Why 2011 Was a Good Year for 8x8

As we approach the end of 2011, it's a good time to look back at what happened to the stocks that interest you. By knowing what a company accomplished -- as well as the challenges it faced -- you can make a better decision about whether it should have a place in your portfolio. Today, let's look at how well VoIP and cloud services provider 8x8 (Nasdaq: EGHT  ) fared during 2011.

Stats on 8x8

Year-to-Date Stock Return 53.4%
Market Cap $253.3 million
Revenue, Trailing 12 Months $74.3 Million
1-Year Revenue Growth 10.7%
1-Year EPS Growth 67.4%
Caps Rating (out of 5) ***

Sources: Yahoo! Finance and Motley Fool CAPS.

What happened to 8x8 this year?
8x8 spent the year continuing to carve out its niche as a one-stop communications shop for small and medium businesses – or, as my fellow Fool Tim Beyers has previously described it, the Cisco (Nasdaq: CSCO  ) of the cloud.

As far as business models go, it appears pretty solid. In addition to offering VoIP services that compete with Vonage (NYSE: VG  ) and Skype, the company also provides video conferencing and managed hosting services.

So far, the product mix seems to be working. During the year, the number of 8x8's business customers grew to more than 26,000. Among the new customers, one of the more interesting is the city of Garden Grove, Calif., which selected 8x8 to host its disaster recovery servers and operations. If a natural disaster disrupts power to the servers in city hall, its Web services will automatically fail-over to 8x8's servers. Although I doubt disaster recovery services will ever become 8x8's primary focus, they do present an opportunity for the company to grab revenue from companies and governments that might not otherwise need 8x8's services.

In October, the company closed a deal to acquire cloud-based call center provider Contactual, which added higher-profile companies like Jamba (Nasdaq: JMBA  ) , HomeAway, and General Electric (NYSE: GE  ) to its roster.

Over all, it seems that 8x8 had a pretty good year. However, I'm a little concerned about the company's valuation. While its trailing P/E of 40 is on the low side when compared to cloud-computing players like salesforce.com (NYSE: CRM  ) and Rackspace Hosting (NYSE: RAX  ) , it's still not cheap. As we saw after the company reported first-quarter earnings this summer, anything short of beating analyst estimates can send shares plunging. It's a little too risky for my investing style, but I think 8x8 is worth keeping an eye on in 2012.

In the meantime, if you would like to learn about another tech story worth watching in the coming year, then you should check out this special report: "The Next Trillion-Dollar Revolution." It's free, so click here to download it today.

The Motley Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Rackspace Hosting, Cisco Systems, Salesforce, and HomeAway. Motley Fool newsletter services have also recommended shorting Salesforce. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Patrick Martin owns no shares of any of the companies mentioned here. You can follow him on Twitter @TMFpcmart03. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

DocumentId: 1748852, ~/Articles/ArticleHandler.aspx, 7/26/2014 3:45:39 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement