By Hook or by Crook, the Big Contracts Are Coming

Riding the long tail can take you a long way. But when you're ready to join the big leagues, you really need to sign bigger deals.

That's exactly where Internet-based phone service specialist 8x8 (Nasdaq: EGHT  ) stands today. In the just-reported second quarter, the company recorded revenue of $19.8 million, a 14% year-over-year improvement. Ninety-one percent of the money comes from 26,767 business accounts, which is where 8x8 really wants to succeed -- consumer services are an afterthought nowadays.

It works out to a very modest $673 per business customer, or about $224 per month. We're talking about the small-biz long tail here, folks.

But that's changing, in large part thanks to a quick acquisition. The stock-based pickup of privately held Contactual closed near the end of this quarter, adding a significant software as a service call center platform. And that deal came with some brand name customers: Thanks to Contactual, 8x8 now sells directly to fruit smoothie pioneer Jamba (Nasdaq: JMBA  ) , alternative vacationing expert HomeAway (Nasdaq: AWAY  ) , and even industrial conglomerate giant General Electric (NYSE: GE  ) .

Not bad for a deal that only cost 6.7 million shares, or about $25 million at recent 8x8 share prices. The big-deal nature of Contactual's customer list is already expanding 8x8's revenue per customer by about 10%.

It doesn't end there. CEO Bryan Martin expects to see "many similarly sized names embracing cloud communications in the future." And that's the magic keyword in the 8x8 story: cloud communications.

8x8 stands at the very nexus of two highly investable IT trends: cloud computing and data networking. A traditional phone system of the kind AT&T (NYSE: T  ) or Verizon (NYSE: VZ  ) might sell pushes specialized voice traffic over an equally specialized infrastructure, and requires tons of single-use hardware in many places along the way. In the 8x8 model, you're shepherding communications over multipurpose data networks and managing everything in a centralized cloud -- no need for expensive, special hardware in your office.

Learn more about cloud computing from this video, and about high-speed networking in this special report. After you do, you'll come back with a whole new appreciation for the opportunities ahead of 8x8. Both reports are totally free, so what are you waiting for? Get informed right now!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Motley Fool newsletter services have recommended buying shares of AT&T and HomeAway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can go over Anders' holdings and a concise bio, follow him on Twitter or Google+, or check out our Foolish disclosure policy.


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