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Ericsson: Fingers Crossed

Ericsson AB's (Nasdaq: ERICY) current rights issue may just give it enough to cash to survive the current recession -- so long, that is, as nothing unexpected happens. That's what analysts are saying these days. And not surprisingly, that's got them speculating over what could rock the boat.

Plenty, it seems.

Candidate No. 1 is that Ericsson might be forced to buy back a lot of the loans that it made when it encouraged carriers to buy its equipment by offering them attractive financing deals. Ericsson sold the loans on to financial institutions, but may be forced to buy them back now that its debt rating has taken a knock, according to a research note from Bear Stearns & Co. Inc. this morning. The bill for buying back loans -- more than $1 billion -- "could become an issue for Ericsson," says the research note.

Lehman Brothers is more bullish about Ericsson's prospects, but notes another possible surprise lying in wait for the Swedish mobile meatball -- having to stick some more cash (as much as $500 million, in the worst-case scenario) in the Sony Ericsson Mobile Communications pot next year.

— Ray Le Maistre, European Editor, Unstrung
http://www.unstrung.com
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