8x8 2009 Annual Report Download - page 39

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former customers to the 8x8 residential service. While service revenues increased during fiscal 2008 our wholesale service and
royalty revenues declined by $1.3 million primarily due to the termination of our agreement with Bellsouth in the fourth fiscal
quarter of 2007 in connection with its merger with AT&T.
2009 2008 2007
Product revenues $ 6,188 $ 5,469 $ 8,084 $ 719 13.1% $ (2,615) -32.3%
Percentage of total revenues 9.6% 8.9% 15.2%
Year Ended March 31, Year-Over-Year Change
(dollar amounts in thousands)
2008 to 2009 2007 to 2008
Product revenues consist of revenues from sales of VoIP terminal adapters, telephones and videophones, primarily attributable
to our 8x8 service.
The increase in fiscal year 2009 from fiscal year 2008 resulted from a $2.2 million increase in product revenue attributable to
growth in our business customer subscriber base. However, product revenue attributable to residential and video service
customers declined by $1.5 million.
The decrease in fiscal year 2008 from fiscal year 2007 was primarily attributable to a $3.4 million decrease in product revenue
attributable to residential customers as we redirected our marketing away from residential customers to marketing our services
to small businesses. In addition, we waived the regular start-up costs, which include the equipment cost associated with
residential service plans, as part of the transition of a competitor’ s former customers to the 8x8 service. The decrease in
residential customer product revenues during fiscal 2008 was partially offset by an increase of $0.8 million in product revenue
attributable to the growth in our business customer subscriber base.
No single customer represented more than 10% of our total revenues during fiscal 2009, 2008 or 2007.
The following table illustrates our net revenues by geographic area. Revenues are attributed to countries based on the
destination of shipment (in thousands):
2009 2008 2007
United States $ 64,633 $ 61,052 $ 52,463
Other locations 41 594 667
$64,674 $ 61,646 $ 53,130
Years Ended March 31,
COST OF REVENUES
2009 2008 2007
Cost of service revenues $ 15,714 $16,671 $ 19,020 $ (957) -5.7% $ (2,349) -12.4%
Percentage of service revenues 26.9% 29.7% 42.2%
Year Ended March 31, Year-Over-Year Change
(dollar amounts in thousands)
2008 to 2009 2007 to 2008
The cost of service revenues primarily consist of costs associated with network operations and related personnel, telephony
origination and termination services provided by third party carriers and technology license and royalty expenses.
Cost of service revenues for fiscal 2009 compared with fiscal 2008 decreased $1.0 primarily due to a reduction in pricing by
third party network service vendors and our use of multiple third party network provider vendors, which allows us to route call
traffic to the third party network provider vendor with the most favorable pricing. The reduction in pricing by third party
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