8×8, Inc. (EGHT) Should Be a Stock You Own

The technological convergence that began in the late 1990’s continues to show positive side effects in product and service offerings of today’s telecommunication providers. Up until just a few years ago, companies – and small business alike – needed to seek out different vendors to aggregate parts to form a communications solution.

Those times have come and gone, and as single companies now offer a cost-cutting, one-stop solution for product and service provision, it behooves us to look into one of the companies that make this possible. 8×8, Inc. (NASDAQ:EGHT) is an Alternative Carrier that is on the forefront of this new market, and its stock is ready to climb.

The host with the most

8×8, Inc. (NASDAQ:EGHT) is a complete, and scalable, office communication solutions provider. Its main product and service offerings are hosted Voice over Internet Protocol, or VoIP, telephony, virtual office communications, web-based conferencing, and cloud-based computing services.

The market for small and mid-sized business communications solutions has been burgeoning here in the U.S. Nearly 80% of businesses are expected to be using VoIP by the end of 2013, with 49% already doing so. This makes a lot of sense as businesses have much to gain by switching to VoIP, primarily due to its low cost as compared to traditional phone services.

8×8, Inc. (NASDAQ:EGHT) is the sixth largest Alternative Carrier, according to market capitalization. It has a growing customer base, which has recently topped 35,000 businesses. In March of 2012, Frost and Sullivan issued analysis, which listed 8×8, Inc. (NASDAQ:EGHT) as the top provider of installed IP telephony lines in North America.

The competition

The company’s competitors include Level 3 Communications, Inc. (NYSE:LVLT) and Vonage Holdings Corp. (NYSE:VG). Level 3 is one of the more recognizable brands in the communications world. It has annual revenue of over $6 billion, but has also lost $1.66 in EPS as of last quarter. Its product and service offerings insofar as VoIP telephony are similar to 8×8, Inc. (NASDAQ:EGHT)’s, but its main crutch is physical networking and fiber optic connections.

The signs showing that Level 3 Communications, Inc. (NYSE:LVLT) will move into profitability have not emerged as of yet.  According to analysts consensus estimates, it will still be in the red for another three quarters. Because of this, I would stay away from this stock and look towards a company already showing profitability and growth.

Vonage Holdings Corp. (NYSE:VG) is another recognizable brand in the VoIP arena. It’s a growing force more with home subscribers, but also has been pushing more into the small and mid-sized business market. Vonage Holdings Corp. (NYSE:VG) currently runs over 2.4 million subscriber lines, which translates into $842 million in revenue as of last quarter.

Following a disastrous IPO in 2006, analysts bet against this company. That is, until Vonage was proven right with its investment into the telephony market. Its foothold with the U.S. consumer is large, and growing. Under new management and a new marketing push, Vonage may be a winner in 2013-2014.  My advice is to watch the stock carefully, and buy on pullbacks.