Ericsson, the world's largest telecommunications equipment manufacturer, issued a severe profit warning yesterday that wiped out a quarter of its market value and triggered a sweeping change to its business strategy.

The Swedish company said operating income is expected to plummet 36 per cent to SEK5.6 billion in the third quarter compared with the same period last year and that operating margins would also fall in the fourth quarter.

The warning marked the end of a honeymoon period for Carl-Henric Svanberg, who has been Ericsson's chief executive since 2003 and played a leading role in restoring the company's profitability after the bursting of the internet bubble.

On a day Ericsson lost $15 billion from its market capitalisation, Mr Svanberg damped his trademark bullishness and said: "This is a day to be humble, concerned and disappointed."

However, he said he had not considered resigning and expressed confidence Ericsson could improve its profitability.

Ericsson blamed the warning on a shortfall in contracts to expand or upgrade existing mobile networks, notably in the US and western Europe. Such contracts generate higher margins compared with deals to roll out new mobile infrastructure in emerging markets.

Ericsson has increased its market share over rivals partly through deals in developing countries such as China and India.