8x8 (EGHT 21.28, +0.18, +0.83%), a provider of VoIP services to business
customers, has been bouncing back in recent weeks after a sell-off in late May
on a disappointing Q4 (Mar) earnings report. 8x8 is a play on a technology
shift that is occurring in business communications where enterprises are
increasingly replacing costly and unwieldy on-premises communications equipment
with agile, cloud-based software services delivered over the public Internet.
In simple terms, what 8x8 has essentially done is combine a phone, a meeting, a collaboration, and a contact center onto one platform. That's not easy to do because in essence, these technologies are very dissimilar. By integrating all of them, the platform achieves a richness of data and analytics that allows clients to inform their businesses and a unification of the experiences of both their employees and their customers.
8x8's "pure-cloud" offering combines voice, conferencing, messaging, and video with integrated workflows and big data analytics on a single platform. For example, a user who initiates a voice call on a desk phone and then needs to leave the office can seamlessly transfer the call to a mobile device without the person they are communicating with being aware that the user is no longer at his or her desk.
The rapid rise of mobile devices as sites for conducting business has created demand for "bring your own device," or BYOD, enabling capabilities in the workplace. Additionally, companies are looking to integrate ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), and HCM (Human Capital Management) applications within their communications infrastructures.
That business environment and culture can render on-premises communications systems, like those offered traditionally by legacy hardware vendors, poorly suited to meet evolving needs. In addition to being difficult to deploy and expensive to maintain while spanning multiple locations, these hardware systems may not provide the mobility, resiliency, and continuity capabilities that customers require. BYOD demands from employees complicate the delivery of a company-wide communication system, forcing provisional adaptations that may result in patchwork communications systems laden with security risks. Security compliance in this environment is extremely difficult.
Because of these inadequacies and security risks, more and more businesses are moving to enterprise-class cloud platforms like the platform offered by 8x8. To provide ease of availability and compatibility, 8x8 delivers its software via all major Internet browsers and on leading mobile devices. Virtually all of its customers do not need to specifically dedicate any equipment, employees, or carriers to be able to work 8x8’s offerings -- nothing more is required than Internet connectivity and a subscription to the 8x8 service.
A key strategy for EGHT has been to go upstream to larger customers. In the just completed FY18, service revenue from mid-market and enterprise customers increased 29% year/year and represented 58% of total service revenue. The success here was helped by EGHT splitting its sales operation into two separate business units -- Small Business and eCommerce, aimed at businesses with 1-99 employees, and Mid-market and Enterprise, aimed at businesses with 100 or more employees. This has helped each segment focus better on its market niche.
Looking ahead, EGHT said at a recent investment conference that it's seeing a classic adoption cycle in action. Large on-premise vendors are now producing cloud offerings, which means they've all decided that it’s time for on-premise operations to move to the cloud. 8x8 is one of the leaders in the cloud and is poised to utilize that position amid growing demand.
As a note, the stock’s recovery from the hit taken after the MarQ report, can be partly attributed to its CEO using the dip to scoop up more shares (acquired 7,700 shares at $18.15-18.30 for approx. $200K).
- OUR VIEW
- LEARNING CENTER