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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

April 21, 2006

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 23, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or

Form 40-F. Form 20-F x      Form 40-F ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ¨      No x

 

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Announcement of LM Ericsson Telephone company, dated July 21, 2006 regarding Ericsson Q2 Report 2006

 

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		Second quarter report 2006
		July 21, 2006

Ericsson reports strong development securing new business

 

•

Net sales SEK 44.2 (38.4) b. in the quarter, SEK 83.3 (69.9) b. first six months

 

•

Operating income SEK 8.3 (8.3) b. in the quarter, SEK 14.9 (14.9) b. first six months

 

•

Operating margin 18.7% in the quarter, 19.6% excl. amortization of Marconi intangible assets

 

•

Net income SEK 5.7 (5.8) b. in the quarter, SEK 10.3 (10.5) b. first six months 1)

 

•

Earnings per share SEK 0.36 (0.37) in the quarter, SEK 0.65 (0.66) first six months 1)

CEO COMMENTS

“In the changing industry environment we have leveraged our scale, technology leadership and global presence to advance our leading position in mobile systems as well as in services,” says Carl-Henric Svanberg, President and CEO of Ericsson. “We have secured a large number of key contracts during the quarter, adding to our strong business momentum. With the Marconi assets as a cornerstone, we are also building a leading position in next-generation converged networks.

The ongoing consolidation in our industry is a natural process, driven by the need for critical mass in R&D, marketing and supply. As market leader our strategy based on organic growth and bolt-on acquisitions remains. With our scale advantage and an organization focused on innovation and operational excellence, we are well positioned to continue to win market share. Our ability to achieve a healthy balance between long-term growth and short-term profitability will be key to success.

The deployment of 3G/HSPA continues, led by North America and countries in Asia, Central and Eastern Europe, Middle East and Africa. HSPA capabilities enable Internet to go mobile and enhance the consumer experience of using high-speed data services. This will also open tremendous opportunities to people living in countries with limited wireline communications.

Telecommunication is an important driver for economic and social development. We have now reached some 2.5 b. mobile subscriptions in the world. Through an intense cost focus throughout the industry, there are continued opportunities for further penetration. The GSM technology has by far the majority of users and, through its superior economies of scale, strongly contributes to making our vision of ‘communication for all’ a reality,” concludes Carl-Henric Svanberg.

FINANCIAL HIGHLIGHTS

Income statement and cash flow

 

		Second quarter									First quarter						Six-month period
SEK b.		2006			2005			Change			2006			Change			2006			2005			Change
Net sales		44.2			38.4			15	%		39.2			13	%		83.3			69.9			19	%
Gross margin		42.0	%		45.9	%		—			43.3	%		—			42.6	%		47.1	%		—
Operating income		8.3			8.3			-1	%		6.6			25	%		14.9			14.9			0	%
Operating margin		18.7	%		21.6	%		—			16.9	%		—			17.9	%		21.3	%		—
Income after financial items		8.3			8.5			-2	%		6.7			24	%		15.0			15.2			-2	%
Net income 1)		5.7			5.8			-2	%		4.6			25	%		10.3			10.5			-2	%
Cash flow before financial investing activities		-2.0			5.4			—			-16.1			—			-18.0			-1.1			—
Earnings per share, SEK 1)		0.36			0.37			—			0.29			—			0.65			0.66			—
Operating margin adj. for. Marconi intangibles		19.6	%		21.6	%		—			17.9	%		—			18.8	%		21.3	%		—
EPS, adj. for Marconi intangibles		0.38			0.37			—			0.31			—			0.68			0.66			—

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1)	Attributable to stockholders of the parent company, excluding minority interest.

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Sales in the quarter were up 15% year-over-year with good performance in basically all areas and with services being especially strong.

Gross margin was 42.0% (45.9%) during the quarter, reflecting the increased proportion of services sales and the integration of the former Marconi operations.

The operating margin increased sequentially from 16.9% to 18.7% (21.6%), primarily due to continued cost rationalization as well as strong performance by Sony Ericsson. Operating margin amounted to 19.6% excluding amortization of intangible assets related to Marconi. Operating income remained unchanged at SEK 8.3 (8.3) b. year-over-year.

The financial net was 0.0 (0.2) b. in the quarter.

Net income in the quarter was SEK 5.7 (5.8) b. and earnings per share were SEK 0.36 (0.37).

Cash flow before financial investing activities was SEK -2.0 (5.4) b. in the quarter, mainly due to a sequential increase of customer financing of SEK 1.5 b. and increased accounts receivable following the completion of several large contracts late in the quarter.

Balance sheet items and other performance indicators

 

		Six months			Three months			Full year
SEK b.		2006			2006			2005
Net cash		27.9			33.7			50.6
Interest-bearing provisions and liabilities		21.6			32.7			30.9
Days sales outstanding		95			101			81
Inventory turnover		4.5			4.2			5.0
Customer financing, net		4.6			3.2			4.9
Equity ratio		53.9	%		50.2	%		49.0	%

Net cash decreased by SEK 5.8 b. to SEK 27.9 (39.3) b. during the quarter, due to the increased receivables and payment of dividend of SEK 7.2 b. for 2005 in April. In the quarter, bond loans of SEK 9.6 b. matured and were repaid. During the quarter, the pension liability decreased by SEK 1.1 b., mainly due to the change in discount rate in the pension liability in Sweden from 3.5% to 4.0%. The equity ratio was 53.9% (44.9%).

Days sales outstanding were 95 days, a sequential decrease of six days. Inventories, including work in progress, were down in the quarter by SEK 0.4 b. to SEK 23.1 (19.3) b. and inventory turnover improved to 4.5 from 4.2 times in the previous quarter.

Deferred tax assets were reduced by SEK 2.1 b. in the quarter, from SEK 16.8 b. at March 31 to SEK 14.6 b., reflecting utilization of tax loss carry forwards.

MARKET AND BUSINESS HIGHLIGHTS

Long-term industry growth drivers remain solid. New technologies and richer services will continue to drive and accelerate traffic in the world’s networks. The number of mobile subscriptions in the world is expected to pass three billion in 2007. The GSM/WCDMA track represents more than 80% of all mobile subscriptions around the world and the vast majority of the growth. New and more innovative solutions and more affordable handsets are expected to continue to expand the market.

