8x8, Inc.

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Incorporated: 1987 as Integrated Information Technology, Inc. (IIT)
NAIC: 517310 Telecommunications Resellers

Based in Santa Clara, California, 8x8, Inc., is a leading provider of Internet-based telephone and videophone communications services. The company's technology relies on voice over Internet protocol (VoIP) technology. VoIP uses the Internet protocol (IP)--a communications protocol or method that is used for transmitting information between computers on the Internet--for the online transmission of voice and video data.

8x8 offers a number of different services, including the Packet8 Broadband Phone Service for residential customers with high-speed Internet connections, the Packet8 Videophone Service, and the Packet8 Virtual Office phone system for small and medium-sized businesses. The company also offers a video-enabled "softphone" device called Packet8 Softalk, which allows Packet8 subscribers to use their computers to place and receive voice and video calls directly from their personal computers, which is useful when traveling.

Formative Years

8x8 was established in February 1987 by two former Weitek Corp. executives as Integrated Information Technology, Inc. (IIT). According to 8x8, the company's early products consisted of programmable semiconductors and related software for the videophone and videoconferencing sectors. A May 18, 1992, Business Wire release further explained that IIT's early components and products were "optimized for handling numerical, text, graphics, still-image, full-motion video and audio information for the computation, communications and consumer markets."

As of early 1990, Chi-Shin Wang was IIT's president. Two years later, the company had a staff of 100 employees, regional offices in the central and eastern United States, and a subsidiary in Europe. Early competitors included the likes of C-Cube Microsystems.

It was around this time that a line of data compression products was introduced, giving computer users the ability to double the capacity of their hard drives. The introduction came at a time when the Windows operating system and compatible programs were demanding more and more disc space. Products in this category included IIT's XtraDrive Software, which sold for $99, and a related hardware product that retailed for $199.

Like so many technology start-ups, IIT was faced with legal entanglements during its early years. In June 1992, Carlsbad, California-based Stac Electronics sued the company, alleging that its XtraDrive Plus hardware and XtraDrive software infringed upon one of Stac's data compression/decompression patents. A settlement was reached in April 1993, calling for IIT to make past and future royalty payments to Stac.

A major development occurred in 1994 when IIT forged an agreement with National Semiconductor Corporation to develop application-specific integrated circuits (ASICs), which are chips used in devices such as wireless phones, satellite systems, and radar systems. The deal involved National Semiconductor securing an 8 percent equity stake in IIT.

It also was in 1994 that IIT forged a joint effort with Siemens Corp. to produce a low-cost chipset for the personal computer-based videoconferencing market. By this time, IIT had formed a subsidiary named XTechnology, Inc., that was involved in the development and marketing of graphics processors.

A flurry of change occurred at the senior leadership level in 1995. In April the company named Joseph Parkinson--the cofounder of Boise, Idaho-based semiconductor manufacturer Micron--as president, CEO, and co-chairman. In July a reorganization effort resulted in Parkinson being named chairman, Chi-Shin Wang and Dr. Y. W. Sing vice-chairmen, and Robert Shen president and chief operating officer.

Robert Shen left the company days after the July reorganization occurred, leaving Parkinson as interim president. In October, IIT named Larry Barber as executive vice-president and chief operating officer. That same month, design group head Bryan Martin was promoted to the role of chief technical officer.

In early 1996 Sony Electronics announced that it had selected IIT's Video Communications Processor for use in the Sony TriniCom 5000, a four-way group videoconferencing system. In April of that year, IIT changed its name to 8x8, Inc.

In a March 4, 1996, Business Wire release, the company explained that the new name underscored its "focus on programmable solutions for the videoconferencing and MPEG markets. An 8x8 block of picture elements (pixels) is the basis of many video compression algorithms and thus enables a new generation of personal computer videoconferencing systems, video telephones, Internet video products and digital televisions using MPEG CD-players and satellite decoders. The company's family of programmable integrated circuits forms the foundation for this wide range of consumer and PC multimedia products."

The following year a breakthrough occurred when 8x8 unveiled a consumer-oriented product named ViaTV Phone, which combined a standard television set and touch-tone phone with a regular phone line to create an affordable videoconferencing system that people could use to communicate with family and friends. Other consumer and business products were introduced along with the ViaTV videophone. 8x8 went public in 1997, making its initial stock offering in July on the NASDAQ.

IP Telephony Focus

The 1998 introduction of 8x8's Audacity Internet Telephony Processor marked the start of the company's real focus on IP telephony. 8x8 concluded the decade by acquiring telecommunications technology firm Odisei S.A. in May 1999. In early 2000, 8x8 changed its name once again, becoming Netergy Networks, Inc. At this time, the company also discontinued its consumer videophone offerings.

In a March 27, 2000, Business Wire release, Paul Voois, then Netergy's chairman and CEO, said: "Today we are introducing a company that will play a key role in the convergence of voice and data networks. The telecommunications industry is undergoing a fundamental transition from circuit-switched to Internet protocol (IP) based networks. We have made a series of decisive strategic decisions in the past 18 months to capitalize on this transition. Our new name is derived from the words 'network' and 'synergy,' and Netergy Networks is creating synergies out of the convergence of voice and data on IP networks."

By this time, Netergy was marketing an IP-based private branch exchange (PBX) system. A PBX system manages telecommunications between phones within a company and the external public telephone system. The Netergy Advanced Telephony System (ATS) made it possible for competitive local exchange carriers (CLECs) to offer PBX services to businesses from one location. CLECs compete with the established local phone provider in a given market in order to offer consumers additional choice in service. Dialink was the first CLEC to do so, pioneering VoIP service to the business market with the ATS in early 2000.

