Lenovo's Shares Likely Weighed by Concerns About Server Business -- Market Talk

Dow Jones08-16

0349 GMT - Lenovo's shares could be weighed by investor concerns about the profitability of its server business even though overall FY 1Q results were solid, Morningstar analyst Kazunori Ito says. Lenovo's FY 1Q operating margin dropped to 3.2% from 3.5% the previous quarter, raising concerns that "strong revenue growth is not translating into profit growth," he says. In particular, though server sales increased around 25% from the March quarter, profitability didn't materially improve, he says. "Due to the rising costs to accommodate strong server demand and thin margin of the business, it would take longer than expected for the server business to return to profitability," he adds. Shares are down 3.7% at HK$9.65. (sherry.qin@wsj.com)

(END) Dow Jones Newswires

August 15, 2024 23:49 ET (03:49 GMT)

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In particular, though server sales increased around 25% from the March quarter, profitability didn't materially improve, he says. \"Due to the rising costs to accommodate strong server demand and thin margin of the business, it would take longer than expected for the server business to return to profitability,\" he adds. Shares are down 3.7% at HK$9.65. 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