Ericsson ( ERICY) rallied and pulled a handful of peers higher Thursday morning after reporting that its gross margin expanded in the just-completed first quarter.

The Swedish telecommunications giant told investors its gross margin, which measures the number of sales dollars that fall to its profit line, will exceed the 41.6% it posted in the fourth quarter.

"The main reason for the improvement is better-than-anticipated benefits of cost of sales reduction activities," the company said in a statement. Ericsson didn't alter its forecast for first-quarter sales, saying they will be slightly lower than in the fourth quarter due to seasonal factors, but up from a year ago.

Ericsson's massive layoffs campaign was stepped up in the year-ago first quarter when management pledged to slash another 7,000 jobs over the next year, cutting payrolls to 47,000 from more than 100,000 in 2001.

Ericsson shares, which cost about $7 in May 2003, were recently trading on the Instinet premarket session at $29.95, up $2.19, or about 8%, from their Wednesday close. Also higher in the premarket in sympathy were shares of Alcatel ( ALA), up 53 cents, or 3.5%, to $16.37; Nokia ( NOK), up 48 cents, or 2.4%, to $20.76; and Motorola ( MOT), up 10 cents, or 0.6%, to $17.70.

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