S&P boosts Lenovo

S&P said it raised its ratings on Lenovo Group Ltd. and its debt to BBB from BBB-.

“Lenovo's growing service and solutions revenue and good working capital management will contribute to steadier cash flow. Though much of the company's solutions and services group (SSG) revenues are tied to hardware sales, increases in service penetration have led to service revenue growth even as hardware sales declined. SSG's higher margins–3x that of intelligent devices group (IDG; mainly sales of PCs, tablets, and smartphones)–up-front cash payments, and somewhat recurring nature have improved Lenovo's overall profitability and cash flow amid the downturn,” S&P said in a statement.

However, the agency warned SSG revenue growth will likely slow with declining hardware sales but growth should still stay above 10% over the next two years.

The outlook is stable.

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