Ericsson's shares gain 1.8 percent to 1.59 euro, deadline to pay its supplier bills extended

LM Ericsson AB extends its deadline to pay its supplier bills in a move to improve cash-flow, the company said Thursday.

Photo: Ericsson's shares gain 1.8 percent to 1.59 euro, deadline to pay its supplier bills extended

Ericsson, which has seen its stock plummet more than 40 percent this year, will extend the deadline to 90 days from 60 days as part of its global policy, spokeswoman Ase Lindskog said.

"The demands we have from our customers is often longer than 60 days, so now we've said that if they (subcontractors) want to come along with us in this exciting industry they have to accept the same demands that we face."

Lindskog said the plan is part of a larger project begun earlier this year to improve the company's cash flow.

Jari Honko, an analyst at eQ Bank, said that although Ericsson is by no means the only large global company to take such measures, it could be seen as "a reaction to the difficulties the company has been having and a way to improve its operating efficiency."

By extending the deadline, the "subcontractors will fund more of Ericsson's operations," he said.

"If there are no negative implications to how the subcontractors will react to this, it is of course good for the company."

On Oct. 16, shares in the company dropped more than 30 percent after the company made a surprise cut to its 2007 outlook.

On Wednesday, the Stockholm-based company saw its shares fall to the lowest level since 2004 after it said its fourth-quarter revenue is expected to come in at the lower end of the already communicated, somber forecast.

Ericsson gained 0.8 percent to 14.80 kronor (EURO 1.59; US$2.36) in Stockholm on Thursday.