Sustained high development pace
During the quarter, we took some important steps towards profitable growth with the establishment of a new management team and development of a new strategy. We are also starting to see the results of our accelerated product development program in the form of several new launches. The Covid-19 pandemic continues to affect our operations. The negative market impact will probably persist over the coming quarters, even if we have seen signs of a gradual recovery in the third quarter.
Market situation and Covid-19
The general market uncertainty continues due to Covid-19. Live events are back, which is positive, while restrictions on audiences and other changes (such as relocating events or compressing playoffs) are negatively affecting the entire live sport ecosystem. This means that our customers remain cautious about making major investment decisions. Practical restrictions on travel and other areas have also had a negative impact. The inflow of potential new business was lower than normal in the second and third quarters. We maintain, given the situation, active cost control aimed at reducing negative financial effects. Despite the continued uncertainty, we have seen some signs of a slow market recovery during the third quarter, although our assessment is that Net Insight will be negatively affected for the remainder of 2020 and into the first half of 2021.
Growth in our core operations, Media Networks, has been unsatisfactory in recent years. There are several reasons for this, but it mainly relates to excessively broad operations (Nimbra, Sye and ScheduALL) given the size of the company. Insufficient commercial acumen and the structure required to drive growth initiatives are other key factors. All this has led to a lack of focus and insufficient investments in core operations, which has meant opportunities have been lost.
To return to high and profitable growth, we are improving our control and follow-up, creating a new and stronger management team that includes the new role of Chief Commercial Officer, and have also produced a clear long-term strategy. We will gradually be shifting the business mix towards an increased proportion of software, recurring revenue streams and sales of solutions rather than individual products.
Our market position, with the ongoing technology shifts (towards IP and cloud-based solutions) and uncertainty caused by the pandemic, is generating major changes for our customers. This creates some challenges, but also considerable potential. Our strategic growth initiatives focus on segments that benefit from the underlying market trends — for example, the shift towards cloud-based transport and remote production. We have a strong position because of the unique Nimbra ecosystem with a large installed base and the potential to combine solutions and technologies. The Nimbra portfolio is based on our own tried-and-tested transport technologies, supports IP and delivers the most open cloud-based software solution in the sector. This allows our customers to upgrade and optimize their existing Nimbra investments as their media transport requirement increases and changes.
Around the end of the quarter, we introduced a large number of new functions on our existing Nimbra and Aperi platforms. The consolidation of software functions on existing hardware continues, which allows our customers to use the same hardware for many different applications. It is also pleasing that the launch of the next generation of our cloud-based solution Nimbra Edge has been well received by the market. We have won a number of deals and the first systems are now operational.
As previously announced, at the beginning of the year Tata Communications decided to base its new media network on our high-capacity platform Nimbra 1060. A large number of products have been delivered and installed in this network during the quarter. Tata’s new global 100G media network has been built to handle growing demand for capacity from new formats (e.g. UHD/4K), content such as eSport and remote production.
We have numerous new launches planned over the coming 6-12-month period, which has been made possible by our earlier strategic decision to accelerate product development and increase competitiveness in Media Networks. We are set to maintain the high development pace, focusing on functionality and customer solutions relating to our strategic initiatives, such as the cloud-based solution Nimbra Edge.
ScheduALL Evolution, our new cloud-based solution for resource optimization, was launched in the quarter. Evolution allows existing systems to be merged and shifted to a cloud-based environment, which is a highly relevant solution in a media industry characterized by consolidation and cost pressure. We’re also continuing the roll-out of our Business Intelligence services. The business has been negatively affected by Covid-19, and active measures have been taken towards reduction of operating expenses.
We will continuously present information about our operations and growth journey, including through the new communication channel Open Insight that can be found on our website, and through social media channels. Despite continued external challenges, I am looking forward with confidence given the positive market reactions on our new products, e g Nimbra Edge and that we have a focused strategy in place.
Crister Fritzson, CEO