The firm, which sank deep into the red during the technology slump of 2000-2, made 5.5bn kronor (�410m; $750m) before tax in the three months to December.

Heavy cost-cutting has helped to turn the company around.

Ericsson was cautiously positive about prospects for 2004, following the lead of its peers, but warned of tough times in the first three months of the year.

The improvement in the firm's bottom line pushed its shares up 13% by 1100 GMT, levels last seen in April 2002.

Cutbacks

Ericsson's changed fortunes from both the reviving tech market and its cost-cutting strategy present a contrast with 2002.

In the same period of that year, the cost of cutting jobs and shifting its spending patterns - and the decision to merge its handset business with that of electronics giant Sony - meant it lost 2.1bn kronor before tax.

The company's results had sunk into the red in 2000, and stayed there until the third quarter of 2003.

Now that the cost programme - which saw thousands of employees lose their jobs - has settled down, the effects are showing in the company's margins.

Ericsson had predicted a gross margin, the proportion of revenue left after accounting for general costs, parts and labour, of about 36.5%.

In fact, the figure came in at 41.6%.

But the first three months of 2004 are likely to prove tougher.