We are now in a much stronger position to... restore profitability in 2002

Kurt Hellstrom, Ericsson

The firm made a net loss of 21bn kronor (�1.4bn; $2bn) in 2001, as sales of mobile phones slumped towards the end of the year.

In 2000, the firm made a profit of a roughly equivalent amount.

All mobile phone firms, whether manufacturers, operators or other technology providers, have suffered in recent months from a steep decline in demand for new handsets and subscriptions.

But analysts were cheered that Ericsson had not lost market share, despite the perception that it is struggling to compete with larger Finnish rival Nokia.

Some had expected a far worse financial performance from Ericsson, especially since weak results from Motorola on Wednesday.

3G hopes

Although sales of existing network handsets declined by 7% quarter on quarter in the last three months of the year, the company trumpeted strong growth in orders from third-generation (3G) network providers.

CEO Kurt Hellstrom remains bullish

Shortage of handsets is seen as one of the key obstacles to the roll-out of 3G networks, which allow users a wider range of multimedia functions.

Ericsson now claims a 60% share in all 3G orders, which will accelerate as more operators start to prepare their networks.

"We have made significant progress in the changing handset market, where we have repositioned Ericsson as one of the few that can deliver core handset technology," said president and chief executive Kurt Hellstrom.

"We are now in a much stronger position to capitalise on market opportunities and restore profitability in 2002."

Industry analyst Peter Richardson told the BBC's World Business Report: "The first half of this year is probably going to stay pretty tough but moving into the second half what Ericsson will be seeing there is the beginnings of revenue coming in from the third generation networks they are building now... they don't actually get revenues from them until the networks go live."

Market optimism

Ericsson said that the end-2001 fall in mobile sales was a temporary phenomenon.

By the end of 2001, the number of mobile subscribers worldwide had grown to up to 950 million, the company said.

"We expect about 200 million new subscribers to be added in 2002, a solid growth rate of 20-25%," the company said.

"Our long-term forecast of 1.6 billion mobile subscribers by the end of 2005 remains unchanged."

Slashing spending

Part of the reason for the firm's confidence is the fact that it has slimmed down radically in recent years.

Mr Hellstrom trumpeted the success of the company's Efficiency Programme, a long-term cost-cutting scheme.

In the fourth quarter, the firm's costs were down 20% year on year, and Ericsson had shed 20,000 staff, taking its total headcount to just over 85,000.