* What: Lenovo Q1 (April-June) results.

* When: Aug 7

* Easing China growth and U.S. slowdown weigh

By Judy Hua and Vinicy Chan

HONG KONG, Aug 5

(Reuters)

- World No. 4 PC maker Lenovo <0992.HK> is expected to post a 60 percent rise in quarterly earnings, the slowest growth in a year, as it copes with a U.S. slowdown and weaker Chinese demand after a devastating earthquake.

But analysts still say Lenovo, which competes with Hewlett-Packard <HPQ.N>, Dell Inc <DELL.O> and Asian rival Acer <2353.TW>, should fare better over the long run because of its commanding market share in China and in emerging markets.

"Lenovo's outlook is pressured by both easing PC demand growth in China and slower IT spending in the United States. It is hard for Lenovo to maintain its high growth of last year," said JP Morgan analyst Charles Guo.

"But we still like Lenovo's long-term growth prospects, given its strong positioning in China and growth in Europe and the consumer business."

Late to the party, Lenovo only this year re-launched a consumer PC business with new products in Europe and the United States. On Tuesday, it said it would launch its first ultra-low cost laptop or "netbook" -- about a year after rivals had.

Lenovo held 7.9 percent of the worldwide PC market in the quarter, down slightly from 8.0 percent a year earlier, according to IT consultants IDC, the first time in six quarters that it lost market share on a year-on-year basis.

Analysts attributed the slight drop to weakening PC sales in May and June after an earthquake devastated China's southwestern province of Sichuan. The region accounts for around 5 percent of Lenovo's Chinese sales.

Although PC demand in the country has picked up since July, it may ease again this month as business activity in Beijing -- a key distribution hub for tech products -- decelerates during the Olympics starting Aug. 8.

Lenovo is expected to post a quarterly net profit of $107.47 million, up 60.8 percent from $66.84 million previously, according to four analysts surveyed by Reuters.

ASIA SUPPORTS

In the long run, Lenovo will benefit from its strength in Asia, home to some of the world's fastest-growing economies.

In Asia excluding Japan, Lenovo expanded its leading market share to 18.2 percent in April-June from 18 percent a year earlier, riding unit shipment growth of 15.7 percent, IDC said.

Daiwa Research analyst Joseph Ho expects Lenovo's global PC shipments to increase by 17 percent in 2008 to 23.6 million units, versus a 13-percent market growth forecast by Gartner.

Lenovo derived nearly 40 percent of its revenue from China -- it commands a third of the world's top PC arena after the United States -- and 28 percent from the Americas in the last fiscal year.

Analysts also expect Lenovo, which bought IBM's <IBM.N> PC division in 2005 for $1.25 billion, to explore acquisitions after Acer beat it in a race for Europe's Packard Bell last year.

But they say the firm will move cautiously amid volatile financial markets.

"What Lenovo needs is to find a target that fits itself strategically," said an analyst at a European investment bank.

"I don't believe Lenovo will buy any company blindly just because it's cheap now. It may cause lots of trouble with integration afterwards."

Shares in Lenovo climbed 5.6 percent in April-June, outpacing a 3.3 percent fall in the benchmark Hang Seng Index <.HSI>. They have fallen about 40 percent from a 52-week high in November, walloped along with the rest of the sector on fears a sharp global economic slowdown will curb consumer spending.

The stock still trades at 14 times prospective earnings, versus Dell's 15.5 and HP's 12.3, according to Reuters Estimates.