Nov. 20 (Bloomberg) -- Ericsson AB, the world's largest maker of wireless networks, said fourth-quarter sales will probably be at the lower end of a forecast given a month ago as orders slump in Europe and North America.

Ericsson fell to the lowest level in almost four years in Stockholm trading after the company said that those markets are ``tightening,'' and that a falling dollar and political turmoil in some countries are hurting sales.

Chief Executive Officer Carl-Henric Svanberg, who made the comments during a presentation today in New York, reported earnings last month that trailed his predictions, sending Ericsson's stock 24 percent lower in one day. Chief Financial Officer Karl-Henrik Sundstroem resigned nine days later.

``This makes it obvious that something must be wrong in their reporting systems, but it's also obvious that the market is weaker than it has been,'' said Greger Johansson, an analyst at Redeye AB, who recommends holding the stock. ``I don't have much confidence in the company or management.''

Ericsson, which makes base stations and antennae for wireless networks, predicted on Oct. 16 that fourth-quarter revenue would be 53 billion kronor ($8.4 billion) to 60 billion kronor.

Ericsson shares fell 1.98 kronor, or 11 percent, to 16 kronor in Stockholm, the lowest since January 2004. The company's American depositary receipts dropped 12 percent to $25.11 at 4 p.m. in New York.

Declining Dollar

Political turmoil in Pakistan and a cyclone in Bangladesh, as well as further declines in the dollar, are reducing sales, Svanberg said. The dollar has lost 11 percent of its value against the Swedish krona in the past year, which means revenue generated in U.S. currency is worth less when converted back into kronor.

The first quarter ``could very well be the low point of how things develop here,'' Svanberg said. The outlook for the full year hasn't changed, he said.

The third-quarter earnings announced last month surprised shareholders, who had been told by Svanberg a month earlier that industry growth was ``strong.'' The CEO, who said he'd known the figures for just 24 hours, blamed an unexpected drop in network upgrade orders and said it was a ``day to be humble, concerned and disappointed.''

`Strong Support'

Svanberg said today he has ``strong support'' from the board and ``good cooperation'' with directors.

The decline in the stock on Oct. 16 was the biggest in at least 17 years, costing Ericsson its rank as Sweden's largest publicly traded company. Clothing retailer Hennes & Mauritz AB's market value topped Ericsson's for the first time in four years. Today's drop pushed Ericsson another two positions lower, putting it behind TeliaSonera AB and Nordea Bank AB.

``We're seeing a valuation meltdown,'' said Thomas Langer, an analyst at WestLB in Dusseldorf, who recommends holding Ericsson shares.

Margins may start to widen in the second half of next year, provided the market recovers and demand picks up, Svanberg said. He said he doesn't expect the network market to decline in 2008.

In October, Ericsson forecast an operating margin, or operating profit as a percentage of sales, in the mid-teens for the fourth quarter, compared with 22.7 percent a year earlier.

Credit-default swap contracts based on Ericsson's debt increased 8 basis points to 80.5 basis points, according to Deutsche Bank AG. The contracts, used to speculate on a company's likelihood of defaulting on its debt, rise when investors are less confident in a company's creditworthiness.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Next year ``looks to be a very sluggish year and it will be a challenge for the company to deliver any growth'' in the network business, WestLB's Langer said.

To contact the reporters on this story: Maria Fredriksson in Stockholm at mfredriksson@bloomberg.net; Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: November 20, 2007 16:02 EST