Peter Starck
STOCKHOLM: Telecoms equipment maker Ericsson signed a deal on Saturday that
will boost cash flow by $750 million, suggesting an accumulated cash flow impact
of deals announced this month of at least $1.3 billion.
This indicates that Ericsson's top executives may have met their key goal of
positive cash flow to the tune of 13 billion crowns ($1.23 billion) in the
fourth quarter -- an achievement necessary to reach cash flow in the black for
full-year 2001.
Investors closely watch loss-making Ericsson's cash flow because numbers
persistently in the red might force a company to turn to the capital markets for
funds. Issuance of new stock would dilute earnings per share and could knock the
share price.
Ericsson, which made a net loss of 17.8 billion crowns in January-September,
has staked annual bonuses for 3,000 managers on reaching positive cash flow for
the year.
The group earlier this year set about to cut its work force by one fifth as
part of a plan aimed at annual savings of some 38 billion crowns from 2002.
In a statement on Saturday, Ericsson said it had signed a sale-lease-back
deal regarding software testing equipment at test plant sites in Sweden and in
the United States.
"This set-up is another successful step in our efforts to release
capital," Ericsson Chief Financial Officer Sten Fornell said in the
statement. "The transaction will be effective by year-end, and will improve
the cash position of the group with approximately $750 million," Ericsson
said.
It did not say anything about the full-year 2001 cash flow. "There will
be no material impact on Ericsson's future net income," the company said,
adding that staff at the test plants would not be affected.
The sale-lease-back facility, arranged by a syndicate of financial
institutions which Ericsson did not name, is latest in a series of deals
announced this month by the electronics group.
Other disposals announced recently by Ericsson include real estate in Sweden
for an estimated $47-141 million, hardware to Compaq worth $140 million and 1.5
billion crowns worth of vendor loans, which the company said would boost its
cash position by about $300 million.
(C) Reuters Limited.