]Shares of network-based communications specialist 8x8 (Nasdaq: EGHT) looked scary today, having fallen about 10% after sending out first-quarter results. But I think it's fair to call this a correction rather than a drop, because this tock has still posted a massive 50% gain in the past three months alone and more than tripled over the last year.

So Mr. Market overshot a bit leading up to the report. It happens. The real question for 8x8 investors now is, will these shares get back up again and continue their skyward climb?

Just the numbers, ma'am
First, let's look at recent results. In the first quarter, 8x8 saw sales climbing a modest 10% year-over-year to $18.5 million. Net income jumped 93% to $1.9 billion, or from $0.02 to $0.03 on a per-share basis. All of this was in line with analyst expectations.

So far, so average -- hardly numbers worth a tripling of share prices. The rampant surge in net income is greatly magnified by their closeness to the breakeven point, after all, and free cash flows increased by just 33%. This stock's tremendous returns clearly rest on something more than just dollars already collected.

Where's the beef?
So where is 8x8 going next? The company is in the midst of an audacious transformation, so there are no easy answers. An exclusive phone interview with CEO Bryan Martin cleared up most of my questions:

  • 8x8 is getting out of consumer services and focusing exclusively on business-class sales. According to Martin, consumer-type sales have fallen by 35% a year since the peak in 2006, and the company is going to let that continue.
  • Hence, 8x8 is not competing with the likes of Vonage Communications (NYSE: VG) and MagicJack but instead tries to steal business-phone lines from incumbent telecom giants Verizon (NYSE: VZ), AT&T (NYSE: T), and CenturyLink (NYSE: CTL). Given the low cost, high flexibility, and large feature set of 8x8's Internet-based phone services, that's often not a very difficult battle.
  • The company has also started branching out into video communications, competing for contracts with Unified Communications champions Cisco Systems (Nasdaq: CSCO) and Microsoft (Nasdaq: MSFT). That's good for average selling prices and also expands 8x8's addressable market to include services like telepresence and mobile video communications.

Beyond all that, 8x8 is also testing the waters of cloud-computing services. That's still a very small part of its operations, but it's a huge addressable market where it's not too late to stake out a respectable market share among business customers.

Dotting the T's, crossing the I's
All told, 8x8 has grown its customer count by 18% over the past year while lowering customer acquisition costs and holding steady on average sales per customer. Much of that growth comes from brand-new initiatives such as cloud computing and a fresh network of resellers and distributors. If those revenue streams gain traction, the resulting growth could be tremendous.

So I don't see why you'd be scared to look at 8x8 today. That correction may feel like a knee-jerk reaction (ouch!), but it also gives you a nicer starting price for a new position.

Learn more about the cloud-computing opportunity by spending a couple of minutes on this free video. Bill Gates is shaking with fear over this paradigm shift, and 8x8 is smart to jump aboard the bandwagon. And you will look smart for learning all about it.

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