8x8 2010 Annual Report Download - page 9

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 Microsoft Outlook Contacts and Corporate Directory integration
 Virtual Meeting - allows you to create, join and invite participants to web, audio and video meetings.
 iPhone Virtual Office Mobile extension – place and receive (VoIP) calls and access common Virtual Office services
and functions from an iPhone/iPod Touch/iPad mobile handset
 Fax - enables users to send and receive unlimited faxes using either a separate phone number for fax or the same
number as your 8x8 extension
 Call recording - enables any inbound or outbound call to be recorded and later reviewed, downloaded or deleted
 Presence management - tells other co-workers whether you are logged in, logged off, on the phone, off the phone or
currently unavailable
 My Inbox overview - gives a comprehensive view of all voicemails, recordings, FAX messages, calls, and chat history
8x8 Managed Hosting and Cloud-Based Computing Solutions
In May 2010, we introduced 8x8 managed hosting and cloud-based computing solutions enable business customers to reduce
costs and gain performance and reliability advantages by eliminating in-house ownership of server equipment and costly
information technology systems management staff.
Sales, Marketing and Promotional Activities
We currently sell and market our 8x8 services to end users through our direct sales force, website, retail channels, and third
party resellers. Our inside sales force primarily takes inbound telephone calls and website leads which are generated from third
party lead generation sources and direct web advertising such as Google and Yahoo. Our sales force decreased slightly from 63
sales representatives at the end of fiscal 2009 to 61 sales representatives at the end of fiscal 2010. These sales representatives
are paid a base salary and monthly commission for selling our products and services. The commission is based on new sales
made by the sales representative.
We launched the retail channel in fiscal 2005 and refocused this channel on our 8x8 Virtual Office service in 2006 with Office
Depot and subsequently Office Max. Retail channels, online channels and third party resellers generated less than 5% of our
subscriber additions in fiscal 2010.
Competition
We face strong competition from incumbent telephone companies, cable companies and alternative voice and video
communication providers. Because most of our target customers are already purchasing communications services from one or
more of these providers, our success is dependent upon our ability to attract these customers away from their existing
providers. This will potentially become more difficult as the early adopter market for VoIP services becomes saturated and
mainstream customers make up more of our target market. We believe that the principal competitive factors affecting our
ability to attract and retain customers are price, call quality, reliability, customer service, and enhanced services and features.
For more information regarding the risks associated with such strong competition, please refer to Item 1A, Risk Factors
“Intense competition in the markets in which we compete could prevent us from increasing or sustaining our revenue
and increasing or maintaining profitability.”
Incumbent telephone companies
The incumbent telephone companies are our primary competitors and have historically dominated their regional markets. These
competitors include AT&T, Qwest Communications and Verizon Communications as well as rural incumbents, such as
CenturyTel and Windstream. These competitors are substantially larger and better capitalized than we are and have the
advantage of a large existing customer base, and larger marketing budgets than we have. Moreover, they also provide the
broadband services that are required to use our service, which is a significant competitive advantage.