Fixed and mobile broadband enable new user applications with rich content and interactivity, such as IPTV, chatting, gaming and music services. IPTV is expected to be a main driver of new traffic in converging networks when triple play becomes a reality. TV services are expected to grow strongly also in mobile networks, driven by users that want instant access to on-demand business, sports and news updates.

WCDMA/HSPA networks are key components in offering users richer services. Currently Ericsson is a supplier to more than 40 HSPA networks under deployment around the world, of which half are in commercial operation. The number of WCDMA subscriptions grew by approximately 13 million to more than 68 million during the quarter. Seven new WCDMA networks were commercially launched during the quarter, bringing the total to 100 WCDMA networks, of which Ericsson is a supplier to 55.

 

2

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Services continues to be a key area as operators seek to lower operating costs and free up time for customer interaction and business development. We have a clear leadership through our early start and presently manage networks with 65 million subscribers and provide around-the-clock support to networks with 725 million subscribers. Through our economies of scale and proven expertise, we are able to offer our customers not only first-class operations but also considerable savings.

Regional overview

Western Europe sales were up by 26% compared to the same quarter last year. Growth is primarily driven by strong services sales and the added Marconi business. Mobile systems sales were flat. The strong tariff competition and falling roaming charges drive traffic growth and increase operators’ need for network expansions as well as intensify their focus on total cost of ownership.

Central and Eastern Europe, Middle East and Africa sales grew by 24% compared to the same quarter last year. The activity level was especially high in Pakistan, Russia, Saudi Arabia and South Africa. The growth is primarily in GSM, but 3G sales are increasing and during the quarter several contracts for WCDMA/HSPA were received in the region.

Asia Pacific sales grew by 55% compared to the same quarter last year, primarily driven by strong growth in Australia, China, India, Indonesia and Japan. During the quarter, China showed strong increase year-over-year and there is a steady demand and rollout activity. Contracts are however large and completion and invoicing tend to fluctuate between quarters.

North America sales were down 42% year-over-year. Sales were down 17% when adjusted for the extra SEK 2 b. invoicing in the second quarter 2005 related to planned later deliveries. The ongoing HSPA build-out continues according to plan. The 2G build-out also continues, however, operators’ reductions of excess inventory have short-term effects on our sales. The upcoming spectrum auctions presently affect the market but should stimulate new network rollouts.

Latin America sales declined by 14% compared to the same quarter last year. As expected, operators are investing less after two exceptionally strong rollout years. There is, however, in many markets a continued need for investments in quality and coverage. Planning for 3G has started, and in parallel further CDMA operators investigate the benefits of changing to GSM/WCDMA.

Subscription growth

The growth rate for net mobile subscription additions continues with record levels for the first half of 2006 and with some 200 million in the quarter. At the end of the quarter, worldwide subscription penetration reached 38% with close to 2.5 billion subscriptions in total, of which two billion are GSM. The global number of subscriptions is expected to pass three billion during 2007.

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. GSM/WCDMA represents over 80% of the total global mobile systems market. It is our primary market and our outlook will therefore be limited to the GSM/WCDMA track.

For 2006 we believe that the GSM/WCDMA track within the global mobile systems market, measured in USD, will show moderate growth compared to 2005.

Our previous outlook included all standards and was: For 2006 we continue to believe that the global mobile systems market, measured in USD, will show moderate growth compared to 2005.

We continue to believe that the addressable market for professional services will show good growth in 2006.

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

 

3

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SEGMENT RESULTS

Systems

 

		Second quarter									First quarter						Six-month period
SEK b.		2006			2005			Change			2006			Change			2006			2005			Change
Net sales		41.4			36.1			15	%		36.8			13	%		78.3			65.1			20	%
Mobile Networks		30.8			28.8			7	%		26.7			15	%		57.5			52.2			10	%
Fixed Networks		2.5			1.1			122	%		2.9			-13	%		5.4			2.2			147	%
Professional Services		8.1			6.2			31	%		7.2			13	%		15.4			10.7			43	%
Operating income		7.2			8.2			-11	%		6.0			20	%		13.3			14.4			-8	%
Operating margin		17	%		23	%		—			16	%		—			17	%		22	%		—

Sales of mobile networks were up by 7% compared to the same quarter last year. Adjusted for the extra SEK 2 b. invoicing in the second quarter 2005 related to planned later deliveries, sales of mobile networks increased by 15% in the quarter. The larger proportion of initial network build-outs reflects our strong position in the market.

Sales of fixed networks increased by SEK 1.4 b. year-over-year to SEK 2.5 b., of which Marconi added approximately SEK 2.0 b.

Sales of network rollout and professional services increased 30%, compared to the same quarter last year. During the quarter, strong growth in network rollout continued due to a high proportion of new networks being built. Sales of professional services developed strongly during the quarter and grew 31% compared to the same quarter last year. Approximately SEK 0.5 b. of this is services business related to Marconi.

Other Operations

 

		Second quarter									First quarter						Six-month period
SEK b.		2006			2005			Change			2006			Change			2006			2005			Change
Net sales		3.2			2.7			19	%		2.7			18	%		5.9			5.4			9	%
Operating income		0.2			-0.1			—			0.1			—			0.3			0.0			—
Operating margin		7	%		-4	%		—			2	%		—			5	%		-1	%		—

Cables and Ericsson Mobile Platforms continued to show strong performance. The restructuring of Power Modules is generating the expected results. As previously announced, the defense operations will be sold to Saab AB with closing expected before the end of the third quarter.

SONY ERICSSON MOBILE COMMUNICATIONS

For information on transactions with Sony Ericsson Mobile Communications, please see Financial statements and additional information.

Sony Ericsson Mobile Communications (Sony Ericsson) more than doubled year-on-year income before taxes. Units shipped in the quarter reached 15.7 million, a 33% increase compared to the same period last year, and generated a market share increase both on a year-on-year and sequential basis. Sales for the quarter were EUR 2.272 m., a year-on-year increase of 41%, reflecting a successful product portfolio. Income before taxes was EUR 211 m. in the quarter, a year-on-year increase of 143%. Ericsson’s share in Sony Ericsson’s income before tax was SEK 1.0 (0.4) b.

Growth in the global handset market continued to outpace expectations, and Sony Ericsson now forecasts the global market outlook for 2006 to be above 950 million units, up from the previous estimate of above 900 million units.

PARENT COMPANY INFORMATION

Net sales for the six-month period amounted to SEK 0.3 (0.7) b., and income after financial items was SEK 6.6 (5.3) b.

