Monday, December 26, 2011 1:02:31 AM
By Anders Bylund (TMF Zahrim)
December 24, 2011 |
http://www.fool.com/investing/general/2011/12/24/will-8x8-sink-or-swim-in-2012.aspx
This year has been very kind to 8x8 (Nasdaq: EGHT ) . Share prices have climbed more than 50% as earnings solidified and sales growth jumped to double-digit levels.
In fact, this stock crushed all-comers in its industry. Voice-over-IP compadres Vonage (NYSE: VG ) and magicJack VocalTec (Nasdaq: CALL ) couldn't hold a candle to 8x8's returns. Neither could traditional telephony giants AT&T (NYSE: T ) or Verizon (NYSE: VZ ) , whom 8x8 considers its main competition.
Can 8x8 repeat this stellar performance in 2012 -- or are the challenges ahead too great for the little phone-tech rebel? Let's find out.
The strategy
CEO Bryan Martin sees 8x8 working in the "ever-changing business cloud solutions market." With about $20 million in quarterly revenue spread across nearly 27,000 business customers, the average revenue per account comes out to roughly $740 per quarter or $246 a month. We're obviously talking about small to medium-sized businesses here -- 8x8 is leaving retail consumers to magicJack and Vonage.
The company is reaching for larger accounts. Management likes to highlight success stories with 25 lines or more per account -- still far from enterprise-class but larger than the eight lines in the average account.
To get this done, 8x8 is working on developing an indirect sales model as opposed to managing sales calls in-house. The company recently recruited two sales executives from unified communications expert Polycom (Nasdaq: PLCM ) to establish a partner network in 2012. So far, more than 40 partners have joined the external sales force; we'll get to know more about them, maybe even including some names, in the next earnings call.
Challenges and roadblocks
The largest obstacle in 8x8's path will always be the wireline phone company. These services aim to replace traditional phone, fax, and other communications lines with an Internet-based and largely software-focused suite. That's easier said than done, especially since the same incumbents 8x8 wants to push out tend to control the network connections on which this newfangled stuff depends.
On the technology side, 8x8 solutions may be compatible with good old copper-wire solutions as well as competing video and voice networks by Polycom and Cisco Systems, but no IT manager ever got fired for choosing Cisco. Two decades of operating history don't count for much when weighed against the imposing market presence of much larger rivals.
How's that 2012 looking, then?
None of the major challenges facing 8x8 today are particularly new. On the other hand, businesses of every size are getting more comfortable with cloud-based infrastructure services every day. The year to come could very well be the one where VoIP telephony hits the tipping point and starts a period of exponential growth.
I'd put that likelihood at about 30%. Extend your time frame to five years, and I'm certain that this will happen before 2016. Investing a little too early in the next business revolution doesn't cost much, especially when compared with the lost opportunity if you miss that hockey-stick moment. I'd use the Foolish watchlist feature to get a closer look at 8x8 if I were you.
1/2 cent Vancouver penny mooching pirates!
Recent EGHT News
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/17/2024 08:13:48 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/17/2024 08:13:37 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/17/2024 08:13:26 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/17/2024 08:13:16 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/17/2024 08:13:05 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/16/2024 11:20:35 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/16/2024 11:19:30 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/16/2024 11:18:25 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/16/2024 11:17:24 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/16/2024 11:15:43 PM
- 8x8 Delivers Latest Platform Innovations Adding Video Engagement to 8x8 Contact Center • Business Wire • 09/12/2024 01:00:00 PM
- 8x8 Wins Stevie® Awards in 2024 International Business Awards® for Continued Excellence in Professional Services • Business Wire • 09/05/2024 01:01:00 PM
- 8x8 CPaaS est nommé chef de file du marché de la vidéo programmable par un expert du secteur • Business Wire • 09/02/2024 02:00:00 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:54 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:43 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:33 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:22 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:12 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/27/2024 08:19:03 PM
- 8x8 CPaaS Named a Leader in Programmable Video Market by Industry Expert • Business Wire • 08/27/2024 08:00:00 AM
- Form S-8 - Securities to be offered to employees in employee benefit plans • Edgar (US Regulatory) • 08/23/2024 08:17:27 PM
- 8x8 CX Transformation and Innovation Driving Year-Over-Year Contact Center Momentum • Business Wire • 08/22/2024 01:00:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/19/2024 08:33:36 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/19/2024 08:33:03 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/19/2024 08:32:31 PM
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