What Is Pitney Bowes?

Connecticut-headquartered Pitney Bowes (NYSE: PBI) offers customer engagement, business insight, work flow management and integrated mail solutions to customers in more than 130 countries. Offerings include postage meters, mailing equipment, equipment financing, web-based marketing, print stream engineering and end-to-end mail management software. Its subsidiary, Pitney Bowes Management Services, has a suite of outsourcing services to manage documents.

Financials

In 2008, the company, which had 36,000 employees, operated in a market valued at $250 billion. Total assets as of 2007 stood at $9.4 billion, up from $8.5 billion in 2006. The company posted revenue of $6.3 billion in 2008. Adjusted earnings per share from continuing operations between 2003 and 2008 surged at a compound annual growth rate of 6.5 percent. Gross profit totaled $3.28 billion in 2008. Estimated revenue per share is $2.60 for 2010.

Challenges in Customer Retention

Pitney Bowes garnered 69 percent of its total sales of $6.3 billion in 2008 from the U.S. market. Of this, business services amounted to 31 percent; equipment sales, 20 percent; financing, 12 percent; support, 12 percent; rentals, 12 percent; software, 7 percent; and supplies, 6 percent, according to the research firm Hoover's.
Given that the majority of its customers are in the financial services industry--which had been severely affected by an economic downturn in 2008-09--the company's sales were expected to be hit in light of cost-reduction initiatives by customers, going forward. In a report dated May 7, 2009, MorningStar analyst Warren Miller lowered the fair value estimate to reflect "a more permanent decline in demand for Pitney Bowes' products."

Acquisitions Drive Inorganic Growth

Pitney Bowes is aggressive on inorganic growth, having made 90 acquisitions since 2000 for a total of $2.6 billion. These acquisitions have broadened the company's capabilities in providing business insight, managing document work flow and improving mail performance.
The company acquired software provider MapInfo in 2007 for $408 million and merged MapInfo and its Group 1 Software to form Pitney Bowes Software. Other acquisitions in 2007 included Digital Cement, a customer relationship services company, for $52 million and Asterion, a transactional print and document processor, for $29 million. In 2008, Pitney Bowes acquired Zipsort, a mailing-services provider, for $39 million.
The market appears to have viewed the acquisitions favorably. In a report titled "MarketScope for ADF 2.0 (Automated Document Factory) Software" published by the research firm Gartner on Dec. 2, 2008, Pitney Bowes received a "strong positive" rating, the highest awarded by Gartner.

Outlook

According to a report titled "Pitney Bowes, Inc." published by Standard & Poor's Credit Research on July 21, 2009, operating margins and earnings at the company could decline because the revenue mix contains a smaller representation of core mail products. Going forward, growth in sales and earnings is more likely to occur in more fragmented global markets, where Pitney Bowes holds smaller market shares.
The company's strengths--per the S&P report--are its recurring revenue from equipment rentals, well-diversified customer base and leadership in the mailing systems market, which contributes more than 70 percent of the company's revenue.

Diversity Initiatives

Pitney Bowes was named one of the 40 Best Companies for Diversity for the fifth consecutive year in 2009 by Black Enterprise magazine. According to a July 1, 2009, press release from Pitney Bowes, the recognition is based on the company's strong supplier diversity initiatives and the number of African-Americans and other ethnic minorities represented on its board of directors and in senior management.

References

• "MarketScope for ADF 2.0 Software" by Gartner
• MorningStar

Resources

• Pitney Bowes
• Standard & Poor's Credit Research