Major changes in the Parent Company’s financial position for the period include a decrease of net liabilities (current and non-current receivables and liabilities) to subsidiaries of SEK 14.2 b., largely related to the acquisitions of Marconi assets in the first quarter, repayment of bond loans of SEK 9.6 b. and a payment of dividend for 2005 to shareholders of SEK 7.1 b. in the second quarter, resulting in reduced cash and short-term investments of SEK 32.0 b.

 

4

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In accordance with the conditions of the Stock Purchase Plans and Option Plans for Ericsson employees, 1,849,309 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock at June 30, 2006, was 262,234,352 Class B shares.

OTHER INFORMATION

Marconi integration

The integration of the acquired Marconi assets is running according to plan. During the quarter, approximately 1,000 employees have been identified for lay-offs. The remaining 600 will be identified in the third quarter 2006 and provisions will be made for all restructuring costs before year-end. The product portfolio and supply chain integration is on plan with targeted savings by year-end 2007.

Through the restructuring process, service portfolios, softswitch solutions, broadband access and transmission products are being integrated. As a consequence, it will become increasingly difficult to accurately isolate and track the Marconi business. Marconi sales are estimated to be SEK 2.5 b. in the quarter, with an operating loss of approximately SEK 0.2 b. In addition, amortization of intangible assets amounts to SEK 0.4 b.

Sale of defense business

As announced on June 12, 2006, Ericsson has agreed to sell its defense business, Ericsson Microwave Systems AB, and its 40% holding in Saab Ericsson Space to Saab AB. Ericsson will retain the National Security and Public Safety business and parts of the Power Systems business. The retained units have around 300 employees. The retained activities will be reported as part of the Systems segment. The purchase price is SEK 3.8 b. in cash and the agreement involves transfer of approximately 1,250 employees. The estimated value of the current assets and liabilities held for sale amount to approximately SEK 3.0 b. respectively. The transaction is expected to close in September 2006.

As announced on June 12, 2006, the expected capital gain of approximately SEK 3.0 b. is of similar magnitude as the previously announced restructuring costs, mainly related to the Marconi acquisition and the Career Change Offer in Sweden, giving a neutral effect in total on Ericsson’s income after financial items for 2006.

Recommended public offer in Netwise

As announced on June 5, 2006, Ericsson issued a recommended cash offer of SEK 60 per share to the shareholders and holders of warrants in Netwise AB to transfer all shares in and all warrants issued by Netwise to Ericsson. Netwise B-shares are listed on Nya Marknaden in Sweden. Ericsson and Netwise today have an ongoing cooperation and see further possibilities in combining Netwise’s cutting-edge IP competence and applications for the enterprise segment with Ericsson’s global presence.

The acceptance period for the offer runs up to and including August 2, 2006. The estimated date for payment to shareholders is August 27, 2006. The total value of the offer amounts to SEK 300 m. For further information on the offer, please see: www.ericsson.com/investors.

Stockholm, July 21, 2006

Carl-Henric Svanberg

President and CEO

Date for next report: October 19, 2006

REVIEW REPORT

We have reviewed the interim report for the period January 1 to June 30, 2006, for Telefonaktiebolaget LM Ericsson (publ). Management is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim financial information based on our review.

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden RS and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.

Stockholm, July 21, 2006

 

Bo Hjalmarsson		Peter Clemedtson		Thomas Thiel
Authorized Public Accountant		Authorized Public Accountant		Authorized Public Accountant
PricewaterhouseCoopers AB		PricewaterhouseCoopers AB

 

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EDITOR’S NOTE

To read the complete report with tables, please go to:

http://www.ericsson.com/investors/financial_reports/2006/6month06-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET), July 21.

An analyst and media conference call will begin at 14.00 (CET).

Live audio webcasts of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and www.ericsson.com/investors

FOR FURTHER INFORMATION PLEASE CONTACT

Henry Sténson, Senior Vice President,

Communications

Phone: +46 8 719 4044

E-mail: investor.relations@ericsson.com or

press.relations@ericsson.com

Investors

Gary Pinkham, Vice President,

Investor Relations

Phone: +46 8 719 0000

E-mail: investor.relations@ericsson.com

Susanne Andersson,

Investor Relations

Phone: +46 8 719 4631

E-mail: investor.relations@ericsson.com

Glenn Sapadin,

Investor Relations,

North America

Phone: +1 212 843 8435;

E-mail: investor.relations@ericsson.com

Media

Åse Lindskog, Director,

Head of Media Relations

Phone: +46 8 719 9725, +46 730 244 872;

E-mail: press.relations@ericsson.com

Ola Rembe, Director,

Media Relations

Phone: +46 8 719 9727, +46 730 244 873;

E-mail: press.relations@ericsson.com

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 8 719 00 00

www.ericsson.com

Safe Harbor Statement of Ericsson under the Private Securities Litigation Reform Act of 1995;

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as “anticipates”, “expects”, “intends”, “plans”, “predicts”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “would”, “potential”, “continue”, and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) research and development expenditures; (x) the strength of our competitors; (xi) future cost savings; and (xii) plans to launch new products and services.

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference for Ericsson include, but are not limited to: (i) material adverse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) further reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.

 

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FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

		Page
Financial statements
Consolidated income statement		8
Consolidated balance sheet		9
Consolidated statement of cash flows		10
Consolidated statement of recognized income and expense		11
Consolidated income statement - isolated quarters		12
		Page
Additional information
Accounting policies		13
Net sales by segment by quarter		15
Operating income, operating margin and employees by segment by quarter		16
Net sales by market area by quarter		17
External net sales by market area by segment		18
Top ten markets in sales		19
Customer financing risk exposure		19
Transactions with Sony Ericsson Mobile Communications		19
Other information		20
Acquisition of assets from Marconi		21

 

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ERICSSON

CONSOLIDATED INCOME STATEMENT

 

