8x8 2010 Annual Report Download - page 24

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A higher rate of customer terminations would negatively affect our business by reducing our revenue or requiring us to
spend more money to grow our customer base.
Our rate of customer terminations, or average monthly customer churn, was 3.5% for the fiscal year ended March 31, 2010.
Our churn rate could increase in the future if customers are not satisfied with our service. Other factors, including increased
competition from other VoIP providers, alternative technologies, and adverse business conditions also influence our churn rate.
Because of churn, we have to acquire new customers on an ongoing basis just to maintain our existing level of customers and
revenues. As a result, marketing expenditures are an ongoing requirement of our business. If our churn rate increases, we will
have to acquire even more new customers in order to maintain our existing revenues. We incur significant costs to acquire new
customers, and those costs are an important factor in determining our net profitability. Therefore, if we are unsuccessful in
retaining customers or are required to spend significant amounts to acquire new customers beyond those budgeted, our revenue
could decrease and our net income could decrease.
Our future operating results may vary substantially from period to period and may be difficult to predict.
Our historical operating results have fluctuated significantly and will likely continue to fluctuate in the future, and a decline in
our operating results could cause our stock price to fall. On an annual and a quarterly basis, there are a number of factors that
may affect our operating results, many of which are outside our control. These include, but are not limited to:
• changes in market demand;
• the timing of customer orders;
• customer cancellations;
• competitive market conditions;
• lengthy sales cycles and/or regulatory approval cycles;
• new product introductions by us or our competitors;
• market acceptance of new or existing products;
• the cost and availability of components;
• the mix of our customer base and sales channels;
• the mix of products sold;
• the management of inventory;
• continued compliance with industry standards and regulatory requirements; and
• general economic conditions.
Due to these and other factors, we believe that period-to-period comparisons of our results of operations are not meaningful
and should not be relied upon as indicators of our future performance. It is possible that in some future periods our results of
operations may be below the expectations of public market analysts and investors. If this were to occur, the price of our
common stock would likely decline significantly.
We need to retain key personnel to support our products and ongoing operations.
The development and marketing of our VoIP services will continue to place a significant strain on our limited personnel,
management, and other resources. Our future success depends upon the continued services of our executive officers and other
key employees who have critical industry experience and relationships that we rely on to implement our business plan. None of
our officers or key employees are bound by employment agreements for any specific term. The loss of the services of any of
our officers or key employees could delay the development and introduction of, and negatively impact our ability to sell our
services which could adversely affect our financial results and impair our growth. We currently do not maintain key person life
insurance policies on any of our employees.