Net Insight Interim Report First Quarter 2006

5/3/2006
*Sales for the first quarter reached SEK 20.2 million (21.0)

*Reduced loss compared to the same quarter last year, result after taxes for the quarter amounted to SEK –14.4 million (–18.6)

*Earnings per share for the quarter amounted to SEK –0.04 (–0.06)

*Improved gross margin reaching 70% (62%) for the quarter due to increased contribution from software and services

*Continued success within the DVB-T segment with a phase-one order from Nozema Services for the national digital terrestrial TV network in the Netherlands

*Several new customer orders from leading media and broadcast operators

After the reporting period:

*Additional order of above SEK 10 million from Nozema Services for the national digital terrestrial TV network (DVB-T) in the Netherlands

*The first high capacity network switch Nimbra 680 delivered to customer

SIGNIFICANT EVENTS DURING THE QUARTER

Sales and rollouts
Sales in the first quarter reached SEK 20.2 million (21.0). Approximately 80% of sales referred to Europe followed by the US and Asia.

Net Insight continues to focus on the prioritized market segment the Professional Media Industry including digital terrestrial TV (DVB-T and DVB-H) in both Europe, the US and Asia. Previously Net Insight has won deals for building DVB-T networks in Denmark, Finland and Germany, confirming Net Insight´s strong solution for DVB-T networks. During the quarter, Net Insight had continued success within this segment with a number of wins and rollouts including:

*Nozema Services for the national digital terrestrial TV network (DVB-T) in the Netherlands. This is the first phase of the DVB-T network that will be used to transport digital terrestrial TV streams in parallel with contribution streams. Nozema Services is a company that broadcasts and transmits radio and TV-signals.

*Danish digital TV network built on Net Insight´s Nimbra platform was successfully opened on March 31st. Broadcast Service Danmark (BSD) is responsible for the analog and digital distribution of TV and radio in Denmark and placed this order with Net Insight in April 2005. The network serves more than 30 cities nationwide in Denmark and provides 5.5 million people with digital TV.

Furthermore, sales included a number of orders from new customers within the Professional Media Industry from several business industry operators, including for e.g.:

*Corus Entertainment, one of Canada’s leading media companies, ordered equipment to build a media network to transport video, voice and data among its television offices.

*Nexion, a Japanese media operator, for a network to transport real-time critical video between New York and London.

*European media operator for the Nimbra 340 with HD interface for a media network in Europe that transports uncompressed HDTV streams, SDI and data services.

Additionally, Net Insight received important recurring business from existing customers who are expanding or upgrading their networks such as:

*European Broadcasting Union (EBU) for a capacity upgrade of its fiber media network for transporting high-quality TV and media traffic.

*Telenor Satellite Broadcasting for a media network in Bulgaria with around 10 locations in Sofia that transports video and Ethernet services to broadcast and media operators.

*Broadwing, a US media operator, for further business regarding their 44-city coast-to-coast media network in the US.

*Midwest Telnet for a software upgrade to be used in its triple play network, successfully operational since 2003.


The Company experienced a further increase in demand of software, support, service and training during the quarter.

Net Insight also has business opportunities within the highly interesting market segments for triple play and core networks. With the high capacity switch Nimbra 680, Net Insight is very well positioned on these markets.

Partnerships
Net Insight continues to work on potential partners to be able to offer complete end-to-end solutions to the customer. Within the segment for the Professional Media Industry, Net Insight has the possibility to win significant business either together with its established partners or on its own. In the triple play segment Net Insight has established solution partners that enable the Company to effectively bid for triple play projects, however in the larger triple play rollouts, a strong regional or global partner is needed to be part of the deal. Net Insight remains committed that it will establish a successful partnership in order to win triple play business in the future.

New CEO appointed
In January Net Insight announced that the Board had appointed Fredrik Trägårdh as new CEO as of February 17 since the former CEO Tomas Duffy had assumed the position as CEO of Teligent AB. Fredrik Trägårdh has been the CFO of Net Insight for 3.5 years. Anders Persson was simultaneously appointed Executive Vice President including continued responsibility for technical development.

Strengthened sales force in Europe
Net Insight has strengthened its sales team in Europe with two new senior regional sales managers who will target media, broadcast and telecom operators and increase Net Insight´s potential for further sales success in Europe. The new regional sales managers will cover Italy and Iberia as well as U.K and Ireland.

Shows and events
Net Insight has participated at several shows during the first quarter within various areas; the triple play show TVoDSL in Paris, the NTCA Annual Meeting & Expo in San Antonio, the CSTB International Exhibition and Conference in Moscow, DVB World 2006 in Dublin and TechNet Baltic 2006.


SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

Additional order for the DVB-T network in the Netherlands
Net Insight received an additional order from Nozema Services of above SEK 10 million for building the second phase of the national digital terrestrial TV network (DVB-T) in the Netherlands. The network will be based on Net Insight´s Nimbra platform and will be used to transport digital terrestrial TV streams. The equipment will be delivered during 2006.

New board members elected at the AGM
The annual general meeting decided to re-elect Lars Berg as Chairman of the board as well as board members Clifford H. Friedman, Birgitta Stymne Göransson and Bernt Magnusson. Furthermore, Ragnar Bäck and Marco Limena were elected for the first time, both with a great experience from working with large systems sales and partners within the media and/or telecom business:

*Ragnar Bäck is currently the Chairman for Ericsson´s operations in CEMA. Bäck has held several executive positions at Ericsson such as CEO in Italy and in the Netherlands, Executive Manager for the Asian/Pacific region in Hong Kong, and Executive Manager for Western Europe in London.

*Marco Limena was most recently Vice President of Hewlett-Packard’s (HP) Solution Organization for the Network and Service Provider business, addressing communication infrastructure solutions, mobility, and digital rich media services. Limena was responsible for managing all aspects of HP’s strategy, partnerships, and overall solution offering for the service provider industry.

The first Nimbra 680 delivered to customer
Net Insight´s product development focuses on developing market-leading products for customer groups with great demand. Net Insight has continued the development of its next generation product, the Nimbra 680. With the Nimbra 680, Net Insight has a new potential to reach a significantly wider market, both geographically and in terms of segments and customers. The Nimbra 680 is also well suited for high capacity networks in the development of network equipment for the next generation´s communication services.

Interconnection with Verizon Business at US media trade show
Net Insight participated at the media trade show NAB 2006, National Association of Broadcasters, in Las Vegas where approximately 1,400 companies within the professional media industry were exhibiting. Net Insight had its own booth with a live demo where all its products were shown.
Furthermore, Verizon, one of the largest telecom operators in the world, is using a demonstration network based on Net Insight´s equipment. The demonstration network has shown the capability of the Nimbra 340-HD to transmit uncompressed HD video across very large distances and that the network is interoperable with Verizon´s nationwide network. The demonstration network was used during NAB to transport live video feeds into the Net Insight and Verizon booths respectively.

OUTLOOK

The Board does not intend to make any specific earnings forecast, but is focusing instead on providing carefully considered indicators. The Board believes that the Company will increase both sales and financial results substantially in 2006, however sales can fluctuate between the quarters due to the sales processes of larger systems.

RESULTS

Net sales amounted to a total of SEK 20.2 million (21.0) for the quarter. The total costs amounted to SEK 28.8 million (32.0). The company shows a reduction in loss compared to the corresponding quarter last year with an operating loss of SEK –14.8 million (–18.9) and a loss after financial items of SEK –14.4 million (–18.6). The financial net amounted to SEK 0.4 million (0.3).

Gross margin
The Company´s gross margin increased further and reached 70% (62%) for the quarter. The increased gross margin is mainly driven by an increase in sales of software and services.

Costs
The total costs amounted to SEK 28.8 million (32.0), which is somewhat lower than the same quarter last year even though marketing expenses have increased.

Employees
At the end of the period Net Insight had 78 (69) employees of which the parent company Net Insight AB had 71 (64) employees and the US subsidiary Net Insight Inc. had 7 (5) employees.

Liquidity
The liquidity at the end of the period was SEK 75.2 million (49.9).

Investments
Investments in instruments, equipment and improvements to premises amounted to SEK 0.2 million (0). During the period, SEK 10.1 (7.0) million of the Company’s research and development expenses has been capitalized. These have been accounted for as intangible fixed assets.

Parent company
The parent company’s net turnover was SEK 27.8 million (30.2). The deficit after financial items amounted to SEK –10.1 million (–12.2). Liquid funds amounted to SEK 74.2 million (49.0). The calculated accumulated tax deficit for business in the parent company is estimated to be SEK 1,060.9 million.

This report has been established in accordance with International Financial Reporting Standards (IFRS) and IAS 34.

This report has not been examined by the company´s auditors.

Next report from Net Insight
Interim report for January – June: 22 August 2006

Stockholm, 3rd May 2006
Fredrik Trägårdh, CEO Net Insight AB

The full report can be downloaded here.: www.netinsight.net/pdf/060503_Interim_Report_Q1_ENG.pdf

Contact Information

Fredrik Trägårdh

CEO

Net Insight AB

Contact via E-mail