Ericsson said last night that its sales for the remainder of the year would be at the very bottom of expectations amid signs that the mobile phone market was weakening.

Its shares plunged 11 per cent after it blamed tightening demand in the United States and Europe for mobile phone handsets, while further doubts were raised about the future of Carl-Henric Svanberg as the head of the company.

The world’s largest telecommunications equipment maker issued a surprise profit warning only last month, triggering a 30 per cent drop in its share price at that time. Yesterday, at a conference in New York, it said that it expected sales for the last quarter of the year to be at the bottom end of its previous prediction of between 53 billion and 60 billion Swedish kronor (£4 billion to £4.6 billion). Shares closed at their lowest for four years.

Hans Vestberg, the chief financial officer at Ericsson, said that there would also be pressure on margins in the coming quarters because of the cost of building new networks. However, he said that margins should recover by the second half of next year or the beginning of 2009.

The company said that its market in America and Europe had become much tougher and performance had also been affected by political unrest in some of its emerging markets. Mr Svanberg, chief executive, remained optimistic in the longer term.

Asked whether Ericsson’s board still supported management given the news, Mr Svanberg said: “I must say we have in this situation very strong support and good cooperation with the board, so there’s no change there.”

Analysts and investors said that they were concerned about the company’s ability to monitor the performance of its own business and were disappointed that Ericsson did not give a clear sign when it would start to see improvements.

Leo Schmidt, an equities analyst at Chubb Corp, the insurer, which owns Ericsson shares, said: “It’s not good news. That makes people wonder how much management has control of the business.”

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