Business VoIP

In the telecommunications space, “hosted” products are services that an outside company offers and manages, such as hosted VoIP.

 

A major selling point for those services, especially in this slow economy, is that they reduce installation and maintenance costs. As TMCnet reported this week, one IT strategy firm predicts that although overall IT spending is expected to drop in 2009, channel partners say revenues from managed services will grow about 20 percent.

 

The trend toward hosted services goes beyond telecom, of course.

 

For example, this week, the world’s largest online movie rental service is reporting that its subscribership grew 26 percent year-over-year from the fourth quarter of 2007 to 2008.

 

Officials at Netflix, Inc. say revenues grew 19 percent, to $359.6 million, for the three-month period that ended Dec. 31, and grew 5 percent from the prior quarter. Total annual for fiscal year 2008 was $1.365 billion, up 13 percent from 2007, the company says.

 

“Consumers embraced the Netflix experience in near record numbers last quarter, with growth in our core DVD offering and growing momentum with Internet streaming,” said Reed Hastings, Netflix co-founder and chief executive officer.

 

Net income for the quarter came in at $22.7 million – up from $15.7 million year-over-year – and earnings per share rose from 33 cents to 38 cents, company officials say.

 

For the year, Netflix saw $83 million in net income and $1.32 per share, up from $66.6 million and 97 cents per share in 2007.

 

Given the economy, the figures are staggering. Yet, as TMC (News - Alert) President Rich Tehrani reports, companies that offer these hosted services – including virtualization and SaaS (News - Alert) and cloud computing – are turning in good results.

 

“You may have heard Intel and Microsoft missed their numbers but Google, Apple and IBM did well. Most people are trying to make sense of what is happening here,” Tehrani writes. “After all, to most financial analysts, these are all tech companies and subsequently they should all do the same.”

 

Yet in the downturn of 2001-2002, many tech people started to experiment with free Linux solutions when budgets were slashed. The move to Linux had started years earlier but the accelerant was a lack of budgets, Tehrani writes.

 

“In the last 12 months we have seen the slowing economy act as an accelerant as well but in this case it increased adoption rates of virtualization and SaaS/cloud computing,” he writes. “And the kicker is you can try either of these for free to get the ball rolling.”

 

For Netflix, that ball appears to be rolling quickly, though its outlook has been tempered somewhat.

 

For the current quarter, the company is calling for earnings per share of 25 to 33 cents, and net income of $15 million to $20 million. For the year, the company is calling for net income of $88 million to $98 million, and $1.43 to $1.59 per diluted share.