		Apr - Jun									Jan - Jun
SEK million		2006			2005			Change			2006			2005			Change
Net sales		44,166			38,444			15	%		83,342			69,911			19	%
Cost of sales		-25,598			-20,797						-47,817			-37,010
Gross margin		18,568			17,647			5	%		35,525			32,901			8	%
Gross margin %		42.0	%		45.9	%					42.6	%		47.1	%
Research and development and other technical expenses		-6,861			-6,267						-13,609			-11,941
Selling and administrative expenses		-5,263			-3,895						-10,055			-7,536
Operating expenses		-12,124			-10,162						-23,664			-19,477
Other operating income		817			425						1,327			772
Share in earnings of JV and associated companies		992			393						1,689			709
Operating income		8,253			8,303			-1	%		14,877			14,905			0	%
Operating margin %		18.7	%		21.6	%					17.9	%		21.3	%
Financial income		567			881						1,089			1,594
Financial expenses		-529			-696						-996			-1,269
Income after financial items		8,291			8,488						14,970			15,230
Taxes		-2,559			-2,693						-4,633			-4,791
Net income		5,732			5,795			-1	%		10,337			10,439			-1	%
of which
Net income attributable to stockholders of the parent company		5,712			5,843						10,287			10,460
Net income attributable to minority interest		20			-48						50			-21
Other information
Average number of shares, basic (million)		15,869			15,835						15,867			15,790
Earnings per share, basic (SEK) 1)		0.36			0.37						0.65			0.66
Earnings per share, diluted (SEK) 1)		0.36			0.37						0.65			0.66

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1)	Based on Net income attributable to stockholders of the parent company

 

8

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ERICSSON

CONSOLIDATED BALANCE SHEET

 

SEK million		Jun 30 2006		Mar 31 2006		Dec 31 1) 2005
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		5,604		5,842		6,161
Goodwill		6,958		7,334		7,362
Other		15,988		15,796		939
Property, plant and equipment		8,401		8,069		6,966
Financial assets
Equity in JV and associated companies		6,229		5,671		6,313
Other investments in shares and participations		731		701		805
Customer financing, non-current		1,686		467		1,322
Other financial assets, non-current		2,022		2,404		2,796
Deferred tax assets		14,621		16,758		18,519
		62,240		63,042		51,183
Current assets
Inventories		23,105		23,503		19,208
Financial assets
Accounts receivable - trade		46,291		44,790		41,242
Customer financing, current		2,926		2,687		3,624
Other current receivables		14,826		14,817		12,574
Short-term investments		32,905		42,605		39,767
Cash and cash equivalents		16,646		23,749		41,738
		136,699		152,151		158,153
Total assets		198,939		215,193		209,336
EQUITY AND LIABILITIES
Equity
Stockholders’ equity		106,377		107,064		101,622
Minority interest in equity of consolidated subsidiaries		893		943		850
		107,270		108,007		102,472
Non-current liabilities
Post-employment benefits		5,603		6,683		5,891
Other provisions, non-current		669		776		904
Deferred tax liabilities		255		101		391
Borrowings, non-current		13,412		14,131		14,185
Other non-current liabilities		3,094		2,882		2,740
		23,033		24,573		24,111
Current liabilities
Other provisions, current		13,476		16,063		17,764
Borrowings, current		2,616		11,842		10,784
Accounts payable		16,138		14,438		12,584
Other current liabilities		36,406		40,270		41,621
		68,636		82,613		82,753
Total equity and liabilities		198,939		215,193		209,336
Of which interest-bearing provisions and liabilities		21,631		32,656		30,860
Net cash		27,920		33,698		50,645
Assets pledged as collateral		499		546		549
Contingent liabilities		1,491		1,532		1,708

---

1)	Ericsson has adopted the new option in IAS 19 as from January 1, 2006. Earlier periods have been restated accordingly.

The net effect on equity per December 31, 2005 was SEK -3,055 million.

 

9

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ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Apr - Jun				Jan - Jun		Jan - Dec
SEK million		2006		2005		2006		2005		2005
Net income attributable to stockholders of the parent company		5,712		5,843		10,287		10,460		24,315
Adjustments to reconcile net income to cash		2,658		2,239		5,908		4,428		10,845
		8,370		8,082		16,195		14,888		35,160
Operating net assets
Inventories		-433		-105		-2,903		-3,604		-3,668
Customer financing, current and non-current		-1,586		267		246		-179		-641
Accounts receivable		-3,269		-1,699		-4,505		-3,441		-5,874
Other		-2,849		565		-6,394		-6,324		-8,308
Cash flow from operating activities		233		7,110		2,639		1,340		16,669
Investing activities
Product development		-412		-152		-770		-455		-1,174
Other investing activities		-1,808		-1,545		-19,914		-2,005		-4,170
Cash flow from operating investing activities		-2,220		-1,697		-20,684		-2,460		-5,344
Cash flow before financial investing activities		-1,987		5,413		-18,045		-1,120		11,325
Short-term investments		9,700		-6,877		6,862		-9,721		6,375
Cash flow from investing activities		7,480		-8,574		-13,822		-12,181		1,031
Cash flow before financing activities		7,713		-1,464		-11,183		-10,841		17,700
Dividends paid		-7,154		-3,976		-7,160		-3,976		-4,133
Sale/repurchase of own stock		7		15		14		19		117
Other financing activities		-8,154		-663		-7,263		925		-2,070
Cash flow from financing activities		-15,301		-4,624		-14,409		-3,032		-6,086
Effect of exchange rate changes on cash		485		-120		500		-199		-288
Net change in cash		-7,103		-6,208		-25,092		-14,072		11,326
Cash and cash equivalents, beginning of period		23,749		22,548		41,738		30,412		30,412
Cash and cash equivalents, end of period		16,646		16,340		16,646		16,340		41,738

 

10

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CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE

 

		Jan-Jun 2006						Jan-Dec 2005						Jan-Jun 2005
SEK million		Stock- holders’ equity		Minority interest		Total equity		Stock- holders’ equity		Minority interest		Total equity		Stock- holders’ equity		Minority interest		Total equity
Actuarial gains and losses related to post-employment benefits including payroll tax		1,557		—		1,557		-3,221		—		-3,221		-2,750		—		-2,750
Revaluation of other investments in shares and participations
Fair value remeasurement taken to equity		-3		—		-3		-3		—		-3		-6		—		-6
Transferred to income statement at sale		—		—		—		-147		—		-147		-147		—		-147
Cash flow hedges:
Fair value remeasurement of derivatives taken to equity		2,422		—		2,422		-3,961		—		-3,961		-3,125		—		-3,125
Transferred to income statement for the period		120		—		120		1,404		—		1,404		-411		—		-411
Transferred to balance sheet for the period		99		—		99		—		—		—		—		—		—
Changes in cumulative translation effects due to changes in foreign currency exchange rates		-1,519		-62		-1,581		4,118		147		4,265		3,641		122		3,763
Tax on items taken directly to or transferred from equity		-1,293		—		-1,293		1,523		—		1,523		1,901		—		1,901
Total transactions taken to equity		1,383		-62		1,321		-287		147		-140		-897		122		-775
Net income		10,287		50		10,337		24,315		145		24,460		10,460		-21		10,439
Total income and expenses recognized for the period		11,670		-12		11,658		24,028		292		24,320		9,563		101		9,664
Other changes in equity:
Sale of own shares		14		—		14		117		—		117		19		—		19
Stock Purchase and Stock Option Plans		212		—		212		242		—		242		90		—		90
Dividends paid		-7,141		-19		-7,160		-3,959		-174		-4,133		-3,959		-17		-3,976
Stock issue, net		—		15		15		—		17		17		—		10		10
Business combinations		—		59		59		—		-342		-342		—		-293		-293

