Ericsson Still Has A Dial Tone

But the company's future lies in networks, not handsets

Only a year ago, Ericsson's board brought in Kurt Hellstrom, a straight-talking Harley rider, to rescue its hurting mobile-phone division. Hellstrom promptly moved to rip out paperwork, speed up product development, and add some zip to Ericsson's notoriously gray repertoire of handsets. Yet on Oct. 20, a day after archrival Nokia Corp. revved up the tech market with a stellar earnings report, Hellstrom came up with some stunning bad news. Ericsson lost $407 million on handsets in the third quarter--and will lose $1.6 billion on phones this year. Amid a welter of analysts' downgrades, Ericsson shares plummeted 20% in the next three days of trading.

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