Ericsson to alter bill payment schedule for more cash flow

CIOL Bureau
New Update

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.