 

11

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ERICSSON

CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

 

		2006						2005
SEK million		Q2			Q1			Q4			Q3			Q2			Q1
Net sales		44,166			39,176			45,665			36,245			38,444			31,467
Cost of sales		-25,598			-22,219			-25,497			-19,862			-20,797			-16,213
Gross margin		18,568			16,957			20,168			16,383			17,647			15,254
Gross margin %		42.0	%		43.3	%		44.2	%		45.2	%		45.9	%		48.5	%
Research and development and other technical expenses		-6,861			-6,748			-6,378			-6,135			-6,267			-5,674
Selling and administrative expenses		-5,263			-4,792			-5,332			-3,932			-3,895			-3,641
Operating expenses		-12,124			-11,540			-11,710			-10,067			-10,162			-9,315
Other operating income		817			510			883			836			425			347
Share in earnings of JV and assoc. companies		992			697			1,013			673			393			316
Operating income		8,253			6,624			10,354			7,825			8,303			6,602
Operating margin %		18.7	%		16.9	%		22.7	%		21.6	%		21.6	%		21.0	%
Financial income		567			522			362			697			881			713
Financial expenses		-529			-467			-643			-490			-696			-573
Income after financial items		8,291			6,679			10,073			8,032			8,488			6,742
Taxes		-2,559			-2,074			-1,435			-2,649			-2,693			-2,098
Net income		5,732			4,605			8,638			5,383			5,795			4,644
of which
Net income attributable to stockholders of the parent company		5,712			4,575			8,541			5,314			5,843			4,617
Net income attributable to minority interest		20			30			97			69			-48			27
Other information
Average number of shares, basic (million)		15,869			15,866			15,859			15,845			15,835			15,756
Earnings per share, basic (SEK) 1)		0.36			0.29			0.54			0.34			0.37			0.29
Earnings per share, diluted (SEK) 1)		0.36			0.29			0.54			0.33			0.37			0.29

---

1)	Based on Net income attributable to stockholders of the parent company

 

12

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Accounting policies

This interim report is prepared in accordance with IAS 34. The term IFRS used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC). In this interim report we have adopted the following amendments and interpretations effective as from January 1, 2006. These amendments and interpretations have been endorsed by the EU, except for one amendment to IAS 21. That amendment is commented below under IAS 21.

IAS 19 Employee Benefits

As from January 1, 2006, Ericsson has adopted the new allowed alternative in IAS 19, Employee Benefits, on how to recognize actuarial gains and losses. The previous method to recognize actuarial gains and losses – to the extent that they fell outside the 10 percent corridor – was that they were amortized over the average remaining service time of plan participants. Instead, as from January 1, 2006, all actuarial gains and losses are recognized directly in equity, net of deferred tax, in the period they occur. Earlier reporting periods have been restated accordingly. The adoption of this new alternative has increased the provision for post-employment benefits with SEK 3.5 billion, accruals for social security with SEK 0.8 billion and has affected equity by SEK 3.1 billion net of tax as per January 1, 2006. The impact on reported equity as per January 1, 2005, is SEK 0,7 billion.

IAS 39 Financial instruments: Recognition and Measurement

Three amendments have been issued by the IASB, effective as from January 1, 2006, with earlier application encouraged.

The amendments relate to:

 

•

Cash Flow Hedges of Forecast Intra group Transactions that permits the foreign currency risk of a highly probable intra group forecast transaction to qualify as the hedged item in a cash flow hedge. Ericsson adopted his amendment 2005.

 

•

Fair Value Option that restricts the use of the option to designate any financial asset or any financial liability to be measured at fair value through profit and loss. The company carries loans and receivables, deposits and borrowing at amortized cost, except for specific issued bonds where the carrying value is adjusted as a result of the application of fair value hedge accounting. This amendment has therefore not had a any impact on the financial position or result for 2005 and is not expected to have any impact for 2006.

 

•

Financial guarantee contracts that requires financial guarantee contracts to be recognized, initially at fair value and subsequently at the higher of (i) the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and (ii) the amount initially recognized less any cumulative amortization. This amendment has not had a significant impact on the financial position or result.

IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 21 has been amended in relation to the accounting treatment of Net Investments in a Foreign Operation. A monetary item that forms part of a company investment in a foreign operation should not be dependent on the currency of the monetary item. Also, the accounting should not depend on which entity within the group that conducts a transaction with the foreign operation. It is only the second amendment that is endorsed by the EU as of March 31, 2006. These amendments have not had a significant impact on the financial position or result.

IFRIC 4 Determining whether an Arrangement contains a Lease

This interpretation has not had a significant impact on the financial position and result.

 

13

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IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste of Electric and Electronic Equipment

This amendment has not had a significant impact on the financial position or result.

Parent Company information

The Parent Company reports according to RR 32 “Reporting in separate financial statements”. RR 32 requires the Parent Company to use similar accounting principles as for the Group, i.e. IFRS to the extent allowed by RR 32.

