Advertisment

Ericsson seen meeting cash flow target

author-image
CIOL Bureau
New Update

Peter Starck

Advertisment

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.

Advertisment

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.

Advertisment

"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.

tech-news