8x8 1998 Annual Report Download - page 5

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This Report on Form 10-K contains forward-looking statements, including but not limited to those specifically identified as such, that involve
risks and uncertainties. The statements contained in this Report on Form 10-K that are not purely historical are forward-looking statements,
including without limitation statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this Report on Form 10-K are based on information available to the Company on the date hereof, and
the Company assumes no obligation to update any such forward-looking statements. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth below
under the headings "Manufacturing," Competition" and "Factors That May Affect Future Results" and elsewhere in this Report on Form 10-K.
PART I
ITEM 1. BUSINESS
8x8, Inc. ("8x8" or the "Company") designs, develops and markets highly integrated, proprietary video communication semiconductors and
associated software to original equipment manufacturers (OEMs) of corporate video communication systems. To address new opportunities,
the Company has leveraged its strengths in semiconductor design and related software to develop and market low cost video communication
systems (hereinafter referred to as its "VideoCommunicators"). The Company began shipping the first product in its planned family of
VideoCommunicator products, ViaTV videophone model VC100, in February 1997. Subsequently, the Company introduced the VC105, an
upgraded VC100, and added three new models, the VC50, VC55 and VC150, to the ViaTV product line. The Company also has introduced
versions of its ViaTV videophones designed for European and Asian markets.
The Company's video communication semiconductors combine a reduced instruction set computer (RISC) microprocessor, a digital signal
processor (DSP), specialized video processing circuitry, static random access memory (SRAM) and proprietary software on a single chip. The
Company's semiconductors perform the real time compression and decompression (codec) of video and audio information and establish and
maintain network connections in a manner consistent with international standards for video telephony. These semiconductors are designed to
provide video communication over a broad range of network types including standard analog telephone lines (commonly known as plain old
telephone service or POTS), integrated services digital networks (ISDN), local area networks (LAN) and digital subscriber lines (DSL).
Customers for the Company's video communication semiconductors include Mitsubishi, PictureTel, Siemens, Sony, Tandberg, VideoServer,
VCON and Vtel.
The Company's VideoCommunicators are based on its proprietary semiconductor, software and systems technology. The ViaTV videophones
are designed to be compliant with the H.324 international standard for video telephony over POTS and to be compatible with personal
computer (PC) and non-PC based systems that adhere to the H.324 standard. The ViaTV videophones are designed to communicate with full
duplex audio and video rates of up to 15 frames per second.
The VC105 ViaTV product connects to a television set and a standard touch-tone telephone adding video to an otherwise normal telephone
call, without the need for a PC. The VC50 and VC55 are designed without a camera and utilize an external camera device such as a camcorder
or digital still camera in addition to a television and a touch-tone telephone. In addition to video communication capability, the VC55 includes
an internet web browser developed by PlanetWeb, Inc. The VC150 includes a built-in liquid crystal display (LCD) and camera, thus requiring
only the addition of a touch-tone telephone to permit video communication.
INDUSTRY BACKGROUND
The continued expansion of the video communication market is dependent on several factors including system cost, network bandwidth, the
acceptance of video telephony standards and compression technologies. Decreases in system costs will expand the number of potential
consumers and applications for video
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