8x8 2011 Annual Report Download - page 45

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8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
8x8, Inc. (“8x8” or the “Company”) develops and markets telecommunications services for Internet protocol, or IP, telephony
and video applications as well as web-based conferencing and unified communications services. The Company was
incorporated in California in February 1987 and was reincorporated in Delaware in December 1996.
The Company offers the 8x8 Virtual Office hosted PBX service, 8x8 Complete Contact Center service, 8x8 Trunking service,
8x8 Hosted Key System service, 8x8 MobileTalk service, 8x8 Virtual Meeting web conferencing service, 8x8 Virtual Office
Pro unified communications solution and 8x8 Managed Hosting and Cloud-Based Computing solutions. Between November
2002 and April 2009, the Company marketed its services under the Packet8 brand. In May 2009, the Company began
marketing its services under the 8x8 brand. As of March 31, 2011, the Company had more than 24,000 business customers.
Each business customer subscribes to a number of various lines and services (e.g. physical phone extensions, virtual
extensions, fax lines, toll free numbers, receptionist software, unified communications services, etc.).
The 8x8 Virtual Office suite of business phone services offers small and medium sized businesses feature-rich, HD (high
definition) audio-enhanced communications services that eliminate the need for traditional telecommunications services and
business phone systems. The 8x8 Virtual Office solution essentially replaces an on-premise PBX (private branch exchange),
telephone system with a hosted, Internet-based business phone service that is delivered over a managed or unmanaged Internet
connection. The Company sells pre-programmed IP telephones with speakerphones and a display screen, in conjunction with
its Virtual Office service plans, which enable its business customers to access additional Virtual Office features through on-
screen phone menus. The 8x8 Virtual Office Pro unified communications solution, introduced in January 2010, bundles the
8x8 Virtual Office hosted PBX phone service with essential businesses communications services such as web conferencing,
call recording and archiving, Internet fax, chat, voicemail and presence management and a mobile extension in a competitively
priced offering. 8x8 Virtual Office Pro takes the functionality of an already powerful hosted PBX phone service to a new level
with high fidelity HD voice, remote accessibility via any web browser or smart phone and integration with vital collaboration
tools
The 8x8 Managed Hosting and Cloud-Based Computing solutions offers the ability to enable business customers to reduce
costs and gain performance and reliability advantages by eliminating in-house ownership of server equipment and costly
information technology (IT) systems management staff.
The Company’ s fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these notes to the
consolidated financial statements refers to the fiscal year ending March 31 of the calendar year indicated (for example, fiscal
2011 refers to the fiscal year ending March 31, 2011).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and
equity and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to,
those related to bad debts, returns reserve for expected cancellations, valuation of inventories, income and sales tax, and
litigation and other contingencies. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those
estimates under different assumptions or conditions.