Full-scale commercialization of OcNOS and VirNOS

「During the interim consolidated accounting period under review, revenue and segment profit increased year on year, partly due to the impact of a major project received last year.」

「During the interim consolidated accounting period under review, revenue and segment profit increased year on year, partly due to the impact of a major project received last year.」

「We are focusing on expanding the OcNOS® business.」

「The network business also achieved results, including receiving orders totaling US$70 million from Evollabs Tech FZ-LLC (hereinafter, “Evollabs”).」

「During the fiscal year, the Group continued to focus on securing projects from Tier 2/3 telecommunications operators as it expanded the OcNOS® business, worked to further expand its sales and technical partner network, and responded to various customer needs, including demand for bundled procurement covering hardware as well. However, revenue growth lagged expectations, and development costs also increased, resulting in a wider loss.」

「During the current interim consolidated fiscal period, new customer acquisitions and repeat orders for OcNOS® generally progressed as anticipated. In addition, revenue and profit increased year on year partly because some projects originally expected to be recognized from the third quarter onward were recognized earlier.」

「During the first quarter of the current fiscal year, the number and average value of new customer acquisitions and repeat orders for OcNOS® continued to increase steadily. However, due to the reaction to the large repeat order received in the same quarter of the previous year, revenue and profit declined year on year.」

「OcNOS® has also been highly regarded as a carrier-grade product that delivers flexibility and reliability while reducing capital expenditures, and business results have emerged, including the securing of repeat orders for large projects for the second consecutive fiscal year.」

「New customer acquisition and repeat orders for OcNOS® generally progressed as expected, resulting in higher revenue and a narrower loss compared with the same quarter of the previous year.」

「During the cumulative second quarter of the current consolidated fiscal year, new customer acquisitions and repeat orders for OcNOS® generally progressed as anticipated. In particular, the pull-forward of orders for large repeat projects during the cumulative first quarter resulted in substantial year-on-year increases in revenue and profit.」

「During the cumulative first quarter of the current consolidated fiscal year, the company steadily increased new customer acquisitions for OcNOS® as well as the number and average value of repeat orders. In particular, the pull-forward of orders for large repeat projects resulted in substantial year-on-year increases in revenue and profit.」

「These initiatives proved effective, and during the fiscal year the Group acquired approximately 90 new customers, expanding its customer base to more than 200 in total. The number and average value of repeat orders from customers acquired by the end of the previous fiscal year also increased steadily.」

「During the cumulative third quarter of the current consolidated fiscal year, the number of customers that newly decided to adopt solutions from IP Infusion Inc., including OcNOS®, during the period exceeded 60, among other developments, and steady business growth has continued.」

「During the cumulative second quarter of the current consolidated fiscal year, approximately 40 new customers had adopted solutions from IP Infusion Inc., including OcNOS®, while order values and the number of repeat orders also increased.」

「During the cumulative first quarter of the current consolidated fiscal year, more than 20 new customers had adopted solutions from IP Infusion Inc., including OcNOS®.」

「In 2021, the company secured adoption by more than 65 new customers, while the number and total value of OcNOS® orders, including multi-year contracts, each increased by approximately twofold year on year. The company therefore recognizes that the white-box market is steadily beginning to take hold.」

「During the cumulative third quarter of the current consolidated fiscal year, the initial deployment scale and order values for white-box projects were below the original assumptions.」

「Although inquiries and order volumes increased steadily, revenue and profit declined year on year because the increase in expenses, including personnel costs associated with strengthening the organization and software depreciation, outweighed the trend toward smaller initial deployment values than originally expected.」

「During the cumulative first quarter, the company received orders for white-box projects, primarily in Africa.」

「Against this backdrop, the company had been pursuing discussions with multiple customers on large-scale licensing transactions for its products in the network business, which it positions as a major future growth area, and in the automotive infotainment field within its overseas business. However, in addition to customers taking longer than initially expected to evaluate the transactions due to the impact of COVID-19, the increase in short-term uncertainty associated with the resurgence of infections in Europe and the US meant that the company did not conclude contracts for these large-scale licensing transactions during the current consolidated fiscal year.」

「The company expanded its white-box solutions for data centers by beginning to offer the commercial version of SONiC distribution.」

「In July, the company announced that Asia Pacific Telecom (亞太電信), a telecommunications carrier in Taiwan, had decided to adopt IP Infusion Inc.'s white-box solutions for the construction of its own 5G mobile network, and that Mundo Pacífico, a telecommunications provider in the Republic of Chile, had selected IP Infusion Inc. for the introduction of South America's first white-box optical network to strengthen its own network in major cities in central Chile. The company intends to steadily build on these adoption cases.」

「With its US subsidiary IP Infusion Inc. at the core, the Company has established local subsidiaries in India, Canada and other countries. It is working to maintain the business foundation of its existing “ZebOS®” series of infrastructure software and platforms for networking equipment, while focusing on expanding its “OcNOS®” integrated Network OS for white-box systems.」

