8x8 Announces Second Quarter Fiscal 2009 Operating Results

SANTA CLARA, Calif., Oct. 30 -- 8x8, Inc. (NASDAQ:EGHT) , provider of Packet8 (http://www.packet8.net/) broadband business, residential, video and mobile communications services, today announced financial operating results for its second fiscal quarter ended September 30, 2008.

Revenues for the second quarter of fiscal 2009 increased to $16.4 million, compared with $14.8 million for the same period of fiscal 2008 and $16.3 million for the previous quarter. 8x8 Virtual Office revenue grew to 60% of total revenue in the second quarter of fiscal 2009 compared with 47% of total revenue in the same period of fiscal 2008 and 56% of total revenue in the previous quarter. Sequentially, 8x8 Virtual Office revenue grew 41% from the same period of fiscal 2008 and 8% from the previous quarter. Overall gross margin for the second quarter of fiscal 2009 was 65%, compared with 52% for the same period of fiscal 2008.

GAAP net income for the quarter was $44,000 or $0.00 per share, compared with a net loss of $2.6 million, or ($0.04) per share, for the same period in fiscal 2008 and net income of $1.2 million, or $0.02 per share, for the previous quarter. The Company's cash and investments increased to $15.8 million in the second quarter of fiscal 2009 from $12.9 million in the same period of fiscal 2008 and $14.8 million in the previous quarter.

During the second quarter of fiscal 2009, the Company increased its 8x8 Virtual Office base by 1,846 net new customers and now provides service to more than 13,700 companies with its business communications solutions.

"8x8's money saving Virtual Office communications services are more critical than ever to businesses," said 8x8 Chairman & CEO Bryan R. Martin. "With nearly $16 million in cash and no debt, the Company remains well positioned in its efforts to transition more and more small businesses away from budget-wasting legacy phone solutions. The potential of our Virtual Office service to cut fixed costs to businesses of any size and drive increased efficiencies and capabilities into the telecommunications infrastructure of these companies is more relevant than ever in this economic environment and we are driving this message home to all prospective customers."

Q2 FY'09 Business Highlights:

-- Added 1,846 net new businesses to end the quarter with over 13,700 companies subscribing to 8x8 Virtual Office services

-- Successfully transitioned approximately 1,000 former business customers and a unified communications technology platform from Avtex, LLC to the 8x8 Virtual Office network

-- Added $938,000 in cash and investments quarter over quarter and $2.9 million year over year to the Company's balance sheet for the Company's sixth consecutive quarter of increasing cash and investments

-- Working capital increased year to date by $2.2 million to $8.3 million and stockholder equity increased by $2.1 million to $10 million over the same period

-- Increased business services revenue to 60% of total revenue -- up from 47% in the year ago period

-- Introduced family of leading edge desktop IP phones and new Hosted Key System services

-- Announced marketing partnership and technology certification with Microsoft's Response Point small business phone system

-- Expanded headcount of inside direct sales force, which accounted for 80% of new business sales during the quarter, by more than 30%

-- Expanded indirect channel network to include more than 30 resellers and VARs

Management will host a conference call to discuss these results and other matters related to the Company's business today, October 30, 2008, at 4:30 p.m. ET. To access the call, dial 888-680-0878 (domestic) or 617-213-4855 (international), passcode 80066242. A digital replay of the call will be available for one week following the live broadcast at 888-286-8010 (domestic) or 617-801-6888 (international), passcode 69582458. A webcast of this conference call will also be available for a limited time at the 8x8 Investor Relations website at: http://investors.8x8.com/.

About 8x8, Inc.

8x8, Inc. (NASDAQ:EGHT) offers voice, video and mobile communications solutions for business and residential customers. These solutions leverage existing broadband Internet connections and cellular networks to deliver advanced features and digital quality phone service at a fraction of the cost of legacy, copper wire alternatives. Businesses of any size, configuration or geographic location can benefit from the cost, performance and operational advantages of VoIP technology by selecting the solution that best fits their needs, whether it's the Virtual Office Hosted iPBX phone system, Complete Contact Center, Virtual Trunking IP dial tone solution, Hosted Key System service or Microsoft Response Point/8x8 small business phone system. All 8x8 communications solutions carry little or no upfront investment, no maintenance or upgrade fees and no change in user behavior. For additional company information, visit 8x8's web site at http://www.8x8.com/.

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, information about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our VoIP products and services, the reliability of our services, the prices for our services, customer renewal rates, customer acquisition costs, actions by our competitors, including price reductions for their telephone services, potential federal and state regulatory actions, compliance costs, potential warranty claims and product defects, our needs for and the availability of adequate working capital, our ability to innovate technologically, the timely supply of products by our contract manufacturers, potential future intellectual property infringement claims that could adversely affect our business and operating results, and our ability to retain our listing on the NASDAQ Capital Market. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's reports on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and 8x8, Inc. undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

                                   8x8, Inc.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (In thousands, except per share amounts; unaudited)

                                    Three Months Ended   Six Months Ended
                                       September 30,       September 30,
                                      2008       2007     2008       2007
  Service revenues                   $14,903    $13,272   29,922    $26,683
  Product revenues                     1,522      1,496    2,784      2,827
     Total revenues                   16,425     14,768   32,706     29,510

  Operating expenses:
    Cost of service revenues           4,022      4,430    7,836      8,416
    Cost of product revenues           1,673      2,652    3,105      4,035
    Research and development           1,299      1,026    2,491      2,083
    Selling, general and
    administrative                     9,667     10,050   18,418     18,969
     Total operating expenses         16,661     18,158   31,850     33,503
  Income (loss) from operations         (236)    (3,390)     856     (3,993)
  Other income, net                      107        161      192        293
  Income on change in fair
   value of warrant liability            190        671      259      1,650
  Income (loss) before
   provision for income taxes             61     (2,558)   1,307     (2,050)
  Provision for income taxes              17          -       75          -
  Net income (loss)                      $44    $(2,558)   1,232    $(2,050)

  Net income (loss) per share:
   Basic                               $0.00     $(0.04)   $0.02     $(0.03)
   Diluted                             $0.00     $(0.04)   $0.02     $(0.03)

  Weighted average
   number of shares:
   Basic                              62,278     61,870   62,187     61,822
   Diluted                            62,361     61,870   62,277     61,822



                                  8x8, Inc.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                          (In thousands, unaudited)

                                               September 30,       March 31,
                                                   2008              2008
  ASSETS
  Current assets
    Cash and cash equivalents                    $15,772           $11,185
    Short-term investments                             -             3,382
    Accounts receivable, net                         710             1,807
    Inventory                                      1,753             1,539
    Other current assets                           1,521             1,492
      Total current assets                        19,756            19,405
  Property and equipment, net                      1,770             2,010
      Other assets                                    18               136
          Total assets                           $21,544           $21,551

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities
    Accounts payable                              $3,769            $4,885
    Accrued compensation                           1,168             1,048
    Accrued warranty                                 298               314
    Deferred revenue                               3,646             3,139
    Other accrued liabilities                      2,559             3,872
      Total current liabilities                   11,440            13,258

    Other liabilities                                 66               109
    Fair value of warrant liability                   75               335
          Total liabilities                       11,581            13,702

  Total stockholders' equity                       9,963             7,849
          Total liabilities and
          stockholders' equity                   $21,544           $21,551