For the year ended March 31, 2000, Netergy lost $24.9 million on revenues of $25.4 million. By comparison, the company lost $19.2 million on revenues of $31.7 million in 1999. On April 4, 2000, Netergy changed its ticker symbol to NTRG to reflect its new name. The following month, the company agreed to acquire Montreal-based UForce, a developer of Internet messaging products. The $51 million stock swap was completed in June.

More senior-level leadership changes occurred in early 2001. On January 16, Netergy named Sun Microsystems executive Robert Habibi as its president and chief operating officer, with Paul Voois continuing to serve as CEO. Only days later, on January 22, the company announced that both executives had tendered their resignations. Chairman Joe Parkinson was appointed interim CEO.

A new subsidiary named Netergy Microelectronics was formed in March 2001 to provide voice and video semiconductor and firmware products for the VoIP market, according to a March 12, 2001, PR Newswire release. Firmware consists of data and instructions written into a computer's read-only memory, which are used to control the computer's operations. Netergy also established a new subsidiary named Centile, Inc., which offered scalable VoIP-based PBX solutions (iPBX) for small and midsized businesses.

In April 2001 Netergy shuttered its Montreal office, thereby eliminating its Canadian operations altogether. For the year ended March 31, 2001, the company's revenues totaled $18.2 million, down from $25.4 million the previous year. Netergy recorded a net loss of $74.4 million, down from $24.9 million in 2000.

Less than a year after adopting the new Netergy name, the company changed its name back to 8x8 on July 17, 2001. The ticker symbol EGHT was adopted a few days later.

A major development took place in November 2002, when 8x8 rolled out residential VoIP service to high-speed Internet subscribers under the Packet8 brand name. In July of the following year, the company's Centile, Inc., business sold Centile Europe SA, a European subsidiary, to Sunleigh Investments.

By November 2003, Bryan R. Martin was in the CEO seat at 8x8. Midway through that month the company secured $5.2 million in additional financing by privately placing 1.84 million shares of its common stock. A few days later, the placement of 780,000 additional shares generated another $2.2 million. The year ended with Martin assuming the chairmanship and Joe Parkinson assuming the role of vice-chairman.

Several new product developments occurred in 2004. These included the Packet8 Virtual Office hosted IP PBX phone service in March, which was designed for small business use, followed by the Packet8 DV326 Broadband Consumer VideoPhone that summer. In an October 2004 PR Newswire release, the company claimed that it was the first "to ship a standalone consumer videophone that operates over a high speed Internet connection and delivers full motion video at a rate of 30 frames per second."

In September 2004, 8x8 sold about 3.5 million shares of common stock to an institutional investor, generating net proceeds of $11.2 million. Some of the funds were earmarked for the expansion of the company's Packet8 service. 8x8 rounded out the year by being named among the leading 15 VoIP providers by FierceVoIP in its annual Fierce 15 ranking.

For the 2005 fiscal year, 8x8 recorded a net loss of $19.1 million on revenues of $11.5 million, compared to a $3.0 million loss on revenues of $9.3 million for the 2004 fiscal year. E911 service was rolled out to all Packet8 subscribers in November 2005, in keeping with a mandate from the Federal Communications Commission. In December, the company ended the year on a high note when two institutional investors snapped up 7.14 million shares of 8x8 common stock for approximately $15 million, providing capital for the further expansion of Packet8 in retail and wholesale markets.

Looking to the Future

By late 2006, 8x8 reported that some 5,000 businesses were using the company's Packet8 Virtual Office hosted PBX VoIP service. Of these, 1,000 customers had signed on in the last quarter, signifying the prospect of strong future growth. In December 2006 Chairman and CEO Bryan Martin was appointed to California Governor Arnold Schwarzenegger's broadband task force, which intended to leverage the technology as a means of economic growth.

An innovative product introduction occurred in March 2007 when 8x8 unveiled its Packet8 Tango Video Terminal Adapter. The VoIP device, which was equipped with an LCD screen, allowed consumers to turn any traditional telephone into a videophone. In some respects, this product was reminiscent of the company's earlier ViaTV Phone device.

In December 2007, 8x8's Packet8 Complete Contact Center product was recognized by Customer Interaction Solutions, a magazine serving the call center industry, which awarded 8x8 with its 2007 Product of the Year Award. In a December 4, 2007, news release, 8x8 Vice-President of Sales and Marketing Huw Rees explained: "With the Packet8 Complete Contact Center, small businesses that need a professional, full featured call center solution can now subscribe to a pure hosted VoIP-based service and benefit from the associated lower costs and flexibility."

By early 2008 8x8 revealed that it had become the nation's second largest stand-alone VoIP service provider. The company continued to develop innovative products and technologies, with approximately 69 U.S. patents to its name and more pending. By this time, the number of businesses using 8x8's Packet8 Virtual Office hosted PBX VoIP service had reached the 10,000 mark, double the level recorded a year earlier.

Backed by its experience in VoIP technology, 8x8's prospects for continued growth in the first decade of the 21st century seemed promising.

Principal Subsidiaries

8x8 Europe SARL (France); 8x8 Limited (China); Netergy Microelectronics, Inc.; Netergy Networks Canada Holding Company; UForce Holding Company; Visit, Inc.

Principal Competitors

Net2Phone, Inc.; Nortel Networks, Inc.; Vonage Holdings Corporation.

Further Reading

"8x8 Changes Name to Netergy Networks; Name Change Signifies Company's Focus on IP Telephony," Business Wire, March 27, 2000.

"8x8, Inc.," Mergent Online, January 10, 2008, http://www.mergentonline.com.

"IIT Introduces Retail Data Compression Products; New End User Products Double Storage on PCs," Business Wire, May 18, 1992.

"Integrated Information Technology (IIT) to Change Name to 8x8, Inc.," Business Wire, March 4, 1996.

— Paul R. Greenland