8x8 2010 Annual Report Download - page 36

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.
No single customer represented more than 10% of our total revenues during fiscal 2010, 2009 or 2008.
The following table illustrates our net revenues by geographic area. Revenues are attributed to countries based on the
destination of shipment (in thousands):
2010 2009 2008
United States $ 63,272 $ 64,633 $ 61,052
Other locations 124 41 594
$ 63,396 $ 64,674 $ 61,646
Years Ended March 31,
COST OF REVENUES
2010 2009 2008
Cost of service revenues $ 13,599 $ 15,714 $ 16,671 $ (2,115) -13.5% $ (957) -5.7%
Percentage of service revenues 23.2% 26.9% 29.7%
2009 to 2010 2008 to 2009
Years Ended March 31, Year-over-Year Change
(dollar amounts in thousands)
Cost of service revenues primarily consists 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 2010 compared with fiscal 2009 decreased $2.1 primarily due to a reduction in the prices
we pay to third party network service vendors, as well as 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 network service vendors was partially offset by an increase in personnel and licenses fee costs compared
with the prior fiscal year.
Cost of service revenues for fiscal 2009 compared with fiscal 2008 decreased $1.0 primarily due to a reduction in the prices we
pay to third party network service vendors, as well as our use of multiple third party network service vendors, which allows us
to route call traffic to the third party network service vendor with the most favorable pricing. The reduction in the prices we
pay to third party network service vendors was partially offset by an increase in personnel and licenses fee costs compared with
the prior fiscal year.
2010 2009 2008
Cost of product revenues $ 7,257 $ 7,135 $ 6,762 $ 122 1.7% $ 373 5.5%
Percentage of product revenues 154.0% 115.3% 123.6%
Year-over-Year Change
2009 to 2010 2008 to 2009
(dollar amounts in thousands)
Years Ended March 31,
The cost of product revenues consist of costs associated with systems, components, system manufacturing, assembly and
testing performed by third party vendors, estimated warranty obligations and direct and indirect costs associated with product
purchasing, scheduling, quality assurance, shipping and handling. We allocate a portion of service revenues to product
revenues but these revenues are less than the cost of the product.
The increase in the cost of product revenues for fiscal 2010 from fiscal 2009 was primarily due to a $0.6 million increase in the
shipment of equipment to our business customers. The increase in cost of product revenues was partially offset by a $0.3
million decrease in shipments of equipment to residential customers, a $0.1 million reduction in payroll and related expenses,
and a $0.1 million reduction in freight costs. The cost of product revenues as a percentage of product revenues increased due
to an increase in discounting of product sales by our sales force in fiscal 2010.
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