The European technology sector got a shock yesterday when Ericsson issued a profit warning, sending many shares down sharply. Ericsson tumbled 20 per cent to a 17-month low.

The Swedish telecom equipment maker said it expected to make a loss of 4 billion Swedish krone to SKr5 billion in the first quarter, rather than to break even as it expected. While there have been a number of profit warnings from big US technology companies such as Lucent and Motorola, the news from European companies until now has been less dramatic. But analysts have increasingly felt Europe was not going to escape the effects of the US downturn.

In January the company Ericsson said it would exit mobile phone production, moving instead to outsourcing. But most of its revenues come from building telecom networks and reception systems, in which it is the world's leader. The shares closed at SKr64, a loss of SKr17.50.

The world's number one in handsets, Nokia, fell 9.5 per cent to a new 16-month low of #23.40, hit not just by Ericsson but also the tumbling Nasdaq and the news of job cuts at Cisco Systems. Alcatel was down 7.7 per cent at #39.24, STMicroelectronics down 6.9 per cent at #34, Infineon down 4.5 per cent at #36.38 and Siemens down 4.8 per cent at #119.93.

Europe's leading software company SAP fell 8.8 per cent to #141.40, with additional pressure coming from Deutsche Bank which said it was placing 750,000 shares at #137.50 each. Other software companies were equally weak, with Dassault Systemes down 8.25 per cent to #52.80.

Telecoms fell relatively modestly, with France Telecom off 4.4 per cent to #62.60 and Deutsche Telekom down 4.3 per cent to #25.74.

PT Multimedia, the cable television, Internet and media arm of Portugal Telecom, announced a #265 million loss for 2000, roughly in line with expectations. The shares fell 5 per cent to #19.09.

SAir Group, parent of Swissair, flew into severe turbulence as investors absorbed news that all but one of its supervisory board members planned to resign. The shares fell 13.9 per cent to 174 Swiss francs, the lowest close since January 1996.