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8x8 Announces Second Quarter Fiscal 2008 Operating Results

Nov 01, 2007
SANTA CLARA, Calif., Nov. 1 /PRNewswire-FirstCall/ -- 8x8, Inc. (Nasdaq: EGHT), provider of Packet8 ( broadband Voice over Internet Protocol (VoIP) and videophone communication services, today announced financial operating results for its second fiscal quarter ended September 30, 2007.

Revenues for the second quarter of fiscal 2008 increased to $14.8 million, compared to $13.2 million for the same period of fiscal 2007 and $14.7 million for the previous quarter. The net loss for the quarter was $2.6 million or ($0.04) per share, compared to a net loss of $2.4 million or ($0.04) per share for the same period in fiscal 2007 and net income of $508,000 or $0.01 per share for the previous quarter. Total revenues for the six month periods ended September 30, 2007 and 2006 were $29.5 million and $25.4 million, respectively. Net loss for the six month periods ended September 30, 2007 and 2006 was $2.0 million or ($0.03) per share and $4.2 million or ($0.07) per share, respectively. The Company's cash and investments increased from $12.2 million in the quarter ended June 30, 2007 to $12.9 million at September 30, 2007.

As of September 30, 2007, more than 9,000 U.S. based businesses subscribed to the Packet8 Virtual Office service, an increase of approximately 1,000 new companies during the quarter.

Packet8 Virtual Office revenue grew to 47% of total revenues, and grew 101% over the same period of fiscal 2007, while residential and video revenue for the quarter declined by 19% over the same period of fiscal 2007. Overall gross margin declined from 64% in the first quarter of fiscal 2008 to 52% in the second quarter of fiscal 2008 while service margins declined from 70% to 67%, respectively. The decline in gross margins was primarily related to the significant impact on product margins associated with the acquisition of nearly 25,000 former SunRocket subscribers during the 2nd quarter of fiscal 2008. Product margins declined from negative 4% in the first quarter of fiscal 2008 to negative 77% in the second quarter as the Company provided free equipment and shipping and no activation fees to these new customers.

"We view the SunRocket customer acquisition strategy very favorably as we saw our overall residential customer acquisition costs hit an all time low of $80 per customer. While the former SunRocket customers had a one-time negative impact on our bottom line to get them signed up on our network, we expect that these new Packet8 customers will add greatly to our revenues and net income in future quarters," said 8x8 Chairman and CEO Bryan Martin. "Despite the normal, seasonal slowdown we have historically seen in business sales during the summer months of July and August, we continue to be pleased with the growth in our Virtual Office subscriber base, and the increase in cash and investments on our balance sheet validates our strategy of focusing on the small business market. Cash and investments have increased approximately $1M, or 8.2%, since the beginning of our fiscal year on April 1, 2007, while accounts payable have also decreased by approximately $581K during the same period."

The Company also announced yesterday that it was awarded its 70th United States patent, No. 7,289,491, for a new Internet telephony invention.

8x8 will host a conference call today at 4:30 p.m. ET to discuss its 2nd fiscal quarter results. The event and replays of the call can be accessed from the events page of 8x8's corporate website at

About 8x8, Inc.
8x8, Inc. offers the Packet8 ( ) VoIP (voice over internet protocol) telephone and videophone communications service and the Packet8 Virtual Office service. For additional company information, visit 8x8's web site at

Forward Looking Statements
This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, information about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our VoIP products and services, the reliability of our services, the prices for our services, customer renewal rates, customer acquisition costs, actions by our competitors, including price reductions for their telephone services, potential federal and state regulatory actions, compliance costs, potential warranty claims and product defects, our needs for and the availability of adequate working capital, our ability to innovate technologically, the timely supply of products by our contract manufacturers, potential future intellectual property infringement claims that could adversely affect our business and operating results, and our ability to retain our listing on the NASDAQ Capital Market. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's reports on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and 8x8, Inc. undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

NOTE: 8x8, the 8x8 logo, Packet8, the Packet8 logo, Packet8 Virtual Office and Packet8 Softalk are trademarks of 8x8, Inc. All other trademarks are the property of their respective owners.

                                     8x8, Inc.
                (In thousands, except per share amounts; unaudited)

                                       Three Months Ended   Six Months Ended
                                          September 30,       September 30,
                                         2007       2006     2007       2006
    Service revenues                   $13,272    $11,240   26,683    $21,117
    Product revenues                     1,496      1,916    2,827      4,310
         Total revenues                 14,768     13,156   29,510     25,427

    Operating expenses:
      Cost of service revenues           4,430      5,015    8,416      9,777
      Cost of product revenues           2,652      1,354    4,035      4,282
      Research and development           1,026      1,257    2,083      2,578
      Selling, general and
       administrative                   10,050      8,498   18,969     17,703
         Total operating expenses       18,158     16,124   33,503     34,340
    Loss from operations                (3,390)    (2,968)  (3,993)    (8,913)
    Interest income, net                   161        184      293        427
    Income on change in fair value of
     warrant liability                     671        401    1,650      4,299
    Net income (loss)                  $(2,558)   $(2,383)  (2,050)   $(4,187)

    Net income (loss) per share:
      Basic & Diluted                   $(0.04)    $(0.04)   (0.03)    $(0.07)

    Weighted average number of
      Basic & Diluted                   61,870     61,329   61,822     61,233

                                    8x8, Inc.
                            (In thousands, unaudited)

                                                 September 30,      March 31,
                                                     2007             2007
    Current assets
      Cash and cash equivalents                     $5,365            $6,735
      Short-term investments                         7,542             5,197
      Accounts receivable, net                         554               736
      Inventory                                      1,889             2,629
      Other current assets                             907             1,502
        Total current assets                        16,257            16,799
    Property and equipment, net                      2,399             2,840
        Other assets                                   152               319
            Total assets                           $18,808           $19,958

    Current liabilities
      Accounts payable                              $4,338            $4,919
      Accrued compensation                             868               825
      Accrued warranty                                 339               323
      Deferred revenue                               3,617             1,488
      Other accrued liabilities                      3,671             3,386
        Total current liabilities                   12,833            10,941

      Other liabilities                                157               253
      Fair value of warrant liability                  827             3,387
            Total liabilities                       13,817            14,581

    Total stockholders' equity                       4,991             5,377
            Total liabilities and
             stockholders' equity                  $18,808           $19,958

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