 

14

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NET SALES BY SEGMENT BY QUARTER

SEK million

 

		2006						2005
Isolated quarters		Q2			Q1			Q4			Q3			Q2			Q1
Systems		41,435			36,821			43,020			33,939			36,138			29,002
- Mobile networks		30,782			26,763			33,664			26,763			28,770			23,450
- Fixed networks		2,506			2,868			1,270			1,137			1,130			1,048
Total Network equipment		33,288			29,631			34,934			27,900			29,900			24,498
- Of which network rollout		4,637			5,119			5,451			3,579			3,595			2,748
Professional Services		8,147			7,190			8,086			6,039			6,238			4,504
Other Operations		3,189			2,694			3,012			2,502			2,670			2,712
Less: Intersegment sales		-458			-339			-367			-196			-364			-247
Total		44,166			39,176			45,665			36,245			38,444			31,467
		2006						2005
Sequential change (%)		Q2			Q1			Q4			Q3			Q2			Q1
Systems		13	%		-14	%		27	%		-6	%		25	%		-21	%
- Mobile networks		15	%		-21	%		26	%		-7	%		23	%		-19	%
- Fixed networks		-13	%		126	%		12	%		1	%		8	%		-31	%
Total Network equipment		12	%		-15	%		25	%		-7	%		22	%		-20	%
- Of which network rollout		-9	%		-6	%		52	%		0	%		31	%		-24	%
Professional Services		13	%		-11	%		34	%		-3	%		38	%		-27	%
Other Operations		18	%		-11	%		20	%		-6	%		-2	%		-18	%
Less: Intersegment sales		35	%		-8	%		87	%		-46	%		47	%		-63	%
Total		13	%		-14	%		26	%		-6	%		22	%		-20	%
		2006						2005
Year over year change (%)		Q2			Q1			Q4			Q3			Q2			Q1
Systems		15	%		27	%		17	%		15	%		19	%		11	%
- Mobile networks		7	%		14	%		16	%		13	%		19	%		11	%
- Fixed networks		122	%		174	%		-16	%		11	%		0	%		17	%
Total Network equipment		11	%		21	%		14	%		13	%		18	%		11	%
- Of which network rollout		29	%		86	%		51	%		35	%		44	%		25	%
Professional Services		31	%		60	%		31	%		25	%		25	%		9	%
Other Operations		19	%		-1	%		-9	%		-12	%		-5	%		11	%
Less: Intersegment sales		26	%		37	%		-46	%		-68	%		-38	%		-43	%
Total		15	%		24	%		16	%		14	%		18	%		12	%
		2006						2005
Year to Date		0606			0603			0512			0509			0506			0503
Systems		78,256			36,821			142,099			99,079			65,140			29,002
- Mobile networks		57,545			26,763			112,647			78,983			52,220			23,450
- Fixed networks		5,374			2,868			4,585			3,315			2,178			1,048
Total Network equipment		62,919			29,631			117,232			82,298			54,398			24,498
- Of which network rollout		9,756			5,119			15,373			9,922			6,343			2,748
Professional Services		15,337			7,190			24,867			16,781			10,742			4,504
Other Operations		5,883			2,694			10,896			7,884			5,382			2,712
Less: Intersegment sales		-797			-339			-1,174			-807			-611			-247
Total		83,342			39,176			151,821			106,156			69,911			31,467
		2006						2005
YTD year over year change (%)		0606			0603			0512			0509			0506			0503
Systems		20	%		27	%		16	%		15	%		15	%		11	%
- Mobile networks		10	%		14	%		15	%		14	%		15	%		11	%
- Fixed networks		147	%		174	%		0	%		9	%		8	%		17	%
Total Network equipment		16	%		21	%		14	%		14	%		15	%		11	%
- Of which network rollout		54	%		86	%		40	%		35	%		35	%		25	%
Professional Services		43	%		60	%		24	%		20	%		18	%		9	%
Other Operations		9	%		-1	%		-4	%		-2	%		2	%		11	%
Less: Intersegment sales		30	%		37	%		-49	%		-51	%		-40	%		-43	%
Total		19	%		24	%		15	%		15	%		15	%		12	%

 

15

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OPERATING INCOME, OPERATING MARGIN AND EMPLOYEES

BY SEGMENT BY QUARTER

SEK million

OPERATING INCOME AND MARGIN

 

		2006						2005
Isolated quarters		Q2			Q1			Q4			Q3			Q2			Q1
Systems		7,237			6,033			9,391			7,122			8,155			6,217
Phones		945			665			933			653			371			300
Other Operations		221			54			212			119			-94			46
Unallocated 1)		-150			-128			-182			-69			-129			39
Total		8,253			6,624			10,354			7,825			8,303			6,602
		2006						2005
As percentage of net sales		Q2			Q1			Q4			Q3			Q2			Q1
Systems		17	%		16	%		22	%		21	%		23	%		21	%
Phones 2)		—			—			—			—			—			—
Other Operations		7	%		2	%		7	%		5	%		-4	%		2	%
Total		19	%		17	%		23	%		22	%		22	%		21	%
		2006						2005
Year to date		0606			0603			0512			0509			0506			0503
Systems		13,270			6,033			30,885			21,494			14,372			6,217
Phones		1,610			665			2,257			1,324			671			300
Other Operations		275			54			283			71			-48			46
Unallocated 1)		-278			-128			-341			-159			-90			39
Total		14,877			6,624			33,084			22,730			14,905			6,602
		2006						2005
As percentage of net sales		0606			0603			0512			0509			0506			0503
Systems		17	%		16	%		22	%		22	%		22	%		21	%
Phones 2)		—			—			—			—			—			—
Other Operations		5	%		2	%		3	%		1	%		-1	%		2	%
Total		18	%		17	%		22	%		21	%		21	%		21	%

---

1)	“Unallocated” consists mainly of costs for corporate staffs and non-operational capital gains and losses

2)	Calculation not applicable

NUMBER OF EMPLOYEES

 

		2006						2005
Year to date		0606			0603			0512			0509			0506			0503
Systems		57,779			57,554			50,107			48,839			47,955			46,338
Other Operations		6,013			5,699			5,948			5,748			5,683			5,587
Total		63,792			63,253			56,055			54,587			53,638			51,925
Of which Sweden		21 129			21 108			21 178			21 238			21 358			21 175
		2006						2005
Change in percent		0606			0603			0512			0509			0506			0503
Systems		20	%		24	%		10	%		9	%		6	%		2	%
Other Operations		6	%		2	%		18	%		9	%		2	%		3	%
Total		19	%		22	%		11	%		9	%		6	%		3	%
Of which Sweden		-1	%		0	%		-1	%		-3	%		-5	%		-7	%

 

16

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NET SALES BY MARKET AREA BY QUARTER

SEK million

 

