8x8 by Two

07/01/2005 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

We caution that 8x8 is a low-priced, highly speculative play on Voice over Internet Protocol. However, the fact that it has caught the attention of two very bright minds in the advisory world- Tobin Smith and Elliott Gue- warrants its inclusion for the speculatively inclined.

"8x8 (EGHT NASDAQ) offers Voice over Internet Protocol (VoIP) service. VoIP allows telephone calls to be made over the Internet. Typically, by calling over the Internet, costs are a fraction of what they are for traditional phone service. Market research firm IDC projects there will be 27 million VoIP users in the US in 2008, up from about three million in 2003. This industry does have some competition. The big cable companies are getting into the mix, and there are other small VoIP players like Vonage that compete with 8x8. But right now, 8x8 is seeing tremendous growth. In the last reported quarter, it added 14,000 customers, bringing its total to 40,000.

"Technically, the stock looks sold out- 8x8 formed a heavy volume blowout low in late April. And lately, the company has been seeing large rallies accompanied by heavy volume. This is a sign of big money flowing into the stock. We would warn readers that 8x8 is a highly speculative stock. The recommended stop is very loose and you should use a smaller-than-normal position size that takes into account the high level of risk in this trade. Buy under $2.50 for a target of $3.50, for a potential 70% gain. Our initial stop is at $1.30, and we will trial the stop higher as the stock rallies.

Tobin Smith also recommends the stock and offers an update on the firm's recent product releases: "The Packet8-enabled UIP1868P is a 5.8GHz digital expandable corded/cordless phone with built-in VOIP technology and full router functionality, and it offers plug-and-play access to Packet8's feature-rich broadband telephone service. The Packet8 residential broadband phone service, introduced in November 2002, offers unlimited local and long-distance calling to the US and Canada for $19.95 per month and includes calling features such as voicemail, call waiting, and caller ID.

"8x8 Inc. also announced that it has launched a co-marketing program with Pitney Bowes Inc. that allows 8x8 to market the Virtual Office business-class broadband phone service as well as the Packet8 VideoPhone service to 840,000 PB Direct small-business customers. Uniden America, a leading manufacturer of wireless consumer electronics, announced that the 8x8', Inc. Packet8-enabled UIP1868P, a fully integrated, service-ready holistic VOIP phone system, will be available nationwide at several retailers this year including Fry's, OfficeMax, Costco.com, and Amazon.com. This is the first national distribution rollout for this new product, and retailers will begin offering the product in July of this year."

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