Global technology investors were delighted on Thursday as Swedish telecommunications equipment giant Ericsson gave a surprisingly upbeat estimate on its performance since the start of the year, breathing life into European stock markets.
Ericsson said it was raising its expectations for gross margins for the first quarter, which was now expected to outstrip the 41.6 percent it achieved in the last three months of last year.
Ericsson, which in the fourth quarter returned to net profit for the first time in years, said the expected improvement was due to its cost-cutting efforts, which were paying off faster than expected.
The announcement inspired stock market investors, who bought into the stock rapidly, pushing it 6.70 percent higher on the Stockholm exchange to a closing level of 22.30 kronor (US$2.98).
"These are higher margins than people were counting on. Nobody believed they would even match the very strong 41.6 percent seen in the fourth quarter," Mikael Lasen, an analyst at Kaupthing Bank said.
Across the border in Finland, shares in mobile handset world leader Nokia also rose following the announcement, rising 1.50 percent on the Helsinki stock exchange, before levelling off to a closing gain of 0.3 percent 16.73 euros (US$20.62).
"People expect Ericsson's improved outlook to also benefit Nokia, as it should," said analyst Karri Rinta at Evli Bank.
In Paris, Ericsson rival Alcatel rose 4.8 percent to 13.46 euros in closing trade following the announcement from Sweden, making it the French stock market's strongest blue chip gainer.
Ericsson's announcements have been music to the ears of global technology investors ever since the company said in February that the worst was over for the global cellphone market.
Presenting last year's results, Ericsson reported a return to the black in the fourth quarter after 10 straight quarters of deficits at the net level, but remained in loss for the full year.
During its period of re-adjustment since 2000, Ericsson's workforce halved from over 100,000 to 51,600 by the end of last year, and further bloodletting is to take its payroll to 47,000 this year.
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