Ericsson to alter bill payment schedule for more cash flow

Tony Munroe

HONG KONG: Telecoms gear giant Ericsson, seeking 13 billion Swedish crowns
(US$1.23 billion) in positive cash flow in its fourth quarter to reach positive
cash flow for the year, said on Friday it can achieve more than half of that by
shortening its accounts receivable schedule.

Ericsson also said it intends to double its investment in China, its biggest
market, to more than US$5 billion by 2005, including investments by its Chinese
joint venture partners. Ericsson, the world's biggest supplier of mobile
telecoms networks, has been suffering along with its rivals as demand from
carriers for equipment has withered.

It said the tough market would persist but adopted a positive longer-term
outlook during a briefing in Hong Kong with reporters and analysts. The company
has staked bonuses for 3,000 managers on reaching positive cash flow for the
year, which would diminish the need to issue more shares.

Ericsson on Friday reiterated its intention not to offer new shares. The
company said it intends to reduce its accounts receivable days of sales
outstanding -- the time it takes for customers to pay their bills -- to 90 days
by year-end from 102 days in its recently reported third quarter and 97 days in
the second.

"We are all very motivated to making this a reality," chief
financial officer Sten Fornell said, referring to the full-year positive
cash-flow target. The company is reviewing the way it structures contracts,
breaking them into smaller pieces so that customers can be billed more
frequently, Fornell said on the sidelines of the event.

Ericsson posted negative cash flow in its first quarter of 17.7 billion
crowns but reaped positive cash flow of 4.3 billion crowns and 1.2 billion
crowns in its second and third quarters. Fornell on Friday reiterated that the
company wanted to post a fourth quarter pretax loss "somewhat smaller"
than the third quarter pretax loss of 5.8 billion crowns.

The company also stood by its revenue target of 55 billion crowns for the
quarter, excluding the handset business hived-off into a separate venture with
Japan's Sony Corp.. Ericsson, which has undertaken an aggressive cost-cutting
schedule that could see it shed up to 22,000 jobs, said it is ahead of schedule
on the savings effort. It has set a goal of reaching five per cent operating
margins in 2002, a target some analysts consider to be aggressive.

President and CEO Kurt Hellstrom, speaking on the sidelines of the event,
said that target is based "on our performance when it comes to producing
cost savings, streamlining the company." While Hellstrom did not completely
rule out more job cuts, he said there would not be any further big job cut
programs "if things aren't getting considerably worse." "Of
course we are going to continue to drive efficiency measures whenever we find
the possibility to do that, and that could of course mean job cuts also,"
he said.

Hellstrom cited China as "a real comfort today, with the difficult
conditions that the market and the industry are in." China overtook the
United States this year as the world's biggest mobile market and accounts for
nearly half of Ericsson's Asia-Pacific sales. Overall, Hellstrom said, "we
plan for a scenario where the difficult conditions will continue for some
time," especially in Latin America. But he added, "we are optimistic
about the future and the long term."

(C) Reuters Limited.