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Swedish mobile phone makers Ericsson posted a drop in profits in its fourth quarter results and revealed that it would be axing more than 1,000 jobs.

The loss in profits is the biggest since 2003.

Operating income in the fourth quarter plummeted 38 per cent, taking a dive to 7.6 billion Swedish kronor (£0.6 billion) from 12.2 billion Swedish kronor (£0.96 billion) kronor.

Net income plunged 42 per cent, while earnings per share took a similar trip down 43 per cent.

Chief financial officer Karl-Henrik Sundstroem quit last October after quarterly profits tumbled 36 per cent.

"During 2007 we continued to strengthen our competitive position," said Carl-Henric Svanberg, president and chief executive of Ericsson.

"We generated an operating income of 30 billion Swedish kronor. During the autumn we did however experience significant margin erosion in our networks business."

Sales in western Europe fell ten per cent during the fourth quarter and one per cent over the financial year in 2007.

Buyers in Latin America showed a dramatic increase in their demand for Ericsson's mobile phones, up 40 per cent in the fourth quarter and 12 per cent for the full year.

North American sales rose nine per cent in the fourth quarter, but fell 15 per cent throughout 2007.

Following the results, the company said: "A reduction of approximately 1,000 employees is expected in Sweden and will be made through voluntary programs as far as possible."

Looking ahead, the company said that the long-term outlook remained positive.

The streamlining and cost-cuts planned by Ericsson, which also announced that it would reduce overall expenditure by four per cent, have attracted investors this morning.

Shares have risen 0.14 per cent in early trading on the Nordic exchange in Stockholm.