Ericsson, whose shares have lost nearly half their value since a collapse in earnings announced in mid-October, said its operating profit slid to 7.6 billion Swedish crowns ($1.2 billion) in the fourth quarter from 12.2 billion a year earlier. Forecasts were for a 7.94 billion crown profit.
The firm said its operating margin fell to 14 percent, below forecasts for 14.7 percent and well short of the 22.5 percent reported a year earlier.
The erosion of earnings in recent quarters has been mainly due to the firm making less money from higher-margin network upgrades and more from the less profitable network rollouts.
But analysts, who said a downbeat report from Ericsson had been expected, noted the firm's networks business had performed in line or slightly stronger than expected and instead zeroed in on one particular area where Ericsson looked unexpectedly soft -- the company's multimedia division.
"In the P&L there's one weak spot and that's the multimedia division with much bigger losses than the consensus was looking for," said Thomas Langer, analyst at WestLB. "Everybody was looking for a small operating profit."
Multimedia, a division created as part of a reorganisation designed to ensure future long-term growth, lost 439 million crowns in the quarter versus a year-ago profit of 527 million.
Overall, sales of 54.5 million crowns were slightly better than forecasts of 53.8 billion. Ericsson had announced in October it saw sales in a 53 billion to 60 billion range, but later said it saw them coming in at the lower end of that range.
Battling it Out
Ericsson has 41.1 percent of its main market, according to latest figures from research firm Dell'Oro. But Nokia Siemens Networks has been making gains, capturing 35.5 percent as of the third quarter, the research firm says.
Ericsson's strategy of gaining market share has been questioned since the third-quarter debacle, although it said on Friday its ambition was still to increase market share.
Svanberg pointed to China as a bright spot. "We even grew our market share slightly in China this year, in a year where Chinese vendors are taking market share and all other international vendors have lost market share."
But the market, for now, appears more focused on Ericsson's margins. Svanberg said he had nothing to add to a comment made in November, when he said the first quarter could be the low point in terms of margins.
Analysts said the lack of explicit short-term guidance was pressuring Ericsson shares. "When there's so much insecurity, a clear negative message is better than no message at all," said Evli analyst Anders Berg.
For the local economy, the Ericsson report also made for downbeat reading. Tord Strannefors, head of forecasting for Sweden's AMS labour board, said: "We have seen small job cuts the last couple of years. We have been spared job cuts of this size due to strong export trends."
- Reuters contributed to this report.