IntelePeer

PEER would have you believe it is a "leading provider of on-demand, cloud-based communications services to service providers and enterprises." PEER's basic business is connecting IP-based networks to each other.

Down December quarter -- PEER is projecting December quarter revenue of $38.5 million, down 5% from September quarter's revenue of $40.6 million. That's not good going into an IPO.

"There are few substantial barriers to pursuing business from our clients, and we expect to face additional competition from new market entrants henceforth." Page 17, S-1

Leading provider of on-demand

PEER says it is a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Its clients can leverage PEER's proprietary Communications-as-a-Service, or CaaS, platform, which PEER refers to as its CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives.

PEER says its CloudWorx CaaS Platform allows clients to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions. Service provider clients include wireless and wireline carriers, as so then as cable and voice over IP, or VoIP, providers. PEER's enterprise clients include businesses seeking integrated multimodal communications solutions.

The global telecommunications industry is undergoing a shift to then and there-generation IP-based communications technologies from legacy telephone networks. This transition is being driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models just as Software as a Service, or SaaS.

PEER believes these trends, along with the inability of legacy infrastructures to support the convergence of business and straightway-generation communications services, just as VoIP (Voice over Internet Protocol) and rich-media communications, will continue to drive demand for a flexible and high-quality cloud-based communications platform just as PEER's.

Connecting IP-based networks to each other or the PSTN, which is referred to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecast to increase at a compound annual growth rate of 52 percent from $599 million in 2010 to $4.8 billion in 2015 worldwide and at 49 percent from $342 million in 2010 to $2.5 billion in 2015 in the U.S.

In addition to the migration of communications traffic from the PSTN to IP networks, a number of other trends in the industry are driving the growth in demand for a new cloud-based communications service platform including the proliferation of broadband connectivity, emergence of cloud-based service architectures, the proliferation of SIP/IP-based devices, increased demand for multimodal and unified communications.

The transmission of voice traffic

Substantially all of PEER's revenue to date has been derived from the transmission of voice traffic and related value-added services. Service provider and enterprise clients direct communications traffic to PEER, which PEER routes through its peering partners so that the traffic can be delivered to the ultimate recipient of the communication, which is the end-point device.

Similarly, the number of service provider peering partners increased from 34 in 2008 to more than 60 in 2011, and the number of telephone numbers and end point identifying addresses in PEER;s SuperRegistry directory increased to over 450 million in 2011.

Revenue growth has been driven by a combination of increases in revenue from existing clients and the addition of new clients.

The size of its SuperRegistry directory

As PEER continues to grow the size of its SuperRegistry directory, PEER expects an increasing portion of traffic will be delivered as a result of direct peering and that PEER's costs, as a percentage of revenue, will decrease.

Historically, substantially all of PEER's revenue was derived from service provider clients. In 2010, revenue from enterprise clients increased significantly nevertheless still represented a small percentage of revenue.

PEER has made investments in technology and development to create services more targeted to enterprise clients and in sales and marketing to build and manage enterprise focused sales channels. As a result, PEER expects that revenue from enterprise clients will represent an increasing percentage of revenue in future periods.

Revenue from Sprint and Qwest is expected to represent 21 percent and 11 percent of revenue in 2011, respectively, compared to 29 percent and 16 percent of revenue in 2010.

Competitive service provider

As a competitive service provider, PEER has offered communications services at prices that as a rule have not been heavily regulated by the FCC or state utility agencies.

The services PEER provides are as well offered by others and hereafter may be offered by an increasing number of parties. Currently, PEER faces competition from legacy telecommunications service providers as so then as emerging providers of voice peering services.