Despite profit loss, Pitney Bowes looking forward

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NEW YORK - Despite a fall in first-quarter profit of 6 percent to about $144.8 million, Pitney Bowes Inc. believes the underlying trends in its business remain solid.

Pitney Bowes discussed the loss in profit and its future at its Investor Update 2007 at the Grand Hyatt hotel here. The company attributed its loss to delays in orders for mailing equipment and software in the United States and weaker sales in Europe.

"We are confident about our performance going forward, especially since the recently approved U.S. postal rate case is currently providing stimulus for growth and, as finally approved, is more favorable than we anticipated at the beginning of the year," said Michael Critelli, chairman/CEO of Pitney Bowes, who becomes executive chairman May 14.

Revenue was $1.4 billion, up 4 percent from the same quarter in 2006, and "softer than anticipated," he said.

Dramatic changes in technologies, regulations and customer preferences, however, are reinventing the global mailstream. The top management of Stamford, CT-based Pitney Bowes ( said this means new growth opportunities for the 87-year-old company.

President/chief operating officer Murray Martin - who becomes Pitney Bowes' CEO on May 14 - told investors and analysts that the growth strategies put into place several years ago are working. The company remains committed to expansion in the fastest-growing segments of the global mailstream, he said.

"Over a quarter of our total revenue comes from businesses acquired since 2001 and the growth rate for these businesses is roughly double the growth rate for the businesses we were in when we began," Mr. Martin said.

"We think that the new businesses could constitute more than 50 percent of our revenue by the end of the decade," he said.

Mr. Martin has been president/chief operating office since 2004. He previously was executive vice president and group president of Global Mailstream Solutions, the company's core mail finishing, production and shipping business.

Mr. Martin outlined these six strategic priorities for Pitney Bowes: to maintain and grow the company's healthy cash flow; increase value delivered to customers; improve operating efficiency; solidify the performance of the core mailing business; expand internationally; and focus on high-growth areas of the mailstream.

Customers, Mr. Martin said, are beginning to find additional value in a broader relationship with Pitney Bowes.

Cross-selling of the company's products is expected to grow by double-digit percentages in the years ahead, according to Mr. Martin.

Looking at high-growth segments of the mailstream, Mr. Martin said that software is a rapidly expanding frontier in which Pitney Bowes is becoming a larger player.

The company recently acquired MapInfo to increase its presence in location intelligence, which complements Pitney Bowes's traditional strength in address quality. Mr. Martin said this "is emerging as an important element for business and governments that use spatial information to make better decisions on targeting offerings, serving customers, assessing risk and managing assets."

Mr. Martin emphasized the company's growth opportunities in mail services and marketing services.

Mr. Critelli spoke of the changing postal environment in the United States and Europe as singular opportunities for Pitney Bowes to accelerate its growth. President Bush signed landmark postal reform legislation into law in December 2006, and Mr. Critelli said it was a unique opportunity to redefine Pitney Bowes.

Provisions in the law create four potentially significant business opportunities for the company, according to Mr. Critelli. They include the expanded placement of postage meters and related equipment; greater contracting opportunities with the Postal Service; higher mail volumes through the company's mail presorting network; and greater software sales to help mailers meet more stringent address quality standards.

Each of these opportunities could eventually generate tens of millions of dollars in incremental annual revenues, Mr. Critelli said.

"Postal reform is complex," he said, "but in the aggregate it will be highly beneficial to Pitney Bowes. It allows the Postal Service to respond flexibly to the rapidly changing needs of senders and recipients through market-driven dynamic pricing, frequent price adjustments and lots of product and service innovation. This is an optimal environment for Pitney Bowes."

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