It's difficult to get excited about any part of 8X8 Inc.'s fourth-quarter results. While revenue nearly doubled to $3.9-million from a year earlier, the Internet telephony company's losses soared to $7-million from $1.5-million. The company attempts to cover this bad news by pointing out the number of subscribers rose to 57K from 40K, while it has $31.8-million of cash. Let's be honest: 17K subscribers is what Vonage is attracting every two weeks, while 8x8's cash position was buoyed by a stock offering. It is readily apparent that 8x8 is a company struggling to catch the VOIP wave. The challenge, however, is investors have yet to caught the VOIP bug. If you look at the recent performance of publicly-traded VOIP companies, very few have done well. 8x8 shares have tumbled by about 50% so far this year - cracking the $2 level today. While 8x8 may have the best VOIP service - according to TomsNetworking - it's not attracting enough customers to make it anything more than a marginal player in a market that is seeing growing competition from cablecos.

I'm somewhat amused by the news that Friendster CEO Scott Sassa plans to resign today after less than a year on the job. Friendster's biggest problem was it never had a vibrant business model. It was a quasi-cool, communications tool developed by Jonathan Abrams to help people meet new friends (in other words: it was a dating site for people who did not want to be seen as using a dating site). The big difference between Friendster and Match.com was that Friendster really had no obvious way to make money beyond banner ads and AdSense because its users weren't willing to pay for a service they were getting for free. When I met Abrams a couple years ago, he had this strange "I know something you don't because I work in Silicon Valley" attitude - clearly fueled by investment from some large VCs. Turns out Friendster couldn't find the secret sauce to turn users into revenue. Friendster was an example that investors often to fail to learn fundamental lessons. It was a classic dot-com that somehow emerged a couple years after the party was over. The best scenario for Friendster would have been its purchase by Google or Yahoo for its users but that didn't happen, which should tell you a lot about the company and the market.

There appear to be growing indications the telecom equipment market is coming back to life - at least parts of it. So far this week, there have been two large private equity deals - Tropic Networks raised $33-million while Caspian Networks brought in $55-million. They're eye-catching because a year or two ago these kind of deals didn't exist. The idea of putting money into telecom start-ups seemed ludicrous. So what's changed? For one, carriers and cablecos need to start spending money again on new equipment so they can upgrade/expand IP networks and launch new services. In light of the growing battle between telcos and cablecos, niether side has much of a choice in the matter for fear of becoming less competitive. This has created a window of opportunity for small equipment with leading-edge technology to finally attract some business. This has also let them attract new capital from investors who realize there are strategic opportunities in the telecom market. For investors, there are two scenarios: the telecom equipment makers go public or, more likely, they get purchased by large suppliers looking to fill a hole in their portfolios. Tropic's investors include Alcatel SA, which is also re-selling Tropic's technology into the telco and cableco markets. Caspian, meanwhile, has router technology that could attract attention from Alcatel, Siemens and Nortel. For telecom start-ups that managed to survive the three-year downtown, the good times appear to have returned. That said, this is not going to be an across the board party. It will be by invitation only.