The New VoIP Giant

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The New VoIP Giant

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8x8 has hit $100 million in annual revenue making them the number 2 hosted VoIP provider (behind Comcast).  8X8 put up some good numbers last quarter.

At $100M, the company has proven that they can organically grow revenue. The churn is coming under control and the company is looking up-market.

Rumor is that 8x8 is a take-over target. I would have to agree.

At a market cap of $282M, that is less than 3x revenue.

When you look at the some of the largest ISP's - Comcast, Cox, Charter, AT&T, VZ, CenturyLink, Windstream - they all have a Broadsoft. And they aren't likely to grab 8x8, although Windstream might want to think about it since $300 million for 27,000 business accounts and $100M in revenue isn't bad.

Of the top MSO's - TWC, Bright House, Insight Comm., - don't offer a hosted PBX product. Bright House followed TWC in buying an Alcatel-Lucent switch. That's like entering NASCAR with a Dodge. Cablevision (Optimum Lightpath) and Suddenlink are Metaswitch customers. What does any of that have to do with anything? Well, I think that service providers make business decisions like they make hardware decisions.

That said the best fit would be TWC. TWC bought Navisite for $230M in early last year (2011). Navisite was running about $120M in revenue. TWC has consumer and small business customers like 8x8. TWC has one of the largest regions in the US (after Comcast). 8x8 customers are nationwide. TWC could put many of them On-Net to improve the VoIP quality (which might lower churn even more). It also makes the TWC customers stickier. Plus 8x8 could go up-market easier with network access available.

As a bonus, the company that acquires 8x8 gets its VoIP patent portfolio that could be used as a lever later.

Frontier could use the help but it is still trying to swallow that deal from VZ. And Frontier's DSL service is not capable of supporting VoIP in some markets. (Agents I know tell me how bad Frontier Internet is business and resi DSL. VoIP Provider have said that they won't sell VoIP OTT in Frontier territory.)

BHN has a small territory and is privately owned by Advance/Newhouse Communications, which also owns Business Journals. BHN hasn't acquired any companies yet.

I don't think a Metaswitch shop would buy 8x8, but I could be wrong.

I think it has to do with who can provide network for most of 8x8's customers and prospects to improve quality (much needed). With TV cord cutting, who needs the extra revenue stream?

Windstream might be a suitor IF they have completed integrating PAETEC, which I doubt. PAETEC was a gumbo of Inter-connects (XETA, Quagga), Energy, Allworx, fiber and CLEC's (CavTel, MacLeod, USLEC). If 8x8 is still single in a year when WIND is done with integration, WIND might date EGHT. We'll watch and wait.



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