Ericsson, the Swedish telecoms equipment group, has suffered a collapse in revenue in the third quarter due to a slowdown in emerging markets and a stutter in the pace of new orders.

The company, which bought the bulk of Marconi, its UK rival, in 2005, seemed to be weathering the economic downturn well and had been expected to report further progress in the three months to the end of September. Instead, however, it announced a near 6 per cent decline in sales and a 74 per cent plunge in net income. The results triggered an 8 per cent decline in the share price.

Carl-Henric Svanberg, the outgoing chief executive, blamed weakness in emerging markets and a slight slowdown in new orders for the revenue slip, but argued that analysts had been over-optimistic. “We have said all along that it would be unrealistic that we wouldn’t be affected by the downturn. Some of the expectations out there were a bit high.”

Ericsson is traditionally reticent about discussing its prospects, which heightened concerns over its performance in the coming quarters. Richard Windsor, an analyst with Nomura, said the outlook was “frustratingly opaque” despite management optimism over longer-term demand.

Mr Svanberg said: “It is hard to foresee what will happen in the next 90 days, but overall, in the years to come, we are quite optimistic. The importance of telephony is increasing.”

After seven years running the company, he will hand over to Hans Vestberg, chief financial officer, at the end of the year when he will move from Stockholm to London to become chairman of BP, the oil group. “I will have to get used to drinking tea and eating shortbread,” he said.

Despite the earnings slip, Ericsson maintained its operating margin at 8.5 per cent after a cost-cutting plan yielded about £880 million in savings. Ericsson management said that this programme will be extended in the light of the deterioration in its sales.

The setback at Ericsson comes a week after Nokia reported its first loss in a decade and ahead of AlcatelLucent’s results.

The telecoms equipment sector has been shaken up by the expansion of Huawei and to a lesser extent ZTE, the low-cost Chinese players that have stolen market share from the established operators.

However, Ericsson believes it has yet to feel the full force of the Huawei effect. “It has not been so head-on to this point,” Mr Svanberg said.

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