chinese governmental office -- indirectly controls 27.3% of Lenovo through Legend Holdings.

That's not to say the Chinese government only controls 27.3% of Lenovo. 34.7% of Lenovo and 35% of Legend Holdings are held by private investors and employees -- some of which are government officials.

Regardless, should the rest of the world be intimated by Lenovo? Considering the company had revenue in 2005 of $13.3B USD with a net profit of $309M USD, I'd say so. Am I worried about my Lenovo laptop containing an electronic surveillance device that emails my passwords to the Chinese government? Lenovo did more than $3B USD worth of business with the US last year, and it would only take one incident of a bugged Lenovo product to virtually wipe that number to zero overnight. Quite frankly, I think the Politburo is more interested in driving BMWs than reading my email.

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LOL - "rather drive BMWs than read my email"

By ZardozFrayn on 6/21/2006 12:53:42 PM , Rating: 2

Very funny, undoubtedly true... but there could always be backdoor that lies dormant, until called into action during an emergency, or when it detects irresistible secret info. Communication could be masked using the message-in-a-jpeg technique.

RE: LOL - "rather drive BMWs than read my email"

By Trisped on 6/21/2006 3:53:37 PM , Rating: 2

I am more concerned about a back door being built in. Still, non-Chinese countries design the chips, so if the chips don't work right or are suspicious we would have already heard. If there is still concern, the US Military has enough know how to test each computer for hidden doors and security breaks.

And if it was possible to break in, a hacker already would have.

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RE: LOL - "rather drive BMWs than read my email"

By ZardozFrayn on 6/21/2006 4:31:14 PM , Rating: 2

I remember hearing (what sounded like an urban legend) about once-upon-a-time printers built in the US that had been delivered to foreign countries with chips that could relay everything being printed back to the fatherland (NSA, CIA). Given the resources and expertise of the Chinese, I would think that a backdoor, or eavesdropping (hardware or software) circuit, could be embedded anywhere in the laptop, from the ethernet port to the keyboard, from the BIOS to the system drivers. Would be a formidable task indeed to trace every internal system interconnect, especially if it lies dormant until called into action.

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CAS holds 42% of Lenovo...

By Furen on 6/21/2006 2:50:18 PM , Rating: 3

The Chinese Academy of Sciences holds 65% of Legend, which means that has a controlling stake. As such it has full control over ALL of the stock Legend holds.

Of course a 42% stake is not a controlling stake, but the other "public shareholders" may include Chinese nationals/agents/puppet organizations. The problem, more than anything else, is that the former IBM is being "Lenovonized" and this COULD allow agents of the Chinese government to infiltrate the American arm. Also, remember that IBM is going to eventually sell its stake in Lenovo which will give China a chance to solidify its control of the company once again (IBM is under contractual obligation not to sell its shares quite yet).

Regardless, while I doubt the Chinese government would try anything funny even if it had a controlling stake in the company, there's no point in exposing sensitive systems to the company since some nations have gone to the extremes with regards to espionage.

RE: CAS holds 42% of Lenovo...

By ZardozFrayn on 6/21/2006 3:27:18 PM , Rating: 2

42% is a controlling interest in a firm that size. In the USA, 10% ownership of any large widely held, publicly traded corporation is considered a controlling interest. Not technically, but in practice. The question is wether Lenovo is "widely held". Seems a moot point, given the authoritarian nature of the institutions involved.

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US Government is overly protective??

By othercents on 6/23/2006 12:27:44 PM , Rating: 2

Now really do you think that the US Goverment is being overly protective, or that Lenovo actually has these capabilities? I think the US Goverment is right on target. Who would know better than the biggest spy organization in the world? The US knows that they have the capability and have use the technology in the past.

Plus who in their right mind would crack open every laptop and inspect everything to make sure it isn't bugged?? Even if you did how would you know? It is just easier to cut off the dead or dieing limb than it is to try to nurse it back to health.

If the goverment really wanted everything secure they would watch every packet that goes in and out of the Goverment networks. They should be doing that now to keep secrets from getting outside of the US.

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