April 25 (Bloomberg) -- Ericsson AB, the world's largest maker of wireless networks, rose the most in five years in Stockholm trading after reporting first-quarter profit and sales that beat analyst estimates as North American sales surged.

Ericsson surged as much as 27 percent, the biggest gain since at least February 1987. Net income fell 55 percent to 2.65 billion kronor ($445 million), topping the 2.38 billion kronor analysts had anticipated in a Bloomberg survey. Sales rose 4.7 percent to 44.2 billion kronor, Stockholm-based Ericsson said today. Analysts had predicted a 1.7 percent slide in revenue.

Sales gained 39 percent in North America, where Ericsson supplies AT&T Inc. and Deutsche Telekom AG's T-Mobile USA. Chief Executive Officer Carl-Henric Svanberg said North American demand is picking up as operators need to upgrade networks after holding back on spending. Before today, the stock had lost 53 percent since October after Svanberg cut forecasts twice in the fourth quarter, blaming a slump in North American and European spending.

``Most of the market was waiting to buy Ericsson at some stage, but they've had so many gaffes and blowups that people were scared of doing it,'' said Stuart O'Gorman, who helps manage $1.5 billion in technology stocks at Henderson Global Investors in Edinburgh and doesn't hold Ericsson shares.

Ericsson climbed 2.06 kronor to close at 14.50 kronor in Stockholm, after rising as much as 27 percent earlier. Competitor Alcatel-Lucent SA, which reports earnings next week, rose 6.4 percent to 4.32 euros in Paris.

`More Positive'

``Fundamentals support a more positive long-term outlook,'' Svanberg said at a press meeting in Stockholm today. ``Things are going in a good direction.''

Svanberg reiterated the company is planning for a ``flattish'' market for mobile infrastructure equipment such as switches, base stations and antennas this year. Ericsson's main competitors are Espoo, Finland-based Nokia Siemens Networks and Paris-based Alcatel-Lucent.

Ericsson's customers also include China Unicom Ltd., India's Bharat Sanchar Nigam Ltd. and the U.K.'s Vodafone Group Plc.

In October, Svanberg said third-quarter profit and sales would miss forecasts, a month after telling analysts demand was ``strong.'' On Nov. 20 in New York, Ericsson said fourth-quarter sales would be at the lower end of a target range, sending the stock down 11 percent, the lowest in almost four years.

``Considering what has happened in the last six to nine months it's really nice to see that they can show good sales and earnings,'' said Greger Johansson, an analyst at Redeye AB in Stockholm, who has an ``accumulate'' rating on the stock and might raise it to ``buy' following the report.

`Credibility Issues'

Ericsson announced this year it would cut as many as 4,000 jobs. The company slashed more than half its workforce from the end of 2000 to early 2004 and now employs about 74,000 people.

Earnings per share fell to 0.17 krona in the first quarter from 0.36 krona a year earlier.

``The management has been having some credibility issues, so this is a step in the right direction,'' said Mika Heikkinen, a fund manager at Glitnir Asset Management in Helsinki, which oversees the equivalent of $4.7 billion. ``The expectations were very low,'' said Heikkinen, who doesn't hold Ericsson shares.

Ericsson's gross margin, or the percentage of sales minus production costs, shrank to 38.6 percent from 43 percent a year earlier, beating the 35.1 percent analyst estimate in an SME Direkt survey. Operating profit fell to 9.7 percent of sales from 19.3 percent, beating the 9 percent analysts in the SME survey had predicted. The margins exclude restructuring costs.

Nokia Siemens Loss

Nokia Oyj, the world's biggest maker of mobile phones and Ericsson's biggest competitor on networks, booked costs of 100 million euros ($157 million) for job cuts at Nokia Siemens Networks in the first quarter.

Nokia Siemens, the venture formed with Siemens AG a year ago, had an operating loss of 74 million euros on sales of 3.4 billion euros in the first quarter. Nokia reiterated it will achieve 2 billion euros in cost savings annually by the end of 2008 by cutting 15 percent of the venture's workforce.

``Still it's a tough battle, but I would say the tough price pressure from traditional vendors is somewhat lower,'' Svanberg said at the press meeting today.

Some orders linked to the completed U.S. spectrum auctions may be booked this year, with most mobile broadband rollouts coming in 2009, Svanberg said in an interview in Stockholm.

`Around the Corner'

``The U.S. has been a bit slow, but now we have quite a lot of activity around the corner,'' he said in a Bloomberg Television interview.

``This may be a sign that mobile data trends are finally strong enough for Ericsson to finally see some growth,'' Henderson's O'Gorman said. ``The big strength was in the U.S., where AT&T rolls out a pretty aggressive HSDPA network,'' he said, referring to high-speed downlink packet access systems that allow wireless Internet browsing and video conferencing.

Sony Ericsson Mobile Communications Ltd., which is a 50-50 venture between Japan's Sony Corp. and Ericsson, said on March 19 that first-quarter earnings and revenue would fall on slower handset sales, higher research costs and a component shortage.

Sony Ericsson said this week that first-quarter profit fell to 133 million euros ($208 million) from 254 million euros a year earlier. Sony Ericsson lost its position as the fourth-largest manufacturer to LG Electronics Inc. in the quarter after the 22.3 million handsets it shipped trailed sales of the Asian rival.

Sony Ericsson's earnings contributed about 850 million kronor to Ericsson's operating profit of 3.5 billion kronor in the quarter. The venture's earnings added about 1.6 billion kronor to Ericsson's operating profit of 8.2 billion kronor a year earlier.

To contact the reporter on this story: Maria Fredriksson in Stockholm at mfredriksson@bloomberg.net

Last Updated: April 25, 2008 12:38 EDT