8×8's Losses Grow
It's difficult to get excited about any part of 8X8 Inc.'s fourth-quarter results. While revenue nearly doubled to $3.9-million from a year earlier, the Internet telephony company's losses soared to $7-million from $1.5-million. The company attempts to cover this bad news by pointing out the number of subscribers rose to 57K from 40K, while it has $31.8-million of cash. Let's be honest: 17K subscribers is what Vonage is attracting every two weeks, while 8×8's cash position was buoyed by a stock offering. It is readily apparent that 8×8 is a company struggling to catch the VOIP wave. The challenge, however, is investors have yet to caught the VOIP bug. If you look at the recent performance of publicly-traded VOIP companies, very few have done well. 8×8 shares have tumbled by about 50% so far this year - cracking the $2 level today. While 8×8 may have the best VOIP service - according to TomsNetworking - it's not attracting enough customers to make it anything more than a marginal player in a market that is seeing growing competition from cablecos.
May 25th, 2005 at 12:28 pm
We shouldn't be too critical of 8×8 because we don't know how quickly Vonage is burning through their funds. That's one of the challenges when a company is publicly traded — they're under scrutiny, which is well-deserved because they are public.
Maybe instead of tracking the number of subscribers we should be tracking the cash burn rate per customer (which relates in some manner to the customer acquisition cost).
Frank
May 25th, 2005 at 7:00 pm
The analysis seems to assume that VoIP is a full-fledged industry, like cable television, and that if you can't be profitable quick, something is very wrong. In fact, VoIP is **just starting** as an industry. The industry will **begin** to mature when 75 percent of households have broadband connections to the Internet. VoIP is expected to take off beginning in 2006. It certainly is very minor now. A company needs to invest heavily at the start, just like in any new industry.
The analyst belittles the 17,000 new subscribers. At $15 per month, that's an additional revenue of $255,000 per month, or $3,060,000 per year. That's real cash.
8X8 had a total of 57,000 subscribers at the end of March. That's $855,000 per month, or $10,260,000 per year, at $15 per subscriber.
Note that at the end of 2004, AT&T, with all its name recognition and clout, had but 53,000 CallVantage customers.
8X8 is just starting a marketing campaign, so expect many additional customers in coming months.
By the way, another public company, deltathree (DDDC) is doing very well, just about reaching breakeven in the quarter ended March 31 and expected to be very profitable in 2006.
Finally, it is sad to read so much junk analysis by supposed experts on the Internet. Opinions are worthless unless backed by thought and intelligence.