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Sweden's flagship tech company said its third-quarter earnings would almost completely evaporate, citing a 19% sales decline in its core mobile-network equipment business, while its gross margin fell to 28% from 34% in the same period last year.

The news sent the company's share price down 20% on Wednesday.

Ericsson has been caught in a perfect storm. Spending by mobile-service providers on latest-generation, or 4G, networks largely has dried up, with most mobile-broadband projects having been completed last year.

At the same time, competition has risen, with Huawei Technologies Co. of China expanding aggressively on the traditional European turf of Ericsson and Finland's Nokia Corp.

The Swedish company is betting big on the development of faster wireless networks, called 5G, and software-based systems such as the so-called Internet of Things, with connectivity built into everyday objects such as fridges. But the first revenue from 5G is several years away, analysts say, leaving Ericsson dangerously exposed to hefty research and lab costs in the interim.