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Mail Stop 3561
July 27, 2005
Mr. James Sullivan
Chief Financial Officer
8x8, Inc.
3151 Jay Street
Santa Clara, CA 95054
Re: 8x8, Inc.
Form 10-K for Fiscal Year Ended March 31, 2005
Filed June 14, 2005
Dear Mr. Sullivan:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents. Please address the following comments
in
future filings. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a future revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for Fiscal Year Ended March 31, 2005
Results of Operations
Cost of Product Revenues
1. We refer to your statements that you have offered incentives to
customers who purchase terminal adapters in your retail channels
to
offset the cost of the equipment purchased from a retailer. In
accordance with EITF 00-21, a portion of Packet8 revenues is
allocated to product revenues, but these revenues are less than
the
cost of the terminal adapters. With regard to this statement;
* Tell us the nature of incentives offered and how you account for
them.
* Tell us in more detail why the product costs exceed product
revenue.
* Provide us with examples showing journal entries for both the
product revenue and product cost.
* Refer to the accounting literature you relied upon.
2. We note that for the year ended March 31, 2005, you reversed
$75,000 of writedowns related to semiconductor product inventory
and
reversed approximately $120,000 or royalty and $ 103,000 of
warranty
reserves related to your former video semiconductor and PSTN
videophone products as a result of changes in estimates. In this
regard provide us and disclose in future filing;
* A roll-forward reconciliation of your inventory valuation
account.
Tell us in more detail why inventory reserves for the
semiconductor
product inventory were reversed in the years ended March 31, 2005
and
2004.
* A tabular reconciliation of changes in product warranty
liability
in accordance with paragraph 14 of FIN 45. Tell us in detail why
you
reversed warranty reserves in the years ended March 31, 2005 and
2004.
* Tell us the nature of royalty reserves and how you account for
them. Refer to accounting literature used.
1. The Company and its Significant Accounting Policies
Concentration
3. We note that at March 31, 2005, three customers accounted for
26%,
16% and 11%, respectively, of accounts receivable. We also note
that
in your segment reporting footnote (note 12) that no customers
represented more than 10% of your total revenue in fiscal 2005 and
two customers represented 26% and 16% of your total revenue in
fiscal
2004. Furthermore, according to your consolidated balance sheet
it
appears that your allowance for doubtful account is about 6% of
total
accounts receivable. In this regard tell us why these three
customers represent such a significant portion of accounts
receivable
at March 31, 2005.
9. Commitments and Contingencies
Legal Proceedings
4. We note your disclosure that you are involved in various other
legal that have arisen in the normal course of operations. We
also
note your disclosure in critical accounting policies stating that
your current estimated range of liability related to pending
intellectual property and other litigation is based on claims and
exposures for which you can estimate the amount and range of loss
and
that you have recorded a minimum estimated liability related to
those
claims where there is a range of loss. Please tell us and
disclose
in future filings the nature of all material litigations and an
estimate of the possible loss or range of loss. Refer to
paragraph
9-10 of SFAS 5.
10. Stockholders` Equity
1999 Nonstatutory Stock Option Plan
5. We note that you recognized stock compensation expense in
fiscal
2004 of $1.3 million, which was comprised of: i) $1,164,000
attributable to the change in option terms for certain employees
that
terminated employment, ii) $143,000 attributed to a change in
option
terms for a director of the Company upon his resignation from the
Board. In this regard tell us specifically what option terms
changed
for these employees and directors. Tell us why the change in
option
terms resulted in stock compensation expense. Refer to your basis
in
accounting literature.
12. Segment Reporting
6. We note that you have three revenue streams, packet8 service
and
equipment, semiconductors and related software, and hosted iPBX
solutions. Using the guidance in paragraph 10 of SFAS 131, tell
us
how you determine your operating segments and describe for us the
reports your Chief Operating Decision Maker reviews when assessing
operating segment information. Specifically discuss the measure of
profit and loss reviewed by the Chief Operating Decision Maker. If
you have aggregated several operating segments into one reportable
segment, tell us how determined that you met the criteria for
aggregation in paragraph 17 of SFAS 131, including the requirement
that the segments have similar economic characteristics.
Consolidated Quarterly Financial Data
7. Tell us why total revenue was particularly high in the quarter
ended December 31, 2003. In future filings, disclose any
seasonality
or trend regarding revenue.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. In addition,
you
should make corresponding changes to the pending registration
statement on Form S-3 to the extent applicable. Please furnish a
letter that keys your responses to our comments and provides any
requested information. Detail letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Inessa Berenbaum, Staff Accountant, at (202)
551-3371 or Ivette Leon, Assistant Chief Accountant, at (202) 551-
3351 if you have questions regarding comments on the financial
statements and related matters. Please contact me at (202) 551-
3810
with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Mr. James Sullivan
8x8, Inc.
July 27, 2005
Page 4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE