Motley Fool  Sep 4  Comment 
The company's turnaround strategy is in progress, but it's not quite as hoped.
Yahoo  Aug 20  Comment 
Attention dividend hunters! Pitney Bowes Inc (NYSE:PBI) will be distributing its dividend of US$0.19 per share on the 11 September 2018, and will start trading ex-dividend in 2 days timeRead More...
Motley Fool  Aug 1  Comment 
Sales surge again, but earnings … don't.
Yahoo  Aug 1  Comment 
On a per-share basis, the Stamford, Connecticut-based company said it had profit of 26 cents. The mailing equipment and software company posted revenue of $861.4 million in the period. Pitney Bowes expects ...


Pitney Bowes Inc. (PBI) is the world's largest seller of postage meters, devices that allow companies to print postage on letters rather than using stamps. The company has over 2 million customers worldwide. Its sale and operation of postage meters is heavily regulated by national governments, since printing postage essentially amounts to printing money, and this creates high barriers to entry that protect Pitney Bowes' virtual monopoly in this business. PBI controls 80% of the domestic postage-meter market and 65% internationally.[1]

While postage meters are in continual demand by any business that sends a lot of mail, direct mailing is being increasingly displaced by internet advertising, and this limits PBI's growth opportunities within its core market. To build revenues in the long term, PBI has turned its attention outside of postage meters into businesses such as document services, including letter production and design software, facilities management, and outsourced marketing.[2] The firm has made $2.5 billion in acquisitions since 2000 in order to diversify beyond the postage meter business. Notable acquisitions in 2007 - when the firm spent $570 million buying other companies - included MapInfo (Troy, NY) and Digital Cement (Toronto, Canada). [3]

However, these businesses are relatively new to PBI, which has historically focused exclusively on postage meters since its founding in 1902.[4] Industries such as document management, information intelligence, and legal services are not regulated by the government, and there are low barriers to entry which create competition in these markets - something Pitney Bowes does not deal with in the postage meter business. In these markets PBI is forced to compete with firms like Xerox and IKON Office Solutions (IKN) that have specialized in these businesses for longer and have established customer relationships. This presents a challenge to PBI as it builds an economic niche outside of its traditional dominance in postage meters.

Business Overview

PBI's biggest source of revenue is its U.S. Mailing division. The company's 85 acquisitions since 2000, along with its international postage meter operation, make up the rest of PBI's business. PBI divides its offerings into two main sections, Mailstream Solutions and Mailstream Services.

Business & Financial Metrics[5]

In 2009, Pitney Bowe

Business Segments[6]

Pitney Bowes has seven reportable operating segments.

  • U.S. Mailing (36.2% of total revenues): This segment sells, rents, and finances the company's mailsorted mail and cross-border mail services.[7]
  • Marketing Services (2.5% of total revenues): This segment provides direct mail marketing services on behalf of clients to targeted customers.[7]



The lack of growth in the postage meter market hurts PBI's core business segment.

PBI's U.S. Mailing division, which best represents PBI's original core postage meter business, accounted for more than 36% of the firm's total revenues in 2009. PBI controls 80% of the domestic postage-meter market and 65% internationally.[8] High barriers to entry faced by potential competitors protect this market share; since postage meters essentially print money, governments tightly regulate this industry and limit the number of providers.

However, growth in this division's revenue is stagnant.[9] This lack of growth is due to the fact that use of computers has increased dramatically since the 1990s, and as a result, businesses are increasingly using internet advertising as a less expensive substitute for brochures and catalogs sent through the mail.

PBI's growth strategy undermines its competitive advantages.

The rise of E-Commerce has significantly decreased the demand for PBI's postage meter services, so PBI has reacted by rapidly expanding into other areas (see the list of divisions in business overview above). Although PBI has invested significant capital in its own research and development, its expansion has thus far been accomplished through $2.5 billion in acquisitions since 2000. These purchases have included a wide variety of companies, including MapInfo (location intelligence), Digital Cement (customer relationship management), Ibis Consulting, Inc. (electronic legal discovery services), and Group 1 Software, Inc. (mailing efficiency software), among others.

PBI does not have the same competitive advantages or market dominance in these areas as it does in its postage meter segment. Other companies, already dedicated to these other markets, are more established in their respective specialties and have existing relationships with customers. The success of PBI's expansion strategy will depend on PBI's ability to acquire companies that are already well-established and can maintain a niche in their markets.

The introduction of shape-based postage pricing increases demand for PBI's services.

The most notable change included was a transition from purely weight-based pricing to a new system that took the shape of the piece of mail into account as well. [10] Under the new regulations, postage will be cheaper for pieces that are more easily processed by USPS equipment. Letter-size envelopes will fare the best, followed by flats (e.g. manila envelopes) and then parcels. Due to these changes, customers - particularly large companies that regularly send large volumes of mail - stand to save lots of money by conforming to the most cost-effective shaping standards.

PBI will gain in two ways as a result of shape-based pricing. First of all, demand will increase for products like the Shape Based Sizing Template, which helps mailers compute the exact, correct postage for their mail according to the new, more complex shape-based pricing rules. Secondly, demand will also increase for machines offered by PBI that fold mail into the specific shapes that cost the least to send under the new system; for example, customers will be interested in machines that will let them change mailings that are currently formatted as flats into letter-shaped envelopes (which are now less expensive). [11]


As mentioned above, the postage meter business is tightly regulated by the government because the meters essentially print money. Only four companies other than PBI are licensed to produce and sell postage meters in the United States:[12]

Pitney Bowes also competes with other companies in its other business segments. These companies include:


  1. Putting a New Stamp On Pitney Bowes, Smartmoney.com, 01/03/06
  2. Pitney Bowes Fast Facts, 2008
  3. Pitney Bowes Fast Facts, 2008
  4. Wikipedia:Pitney Bowes
  5. PBI 2009 -10-K pg. 10  
  6. PBI 2009 -10-K pg. 78  
  7. 7.0 7.1 7.2
  8. Putting a New Stamp On Pitney Bowes, Smartmoney.com, 01/03/06
  9. PBI 2007 10-K, page 11
  10. USPS news release #07-041, 5-07-07
  11. Print Professional Magazine, New View, March 01 2008
  12. USPS - Postage Meters
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