For the fourth quarter the Stockholm, Sweden-based company posted net income of SEK 9.7bn ($1.39bn), up 13% from SEK 8.6bn ($1.22bn). This rise included a tax benefit. Sales meanwhile rose 18% to SEK 53.7bn ($7.68bn) from SEK 45.6bn ($6.53bn).

The full-year figures were equally impressive. Net income rose 8% to SEK 26.2bn ($3.75bn) from SEK 24bn ($3.48bn), while sales rose 17% to SEK 177.7bn ($25.45bn) from SEK 151.8bn ($21.7bn) in 2005.

The company is perhaps best known as the one of the largest makers of equipment for mobile phone networks, where during the past 12 months sales rose 10% to SEK 123.4bn ($17.66bn). Fixed networks rose 162% (thanks again to Marconi) to SEK 12bn ($1.71bn), while professional services rose 30% to SEK 32.3bn ($4.62bn).

Western Europe provided solid sales, up 24% on an annual basis. Meanwhile sales in Central and Eastern Europe, Middle East and Africa rose 23%, while Asia Pacific grew 42%, much higher than the company had expected at the start of 2006.

According to CEO Carl-Henric Svanberg, the strong performance in the Asia Pacific market reflects the fact that Japan leads global mobile broadband development, as well as demand in China, which has a lot of pent up capacity needs while waiting for 3G. However, Svanberg warned during a press conference that he does not expect China to issue the long-awaited 3G WCDMA licenses in 2007.

On the other side of the world it was less good news, with revenues from Latin America down 14% annually. North American revenues were down 18%, despite the US focusing a lot on fiber to the home and triple-play.

During 2006, we successfully integrated Marconi into our operations, including reaching expected profitability, said Svanberg. We also recently announced the acquisition of Redback Networks in a move to further enhance our strong all-IP offering.

Svanberg said the focus has been on all-IP and multimedia services, with high capacity routers being the key here. The Redback acquisition closed on January 25, and has given the Swedish company access to over 800 engineers in Silicon Valley, and accelerates our relationships with fixed-line operators.

Svanberg believes that the supply chain of the Marconi assets will show steady positive development over the year as more production is moved to low-cost countries and bottlenecks are removed. He pointed out that on the revenues from services are 30%, and that Ericsson is now responsible for 100 million subscribers on 100 networks that it is running.

The good news was reinforced by the impressive financial performance of Ericsson’s mobile handset joint venture. Indeed, the fourth-quarter performance at Sony Ericsson Mobile Communications AB was so strong that it beat Samsung Electronics into third place in terms of market value.

For the fourth quarter, net profit at the joint venture rose 144% to 447m euros ($578m) from 144m euros ($186m) in the year-ago quarter. Sales rose 60% to 3.78bn euros ($4.89bn). London, UK-based Sony Ericsson said it shipped 26 million phones during the fourth quarter and 74.8 million devices during 2006.

But the market had been waiting for a sting in the tail and it reacted in typical fashion when Svanberg predicted mid-single digit market growth for 2007. The market believed this was a weakening in its outlook statement, as it has previously forecast moderate growth in 2007.

Consequentially, Ericsson’s ADS shares on the Nasdaq fell 6.38% to $36.82 on Friday.

Yet Svanberg was well aware of these market fears, and effectively blamed the poor performance at his rivals for lowering his outlook. The newly merged Alcatel-Lucent SA recently warned of a fourth quarter net loss on sales down 15.8% to $4.25bn euros ($5.7bn). Meanwhile, Nokia Corp and Siemens AG are pressing ahead with the merger of their networking business, despite the 420m euro ($555m) bribery scandal at Siemens. Growth at Nokia’s network business had fallen to 12% in the last quarter.

We are gaining market share faster than we thought, and we are seeing weaker players losing market share faster than we thought, said Svanberg. We expect 2007 to show similar growth for 2006, but we changed our guidance to single mid digits which is a much better representation of where we see the market growing.

An upbeat Svanberg told reporters that Ericsson had 40% of the market for supplying GSM mobile equipment, and has 35% market share for 3G networks based on WCDMA/HSPA technology.