UPDATE 2-Ericsson downbeat on Q4 sales, shares slide

(Updates with stock fall, quotes from CEO, CFO and trader)

By Sinead Carew

NEW YORK, Nov 20 (Reuters) - Telecom equipment maker Ericsson (ERICb.ST) on Tuesday offered a downbeat outlook for fourth-quarter sales, sending its shares tumbling to a near four-year low.

In a presentation to an investor conference in New York, the world's biggest mobile network maker said its planning assumptions for fourth-quarter sales were now at the lower end of the range which it forecast as recently as last month.

When the company issued a third-quarter profit warning in October, Ericsson had said fourth-quarter sales were expected to be between 53 billion and 60 billion Swedish crowns ($8.4 billion to $9.6 billion).

It also said it expected operating margins in the mid-teens, excluding its handset joint venture Sony Ericsson.

The company said the networks market in the United States and Europe had tightened and also cited political unrest in some emerging markets as a factor for the network market.

Chief Executive Carl-Henric Svanberg told investors Ericsson expected a slight decline in business from networks in Europe.

"We just assume that we'll have continued disruptions from consolidation," he said.

"We do not think for at least the next year that we will have any major upgrades because of data, which means that whatever growth we have in Europe ... will be from services and multimedia and maybe transmission," Svanberg said. "But less in networks (which) we expect could actually be slightly down." He added: "Longer term, we're quite optimistic actually."

Shares in the Sweden-based company tumbled 11 percent to close at 16 crowns, having fallen as low as 15.92, their lowest since February 2004.

"There is not much to say. It is a disaster. This is the second time in a short time that they have warned," said one Stockholm-based stock trader who declined to be identified.

MARGINS UNDER PRESSURE

Chief Financial Officer Hans Vestberg told investors he expected network build-outs to continue to weigh on margins for the next several quarters.

"We are of course in this moment knowing that we will have new network build-outs that we're doing right now or rolling out and we're in the midst of, and we have some that we have already or are starting right now," Vestberg told the audience.

"Those will weigh on our margins for the next several quarters, they will be there. They usually are six to nine months, sometimes up to 12 months, so we know that they will be there for quite a while."

But Svanberg said margins were likely to improve in the longer term.

"Over time you will see margins come up again. Then you are into the second half of 2008 and 2009. All equal, it should start to pick up again," he said.

The double-digit percentage drop in the shares on Tuesday followed a plunge of 30 percent when Ericsson shocked the market with its third-quarter warning.

The company blamed an unexpected business mix for a shortfall in profits, which were sharply lower than what it or the market had expected. It said it was receiving a greater share of sales from network build-out and less than it had planned on from upgrades, which are more lucrative.

Within days of the warning, Ericsson replaced its old chief financial officer, Karl-Henrik Sundstrom, with Vestberg. It also promised to try to improve its ability to monitor business conditions to avoid such market shocks in future.

In response to a question about whether the board of directors still supported management given Tuesday's latest downbeat comments, 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." (Writing by Adam Cox and Jerker Hellstrom in Stockholm; Editing by David Holmes, Paul Bolding)