Ericsson shares rose nearly 2% to SKr51.50 in a generally depressed market, however, investors took comfort from news that it had returned to a positive cashflow position. The company, which lost SKr17.7bn ($1.68bn) in cash in the first quarter, said cashflow would be positive for the full year.

Analysts, however were less enthusiastic suggesting the results highlighted a number of more fundamental problems.

Ericsson reported pre-tax losses of SKr5.3bn in the three months to the end of June, compared with a profit of SKr6.7bn in the same period last year. A loss of SKr4.6bn in the company’s ailing handset unit, slightly better than expected, accounted for most of this.

However, the results were also hit by falling profitability at its key mobile network systems unit, which accounts for more than 80% of sales. Margins there fell to 1 per cent from 21 per cent in the same period last year as a result of third-generation development costs and competitive pricing, the company said. It added that pricing pressures showed no signs of easing.

In a statement to the press Ericsson chief executive Kurt Hellstrom, spoke of the present gloomy market situation, Weak market conditions for our industry persisted in the second quarter. Many of our customers have delayed spending in network expansion and in some cases postponed contracted deliveries. We cannot predict how long the situation will prevail as we have yet to see signs of improvement.

In addition to the pre-tax losses, Ericsson took a SKr15bn restructuring charge in the second quarter. The losses came on revenues that fell 3% to SKr62.8bn.

The company revised previous estimates of growth in both the mobile systems and handset markets. Ericsson had previously forecast growth of between 5% and 15% for the mobile systems market, but now said it expected growth to be flat to moderate, no more than 5%.

The company, which has already announced staff cutting measures affecting 25,800 employees and consultants, hinted that it was prepared to take further measures in response to worsening market conditions.