「In addition, the company plans to make DANOS-Vyatta edition compatible with the specifications for TIP's Disaggregated Cell Site Gateway (DCSG), developed by the Telecom Infra Project (TIP), which promotes the Open Optical & Packet Transport project group.」

「During the third quarter of the current consolidated fiscal year, the company’s consolidated subsidiary IP Infusion Inc. entered into a license agreement and business alliance agreement with a subsidiary of AT&T Inc., a major US information and communications and media conglomerate, concerning a white-box solution for network equipment for telecommunications carriers, which separates hardware and software. Accordingly, IP Infusion will develop and sell “DANOS-Vyatta edition” alongside “OcNOS®,” which it has developed and sold to date.」

「The business’s medium- to long-term strategy is to have OcNOS® directly adopted by telecommunications carriers. To achieve this, it is currently focusing on product development investment, including support for diverse semiconductor chipsets and functional enhancements, as well as technical validation and field trials with more than 30 telecommunications carriers and other operators. In the current fiscal year, the company’s goal is to acquire early-adopter customers and build a track record of business results leading to the acquisition of major telecommunications carrier customers. As part of these efforts, OcNOS® was adopted by SKY Brasil, Brazil’s largest satellite television operator.」

「The business's medium- to long-term strategy calls for direct adoption of OcNOS® by telecommunications carriers. To achieve this, the company is currently focusing on product development investment to support a diverse range of semiconductor chipsets and expand functionality, as well as technical evaluations and proof-of-concept trials with more than 30 telecommunications carriers and other operators.」

「The business's medium- to long-term strategy calls for direct adoption of OcNOS® by telecommunications carriers, and during the current consolidated fiscal year the company is focusing on product development investment to achieve this. As part of these efforts, as stated in the 12 July 2018 disclosure titled Acquisition of Shares in Northforge Innovations Inc. in Canada, the company acquired 100% of the shares of Northforge Innovations Inc. in August 2018 and made it a consolidated subsidiary, with the aim of applying its engineering resources and expertise in chipsets for network equipment to OcNOS® development.」

「Regarding the strengthening of sales, the company expects the impact on its medium-term business growth policy to be limited. This is because multiple large business discussions and collaborations are already progressing, supported by the knowledge gained from the London Internet Exchange project, which recently began full-scale operations, and the favorable response from the industry.」

「During the cumulative second quarter of the current consolidated fiscal year, OcNOS®, which had been adopted by London Internet Exchange, one of the world's largest IXP operators, began full-scale operations. OcNOS was also selected by Serbian Open Exchange, an IXP provider in Serbia, among other developments. Adoption and deployment by major telecommunications carriers and others progressed against a backdrop of growing expectations for the commercialization of white-box solutions for telecommunications carriers.」

「During the first quarter of the current fiscal year, cooperation with London Internet Exchange, one of the world's largest IXP operators, progressed steadily, while OcNOS® was selected by Serbian Open Exchange, an IXP provider in Serbia. Adoption and deployment of OcNOS by major telecommunications carriers and others also progressed, against a backdrop of growing expectations for the commercialization of white-box solutions for telecommunications carriers, and business expansion in network virtualization progressed steadily.」

「Revenue increased as sales of OcNOS®, the white-box Network OS expected to become the next core product, grew steadily.」

「Progress for OcNOS® was strong at the US operation, while the business environment at the European operation improved as unprofitable projects from the previous consolidated fiscal year were brought to an end. As a result, revenue increased, cost improvements progressed, and segment earnings improved.」

「The segment posted higher revenue and profit and returned to profitability during the cumulative second quarter of the current consolidated fiscal year. This reflected strong progress for OcNOS® at the US operation, the pull-forward of some projects, and progress in cost improvements at the European operation as unprofitable projects from the previous consolidated fiscal year were brought to an end.」

「The company is also pursuing business expansion in the new field of network virtualization, specifically by expanding sales of OcNOS®, an integrated network operating system that significantly reduces network infrastructure capital expenditure and operating costs at data centers and elsewhere, and promoting the full-scale commercialization of VirNOS®, a virtual network platform using network functions virtualization technology (NFV: Network Functions Virtualization), which is considered key to flexible and economical network construction and control.」

「During the current consolidated fiscal year, the company advanced the development of sales channels, enhanced its support structure and strengthened its relationships with ODM partners for OcNOS®, a core pillar of business growth. The company's business foundation also progressed, including through the decision by London Internet Exchange Limited, one of the world's largest internet exchange point service providers, to adopt OcNOS.」

「In particular, during the cumulative third quarter of the current fiscal year, OcNOS® was selected by London Internet Exchange Limited (headquartered in the UK), one of the world's largest internet exchange point service providers, among other developments, expanding the customer base for future business growth.」

「In particular, OcNOS® achieved business results during the cumulative second quarter of the current fiscal year, including customer acquisitions and an increase in the number of compatible products.」