Net sales SEK 53.7 (45.7) b. in the quarter, full year up 17% to SEK 177.8 (151.8) b.
Operating income SEK 12.2 (10.4) b. in the quarter, full year up 8% to SEK 35.8 (33.1) b.
Operating margin 22.7% (22.7%) in the quarter, full year 20.1% (21.8%)
Net income SEK 9.7 (8.5) b. in the quarter, full year SEK 26.3 (24.3) b.1)
Earnings per share SEK 0.61 (0.54) in the quarter, full year SEK 1.65 (1.53)1)
Board proposes SEK 0.50 (0.45) per share as dividend for 2006

CEO COMMENTS

"We have concluded another successful year and see continued opportunities to outpace the market," says Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). "We have achieved sales of SEK 178 b., an increase of 17%, while maintaining strong margins. Through our focus on operational excellence, costs continue to grow slower than sales.

Our financial strength has enabled us to execute our strategy of organic growth and own development in combination with bolt-on acquisitions. During 2006, we successfully integrated Marconi into our operations, including reaching expected profitability. We also recently announced the acquisition of Redback Networks in a move to further enhance our strong all-IP offering.

During the year we introduced a more customer-oriented organization to further leverage our leadership and expand our market reach. By this move we enhance our abilities to serve customers needs in networks, services and multimedia. We also strengthened our platform for leadership in next-generation converging IP networks, where multimedia applications and services offer obvious business opportunities.

Sony Ericsson celebrated its fifth anniversary with an exceptional performance. Through successful product development, innovative marketing, and excellence in operations, the company achieved record results and market leadership in the high-end segments. Sony Ericsson has established a unique brand platform and successfully leveraged the assets of its parents.

We are well positioned for 2007. With our leading positions in mobile networks and professional services, substantial investments in next-generation IP networks and multimedia, we have the platform to continue to capture market share and drive the industry forward," concludes Carl-Henric Svanberg.

FINANCIAL HIGHLIGHTS
Income statement and cash flow
Fourthquarter Third quarter Full year
SEK b. 2006 2005 Change 2006 2) Change 3) 2006 2) 2005 Change
Net sales 53.7 45.7 18% 40.8 32% 177.8 151.8 17%
Gross
margin (%) 41.8 44.2 - 41.8 - 42.2 45.7 -
Operating
income 12.2 10.4 18% 8.7 39% 35.8 33.1 8%
Operating
margin (%) 22.7 22.7 - 21.4 - 20.1 21.8 -
Income after
financial items 12.2 10.1 - 8.8 - 35.9 33.3 -
Net
income 1) 9.7 8.5 - 6.2 3) - 26.3 3) 24.3 -
Cash flow 4) 8.9 13.5 - 3.8 3) - 12.2 3) 19.6 -
Earnings per
share, SEK 1) 0.61 0.54 - 0.39 3) - 1.65 3) 1.53 -

1)Attributable to stockholders of the parent company, excluding minority interest.
2)Excluding restructuring charges of SEK 2.9 b. and capital gain of SEK 3.0 b. in third quarter 2006.
3)Including restructuring charges of SEK 2.9 b. and capital gain of SEK 3.0 b. in third quarter 2006.
4)Excluding acquisition of Marconi SEK 17.6 b., Netwise SEK 0.3b. and divestiture of the defense business of SEK 3.1 b. Also adjusted for the Swedish pension trust of SEK 8.3 b. in 2005.


Sales in the quarter were up 18% year-over-year, with growth in infrastructure and services. For the full year sales were SEK 177.8 b. with a growth of 17%, positively impacted by the added Marconi sales. Growth was especially strong in professional services with a sales growth of 30% for the full year.

Gross margin, excluding restructuring charges, was stable sequentially at 41.8% (44.2%), reflecting high level of network rollout and initial network build-outs. The full year gross margin was 42.2% (45.7%), excluding restructuring charges. The strongly growing services business with its lower gross margins as well as the added Marconi business are the main reasons behind the lower gross margin.

The operating margin increased sequentially from 21.5% to 22.7% (22.7%). Operating margin, excluding amortization of Marconi intangible assets, amounted to 23.5% (22.7%) in the quarter. Full year operating margin amounted to 20.1% (21.8%), excluding restructuring charges and capital gains. The effects from the lower operating margin in the beginning of the year were partly compensated by the strong Sony Ericsson performance.

The financial net was SEK 0.0 (-0.3) b. in the quarter.

Net income in the quarter was SEK 9.7 (8.5) b. and earnings per share SEK 0.61 (0.54). For the full year net income and earnings per share amounted to SEK 26.3 (24.3) b. and SEK 1.65 (1.53) respectively.

Cash flow amounted to SEK 8.9 (13.5) b. in the quarter. This includes sequentially increasing accounts receivables, following the seasonally strong fourth quarter sales. Full year cash flow amounted to SEK 12.2 (19.6) b.

During the year two acquisitions were made, Marconi (SEK 17.6 b.) and Netwise (SEK 0.3 b.). The defense business was divested (SEK 3.1 b.).

Balance sheet and other performance indicators
Full year Nine months Six months Three months Full year
SEK b. 2006 2006 2006 2006 2005
Net cash 40.7 34.1 27.9 33.7 50.6
Interest-bearing
provisions and
liabilities 21.6 21.2 21.6 32.7 30.9
Days sales
outstanding 86 105 95 101 81
Inventory turnover 5.1 4.4 4.5 4.2 5.0
Customer financing,
net 3.7 4.9 4.6 3.2 4.9
Equity ratio 56.2% 54.1% 53.9% 50.2% 49.0%
Net cash increased by SEK 6.6 b. to SEK 40.7 (50.6) b. during the quarter. The equity ratio was 56.2% (49.0%).

Days sales outstanding were 86 days with strong collections in the quarter. Inventories, including work in progress, were down in the quarter by SEK 3.6 b. to SEK 21.5 (19.2) b. and inventory turnover improved, reflecting reduction of work in progress in the field.

For the year as a whole, working capital has increased by SEK 14.0 b., reflecting our growth in emerging markets and the growing proportion of large turnkey projects.

Deferred tax assets were reduced by SEK 0.7 b. in the quarter, from SEK 14.3 b. at September 30 to SEK 13.6 b., reflecting anticipated utilization of tax loss carry forwards, net.

OUTLOOK

All estimates are measured in USD and refer to market growth compared to previous year.

The traffic growth in the world's mobile networks is expected to continue as a result of both new services and new subscribers.

For 2006 our estimate is that the GSM/WCDMA track within the global mobile systems market, measured in USD, showed mid-single digit growth.

For 2007 we believe that the GSM/WCDMA track within the global mobile systems market, measured in USD, will continue to show mid-single digit growth.

Our previous estimate for 2007 was that the GSM/WCDMA track within the global mobile systems market, measured in USD, would show moderate growth, similar to 2006.

The addressable market for professional services is expected to show good growth in 2007.

With our technology leadership and global presence we are well positioned to take advantage of these market opportunities.