		2006						2005
Isolated quarters		Q2			Q1			Q4			Q3			Q2			Q1
Western Europe		12,485			11,247			12,522			9,555			9,902			9,961
Central and Eastern Europe, Middle East & Africa		12,908			10,466			12,458			9,404			10,376			8,672
North America		3,726			5,281			5,109			4,500			6,475			3,348
Latin America		3,819			3,652			5,980			5,115			4,429			3,551
Asia Pacific		11,228			8,530			9,595			7,671			7,262			5,935
Total		44,166			39,176			45,664			36,245			38,444			31,467
Of which Sweden		1,641			1,391			1,741			1,304			1,571			1,494
Of which EU		13,755			11,901			13,744			10,409			10,528			10,607
		2006						2005
Sequential change (%)		Q2			Q1			Q4			Q3			Q2			Q1
Western Europe		11	%		-10	%		31	%		-4	%		-1	%		-24	%
Central and Eastern Europe, Middle East & Africa		23	%		-16	%		32	%		-9	%		20	%		-14	%
North America		-29	%		3	%		14	%		-31	%		93	%		20	%
Latin America		5	%		-39	%		17	%		15	%		25	%		-21	%
Asia Pacific		32	%		-11	%		25	%		6	%		22	%		-34	%
Total		13	%		-14	%		26	%		-6	%		22	%		-20	%
Of which Sweden		18	%		-20	%		34	%		-17	%		5	%		-19	%
Of which EU		16	%		-13	%		32	%		-1	%		-1	%		-24	%
		2006						2005
Year over year change (%)		Q2			Q1			Q4			Q3			Q2			Q1
Western Europe		26	%		13	%		-4	%		-2	%		7	%		26	%
Central and Eastern Europe, Middle East & Africa		24	%		21	%		24	%		11	%		31	%		21	%
North America		-42	%		58	%		82	%		35	%		31	%		-24	%
Latin America		-14	%		3	%		33	%		40	%		28	%		24	%
Asia Pacific		55	%		44	%		7	%		16	%		3	%		2	%
Total		15	%		24	%		16	%		14	%		18	%		12	%
Of which Sweden		4	%		-7	%		-5	%		-11	%		2	%		11	%
Of which EU		31	%		12	%		-2	%		4	%		4	%		30	%
		2006						2005
Year to date		0606A			0603A			0512			0509			0506			0503
Western Europe		23,732			11,247			41,940			29,418			19,863			9,961
Central and Eastern Europe, Middle East & Africa		23,374			10,466			40,911			28,452			19,048			8,672
North America		9,007			5,281			19,432			14,323			9,823			3,348
Latin America		7,471			3,652			19,075			13,095			7,980			3,551
Asia Pacific		19,758			8,530			30,463			20,868			13,197			5,935
Total		83,342			39,176			151,821			106,156			69,911			31,467
Of which Sweden		3,032			1,391			6,110			4,369			3,065			1,494
Of which EU		25,656			11,901			45,288			31,544			21,135			10,607
		2006						2005
YTD year over year change (%)		0606A			0603A			0512			0509			0506			0503
Western Europe		19	%		13	%		5	%		9	%		16	%		26	%
Central and Eastern Europe, Middle East & Africa		23	%		21	%		22	%		21	%		27	%		22	%
North America		-8	%		58	%		26	%		13	%		5	%		-24	%
Latin America		-6	%		3	%		32	%		31	%		26	%		24	%
Asia Pacific		50	%		44	%		7	%		7	%		2	%		1	%
Total		19	%		24	%		15	%		15	%		15	%		12	%
Of which Sweden		-1	%		-7	%		-1	%		1	%		6	%		11	%
Of which EU		21	%		12	%		7	%		11	%		15	%		30	%

 

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EXTERNAL NET SALES BY MARKET AREA BY SEGMENT

SEK million

 

Apr - Jun 2006		Systems			Share of Systems			Other			Share of Other			Total			Share of Total
Western Europe		10,729			26	%		1,756			62	%		12,485			28	%
Central and Eastern Europe, Middle East & Africa		12,414			30	%		494			17	%		12,908			29	%
North America		3,530			9	%		196			7	%		3,726			9	%
Latin America		3,773			9	%		46			2	%		3,819			9	%
Asia Pacific		10,899			26	%		329			12	%		11,228			25	%
Total		41,345			100	%		2,821			100	%		44,166			100	%
Share of Total		94	%					6	%					100	%
Apr - Jun 2005
Western Europe		8,465			23	%		1,437			61	%		9,902			26	%
Central and Eastern Europe, Middle East & Africa		10,095			28	%		282			12	%		10,377			27	%
North America		6,302			18	%		173			7	%		6,475			17	%
Latin America		4,388			12	%		41			2	%		4,429			11	%
Asia Pacific		6,840			19	%		421			18	%		7,261			19	%
Total		36,090			100	%		2,354			100	%		38,444			100	%
Share of Total		94	%					6	%					100	%
Change
Western Europe		27	%					22	%					26	%
Central and Eastern Europe, Middle East & Africa		23	%					75	%					24	%
North America		-44	%					13	%					-42	%
Latin America		-14	%					12	%					-14	%
Asia Pacific		59	%					-22	%					55	%
Total		15	%					20	%					15	%
Year to date
Jan - Jun 2006
Western Europe		20,421			26	%		3,311			63	%		23,732			28	%
Central and Eastern Europe, Middle East & Africa		22,535			29	%		839			16	%		23,374			28	%
North America		8,622			11	%		385			8	%		9,007			11	%
Latin America		7,366			9	%		105			2	%		7,471			9	%
Asia Pacific		19,166			25	%		592			11	%		19,758			24	%
Total		78,110			100	%		5,232			100	%		83,342			100	%
Share of Total		94	%					6	%					100	%
Jan - Jun 2005
Western Europe		16,947			26	%		2,916			60	%		19,863			28	%
Central and Eastern Europe, Middle East & Africa		18,390			28	%		659			14	%		19,049			27	%
North America		9,527			15	%		296			6	%		9,823			14	%
Latin America		7,891			12	%		89			2	%		7,980			12	%
Asia Pacific		12,328			19	%		868			18	%		13,196			19	%
Total		65,083			100	%		4,828			100	%		69,911			100	%
Share of Total		93	%					7	%					100	%
Change
Western Europe		20	%					14	%					19	%
Central and Eastern Europe, Middle East & Africa		23	%					27	%					23	%
North America		-9	%					30	%					-8	%
Latin America		-7	%					18	%					-6	%
Asia Pacific		55	%					-32	%					50	%
Total		20	%					8	%					19	%

 

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TOP 10 MARKETS IN SALES

Jan-Jun 2006

 

Sales		YTD Share of total sales			Q2 Share of total sales
UNITED STATES		9	%		7	%
CHINA		7	%		10	%
ITALY		6	%		6	%
AUSTRALIA		6	%		5	%
UNITED KINGDOM		5	%		5	%
SPAIN		4	%		4	%
SWEDEN		4	%		4	%
BRAZIL		4	%		3	%
INDIA		3	%		3	%
PAKISTAN		3	%		2	%

CUSTOMER FINANCING RISK EXPOSURE

 

SEK billion		June 30 2006		Mar 31 2006		Dec 31 2005		Sep 30 2005		Jun 30 2005		Mar 31 2005
On-balance sheet credits		5.7		4.6		7		6.5		6.5		6.9
Off-balance sheet credits		0.1		0.1		0.1		0.1		0.1		0.1
Total credits		5.8		4.7		7.1		6.6		6.6		7.0
Accrued interest		0.1		0.1		0.1		0.1		0.1		0.1
Less third-party risk coverage		-0.2		-0.2		-0.2		-0.5		-0.1		-0.3
Ericsson’s risk exposure		5.7		4.6		7.0		6.2		6.6		6.8
On-balance sheet credits, net book value		4.6		3.2		4.9		4.5		4.4		4.2
Credit commitments for customer financing		6.4		5.5		3.6		2.6		2.8		2.3

TRANSACTIONS WITH SONY ERICSSON MOBILE COMMUNICATIONS

 

		Apr - Jun				Jan - Jun
SEK million		2006		2005		2006
Revenues from Sony Ericsson		737		358		1,697
Purchases from Sony Ericsson		20		211		83
Receivables from Sony Ericsson		515		202		515
Liabilities to Sony Ericsson		59		15		59
Dividends from Sony Ericsson		—		—		1,160

 

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ERICSSON

OTHER INFORMATION

 

		Apr - Jun			Apr - Jun			Jan - Jun			Jan - Jun			Jan - Dec
SEK million		2006			2005			2006			2005			2005
Number of shares and earnings per share
Number of shares, end of period (million)		16,132			16,132			16,132			16,132			16,132
Number of treasury shares, end of period (million)		262			293			262			293			268
Number of shares outstanding, basic, end of period (million)		15,870			15,839			15,870			15,839			15,864
Numbers of shares outstanding, diluted, end of period (million)		15,941			15,912			15,941			15,912			15,927
Average number of treasury shares (million)		263			297			265			298			289
Average number of shares outstanding, basic (million)		15,869			15,835			15,867			15,790			15,843
Average number of shares outstanding, diluted (million) 1)		15,939			15,908			15,938			15,863			15,907
Earnings per share, basic (SEK)		0.36			0.37			0.65			0.66			1.53
Earnings per share, diluted (SEK)1)		0.36			0.37			0.65			0.66			1.53
Ratios 2)
Equity ratio, percent		—			—			53.9	%		44.9	%		49.0	%
Capital turnover (times)		1.3			1.3			1.3			1.2			1.2
Accounts receivable turnover (times)		3.9			4.2			3.8			3.9			4.1
Inventory turnover (times)		4.4			4.5			4.5			4.4			5.0
Return on equity, percent		21.3	%		26.6	%		19.7	%		24.8	%		26.7	%
Return on capital employed, percent		26.2	%		31.0	%		24.4	%		28.0	%		28.7	%
Days Sales Outstanding		—			—			95			90			81
Payment readiness, end of period		—			—			54,205			66,670			78,647
Payment readiness, as percentage of sales		—			—			32.5	%		47.7	%		51.8	%
Exchange rates used in the consolidation
SEK / EUR - average rate		—			—			9.33			9.15			9.28
- closing rate		—			—			9.24			9.42			9.42
SEK / USD - average rate		—			—			7.60			7.11			7.45
- closing rate		—			—			7.27			7.81			7.93
Other
Additions to property, plant and equipment		1,372			1,005			2,071			1,500			3,365
- Of which in Sweden		229			360			499			572			965
Additions to capitalized development expenses		412			152			770			455			1,174
Capitalization of development expenses, net		-238			-516			-556			-1050			-1,930
Amortization of development expenses		650			667			1,326			1,505			3,104
Depreciation of property, plant and equipment and amortization of other intangible assets		1,066			746			2,387			1,398			2,598
Total depreciation and amortization		1,716			1,413			3,713			2,903			5,702
Export sales from Sweden		22,574			23,650			46,872			46,259			93,879

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1)	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share

2)	Ratios restated in accordance with new option in IAS 19

 

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Acquisition of assets from Marconi

As per January 1, 2006, Ericsson acquired assets of Marconi telecommunication operations. Closing took place on January 23, 2006, except for a few smaller parts of the operations. The main part of the acquisition from Marconi was assets, but Ericsson also acquired shares in some entities. The acquisition of subsidiaries has been accounted for using the purchase method of accounting, as defined in IFRS 3 Business Combinations. As prescribed under this method, Ericsson has allocated the total purchase price, both for acquired assets and companies, to assets acquired and liabilities assumed based on their fair values. The fair values have been determined by applying generally accepted principles and procedures. The planned amortization period for intangible assets is 10 years.

The operating income of operations acquired from Marconi, amounted to SEK -1.2 billion for the first six months of 2006, including SEK -0.8 for amortization of intangible assets. This has been included in the consolidated financial statements for the period January 1 - June 30 2006.

Allocation of purchase consideration

 

		GBP m.		SEK b.
Intangible assets
Intellectual property rights		850		11.6
Brands		200		2.9
Customer relationships		52		0.7
Goodwill		0		0.0
Subtotal		1,102		15.2
Other assets and liabilities
Inventory		139		1.9
Property, plant and equipment		91		1.3
Pensions		-59		-0.8
Other		132		1.8
Subtotal		303		4.2
Total purchase consideration		1,405		19.4

The determination of purchase consideration allocation and fair values of assets acquired and liabilities assumed is based on preliminary appraisal; therefore, these values may be subject to minor adjustments.

Cash flow effects

 

Total cash purchase consideration		1,405		19.4
Less acquired cash and cash equivalents		-128		-1.8
Net cash outflow from the acquisition		1,277		17.6

 

21

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: July 21, 2006