Ericsson's Surprise Nosedive

Was it bad luck, bad management, or a warning sign of deeper problems lurking in the $250 billion telecommunications equipment business? Investors didn't know the answer, so on Oct. 16 when mobile networks giant Ericsson (ERIC) warned of lower-than-expected third-quarter revenue growth and a sharp decline in profits, they took the path of least resistance and pressed the sell button. And pressed it again. And again.

By midday, Ericsson stock had plummeted more than 29%—the biggest intraday drop ever recorded for the century-old Swedish company—taking shares down to levels last seen in 2004. In a blink, some $17.5 billion in market capitalization had vaporized, though by the end of the day, prices had recovered somewhat to a loss of 23.8%. Ericsson's swoon also dragged down the Stockholm exchange, which closed off 3.1%, and other stocks and exchanges across Europe.