Packet8 Is First VOIP Company To Show A Profit
Packet8’s parent company, 8×8, Inc., announced today that for the first time in the history of Packet8, they made a profit last quarter. This is exciting and very cool, because they are the first stand alone VOIP company to do so. None of the other purely VOIP companies have been able to do that so far, including Vonage and SunRocket, who were the big players in the broadband phone service market.
While I’m sure that cable companies like Charter and Comcast have been able to make a profit selling VOIP phone service, they have been able to do so only because of their low cost of acquisition. Since they already have a huge customer base in the cable and high speed internet industry, all they would need to do would be to bundle their VOIP offering with a sweet deal on cable television and high speed broadband internet service to pick up extra phone customers at a fraction of what it costs a stand alone VOIP company.
Here’s the pertinent part of the press release from PRnewswire.com:
For the first time since the Company launched its Packet8 VoIP service in November 2002, 8×8 posted GAAP net income of $508,000, or $0.01 per share, compared to a net loss of $2.9 million, or ($0.05) per share for the previous quarter and $1.8 million, or ($0.03) per share for the same period of fiscal 2007. In addition, the Company posted a $284,000 increase in cash and investments for the first fiscal quarter compared to a $492,000 reduction in cash and investments during the previous quarter and a $5.2 million reduction in cash and investments during the same period of fiscal 2007, improving its balance sheet to approximately $12.2 million in cash and investments with no debt.
Total revenues for the first quarter of fiscal 2008 increased to $14.7 million compared to $14.4 million for the previous quarter, and $12.3 million for the same period of fiscal 2007, an increase of 20%. Packet8 Virtual Office revenue grew sequentially by 23% over the previous quarter, while residential revenue declined 5%. Gross margins grew to 64%, up from 54% in the previous quarter, and Packet8 service margins grew to 70% from 62% in the previous quarter.
Some of you may be thinking, “so, what’s the big deal?” The big deal is that now we know that a stand alone VOIP company can live in the current market environment. That means that VOIP is now a mainstream possibility for the United States and the world. Which means, now we know that Vonage could do it too if they followed the example set forth by Packet8, instead of that of SunRocket. They need to concentrate on business customers, add on PBX solutions and video phone capabilities. While Packet8 does save money by not having to pay VOIP related royalties like Vonage and the other’s do, they also spend way more time trying to acquire business based customers; something Vonage hasn’t done very well.
I’m actually really happy for Packet8, I’ve used their products for my business and home, and they did a good job providing a decent service at a fair price. While it looks like Vonage and SunRocket reverted to the spending patterns of the DOT.COM’s in the 90’s stock collapse fiasco, Packet8 has kept their spending and pricing within reasonable bounds in an attempt to grow profits instead of just trying for a high customer count. A high customer count is fine if you make a $1 off of each one every month, but it looks like Vonage has been losing at least $50.00 per customer for a long time (see earlier post). In that scenario, it hurts their bottom line every time they sign up a new customer; not a very good business practice.
Now that we have a VOIP company capable of making money while offering service at a fair price, people should start migrating to them because of their strength. Why sign up with a company that looks like it might go under, or one like Teleblend, that you’ve never heard of, when there’s a VOIP company in the black. If I was an ex SunRocket user, I would sign up with Packet8 right now! At least this company looks like it has the strength to be able to provide customers with service without shutting it’s doors some afternoon and leaving it’s customers scrambling for service.
If you’re worried about the long term health of your broadband phone company, then go sign up with Packet8 right now!
Spiderman