Since opening the year with shares trading around the 2.45 – 2.59 level business communications and cloud computing solutions provider 8×8, Inc. (NASDAQ: EGHT) has put together a string of strategic partnerships along with key acquisitions to push share price to new levels, hitting a 52-week high of 4.97 on Thursday with trading volume consistently in the millions. As aggressive as EGHT has there are investors who have expressed some apprehension regarding the steady climb in share price, opting to wait for a pullback before putting their money on the table. That pullback may not come any time soon though as EGHT has already surpassed that 4.97 mark on Friday and continues to generate strong volume.
While EGHT was certainly aided by their recent inclusion in the Russell 3000 Index, opening the door to institutional investors who use the index as a benchmark for investing, the reality is EGHT has been doing a lot of groundwork to build investor confidence and with their focus on continued growth shareholders couldn’t be happier.
Following a relatively steady March and April things began to take off for EGHT in late May as shares finished the month at 3.41, a .30 increase from where they started. Since the end of May EGHT has added nearly 47% to their share price thanks to a June that featured a number of positive announcements from the company.
On June 8 the company announced they had surpassed 25,000 businesses subscribing to their cloud VoIP, video conferencing, unified communications and managed hosting services and while they noted that demand from small and medium-sized businesses for their services were up they also pointed to an increase in demand from large distributed enterprises and government organizations, a segment they have yet to really tap. What is so encouraging about EGHT’s growth is the fact they continue to innovate and seek out new clients as CEO Bryan Martin stated “We intend to transition an even greater number of businesses to our services in 2011 and 2012 with new differentiated offerings such as Virtual Office Solo and our soon-to-be-released Virtual Room video cloud conferencing service while extending our reach via our recently announced nationwide channel program.”
EGHT followed that announcement with news that they had partnered with Walsh Vision, a leading wireless business solutions provider and an exclusive Sprint partner, to offer mobile VoIP and cloud UC services as part of their Mobile Office solution for business customers. This partnership represents EGHT’s drive to enter broader segments and target growing markets that are in need of wireless data, multimedia and mobility solutions. The partnership with Walsh Vision, which offers full service consulting and business solutions to the educational, public service, and general business sectors, as well as corporate enterprise accounts, shouldn’t be overlooked as they count 50 Fortune 500 companies as clients.
With the goal of strengthening their cloud-based offerings EGHT then acquired Zerigo, Inc., a company that focused on providing virtual servers, managed DNS services, and monitoring tools for cloud-based server operations. What this acquisition did for EGHT is further solidify its commitment to providing managed server solutions for small to medium sized businesses, a market that they have built their business serving. It’s a positive sign that EGHT has no plans on abandoning what has worked thus far and with the ability to now offer expanded cloud computing capabilities while lowering IT infrastructure costs and management requirements they should continue to deepen their roots in this market.
While 8×8 deepens their roots they could also get a nice boost in revenue from their recently launched 8×8 Business Partner Program “designed to offer agents, resellers and traditional hardware VARs a unique and compelling opportunity to capitalize on the growing demand for cloud-based solutions.” This comprehensive program enables partners to engage with 8×8 as a single source provider of four key cloud-based offerings- Cloud VoIP, Cloud Video, Cloud Contact Center and Cloud Hosting. What’s unique about this program is it provides a means for VARs to generate “incremental, long-term revenue by reselling 8×8 SaaS offerings,” something that offered little revenue potential for VARs in the past.
The innovation of 8×8 isn’t only in their technology but in their approach to generating revenue as their Business Partner Program offers VARs and system integrators an opportunity to add incremental revenue in three ways, “through one-time bounties on initial orders, monthly residual payments and commission on equipment accompanying the sale,” a compensation model that has no comparison. This approach should win over a number of VARs and system integrators, the ones who actually provide technology services to small and midsized businesses.
Most recently EGHT announced they were partnering with VCE, the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel, to deliver cloud computing services to businesses utilizing the Vblock Infrastructure Platform. The key to this partnership occurring was EGHT’s acquisition of Zerigo earlier in the month which ensured 8×8 would be able to “add a comprehensive, easy-to-use and powerful provisioning mechanism to the Vblock platform, allowing for rapid and automatic deployment of flexible cloud computing services.” The Zerigo acquisition has also proven to be an excellent tool in generating awareness about 8×8 by some leading technology companies like Cisco, EMC and VMware, the value of this being significant.
Martin expressed how significant saying, “The Vblock solution represents the platinum standard for tier 1 business applications and provides businesses with the confidence to entrust mission critical applications to the cloud. We view this partnership as a major stepping stone towards our goal of becoming the preferred provider for all types of cloud services for businesses across the United States.” This could be the perfect opportunity for EGHT to put their foot into some deeper water.
We’ll see how well EGHT is doing when they release their first quarter fiscal 2012 results on July 20, 2011 but looking at their past quarterly results it would stand to reason that they will once again report strong figures. They have remained profitable in 13 of the last 14 quarters and in their last quarter they reported record revenue of $18.2 million while fiscal 2011 revenue hit $70.2 million, a 24.4% jump from fiscal 2010. Of particular interest in their upcoming quarterly report with be new customers added in the first quarter. They reported 3,009 new business customers in the fourth quarter and if they can surpass that figure in the first quarter it might be enough to convince the uneasy investors that growth is here to stay.
