Techs hammer eurostocks, Ericsson plummets 24 per cent

European bourses started the week with heavy tech-led falls yesterday as Sweden`s Ericsson shed a quarter of its value after announcing poor results, a gloomy outlook and a highly-dilutive rights issue.

The bombshell from the telecom equipment maker was compounded by an eighth consecutive quarterly net loss from US peer Lucent and helped shove the DJ Stoxx technology index down 5.57 per cent, to its lowest level in nearly six months.

"Ericsson`s got the week off to a pretty bad start," said David Thwaites, European strategist at BNP Paribas in London. "The market has been looking for guidance on the second quarter and it`s not been a stunning success so far."

By 1558 GMT, with most European stock markets closed, the FTSE Eurotop 300 index of pan-European blue chips was off 0.72 per cent while the narrower DJ Euro Stoxx 50 index lost 1.27 per cent.

That ate up much of the 1.6 per cent gain which European markets made last week and left the continent`s benchmark indices a touch lower for the year.

Among few positive notes for European equities were Swiss insurance giant Zurich Financial, whose shares surged after its embattled chief said he would quit, and utility stocks, boosted by a UK merger.

On Wall Street, the Dow Jones industrial average shed 1.02 per cent, the broader Standard & Poor`s 500 Index gave up 1.39 per cent and the tech-laden Nasdaq Composite slipped 2.34 per cent.

Ericsson was joined at the top of Europe`s blue-chip loserboard by Nokia, Siemens, and Alcatel, which lost between 3.3 and 5.9 per cent apiece.

"It could take years before telecom equipment companies get rid of excess capacity," said Josef Scarfone, who manages about one billion euros for Frankfurt Trust GmbH and says he has been reducing his exposure to the sector in recent weeks.

German technology and engineering giant Siemens was particularly hard hit, even though it denied dealer talk that it might preannounce its interim results, due on Thursday.

Ericsson`s 24 per cent drop was one of the biggest one-day falls ever recorded by a Stoxx 50 component.

The company, the world leader in mobile networks, asked shareholders for almost $3 billion of new funds and warned it would not return to profit this year.

It also dropped its previous target for a five per cent operating margin this year, announced 20,000 job cuts over the next two years and said it was leaning towards the lower end of forecasts for global handset sales.

The news came hot on the heels of Nokia`s decision last week to trim its 2002 sales outlook. (Reuters)

"Any more news like Ericsson`s would be the last thing we need," said BNP Paribas` Thwaites.

The telecoms sector was also weak as British mobile phone operator mmO2 extended last week`s falls.

Sector leader Vodafone fell 4.7 per cent, although fund managers were relatively sanguine about the subscriber revenues figures it is scheduled to release later in the week.

Observers noted the massive tech sell-off had not been mirrored elsewhere.

"Ericsson is not typical, and I think we`d like to get a clearer picture of what`s happening outside the tech sector, in the consumer stocks for example," said Thwaites, eyeing first quarter results from Unilever at the end of this week.

Food and beverage was the biggest gainer among the sectors, climbing 0.7 as British drinks group Diageo clambered 2.6 per cent higher.

UK utility National Grid gained 3.1 per cent after it agreed to acquire UK gas distributor Lattice Group with a small premium. Lattice added 11.1 per cent.

Zurich Financial was the biggest individual gainer among the blue-chips, up 4.5 per cent on news that Rolf Hueppi, the firm`s embattled chairman and chief executive officer, will quit both positions later this year.