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HolidayBuyer's Guide
Tech Industry

Can Pitney catch up to Stamps.com, E-Stamp?

After toiling for decades under U.S. Postal Service regulations, metering giant Pitney Bowes seems to have become as slow moving as the government agency, watching fleet-footed Net-only rivals take a strong lead in the Internet postage market.

After toiling for decades under U.S. Postal Service regulations, metering giant Pitney Bowes seems to have become as slow moving as the government agency, watching fleet-footed Net-only rivals take a strong lead in the Internet postage market.

While the company has the technology and the established brand recognition to compete vigorously with e-commerce upstarts, its migration to the Internet has been less than energetic.

As a result, investors have pounded the company's stock--which is hovering around a 52-week low--as a steady stream of news about Stamps.com and E-Stamp pours out and pushes their shares higher.

Pitney's predicament is not unique: Dominant retailers in the brick-and-mortar world have been consistently slapped by setbacks in their Net strategies, learning quickly that it takes more than offline branding to muscle their way onto the Net. Companies such as Home Depot, Toy "R" Us, Starbucks, The Limited, Best Buy and Target are part of a growing list of retail giants stumped by the Internet.

Pitney's trouble is the latest example of the struggle between older, established companies and nimble upstarts.

Pitney is still waiting to win approval from USPS for its Internet products, which it hopes to receive by the end of this year or in early 2000.

In the meantime, however, Stamps.com shares rose nearly 35 percent after the company announced plans to provide online ticketing and printing services for travel and financial-services companies. Late last month, Stamps.com also announced several marketing deals, including agreements with IBM and America Online.

Rival E-Stamp also has been busy forging alliances. Earlier this week, it entered a dozen distribution deals with companies including Office Depot, America Online and Comp USA that could help it mine the profitable small-business market.

Still, the company is confident that it can stake a claim to the burgeoning Internet postage market.

"It will be a more competitive market for us than our traditional devices," said Kevin Weiss, president of Pitney's Office Direct division. Pitney's market share of the traditional metering sector has been as high as 84 percent in recent years. "There's a lot of talk about first-mover advantage; we like to talk about best-mover advantage."

Some analysts agree with Pitney's boast, noting that the company is preparing a diversified suite of products offering both PC- and Internet-based products aimed at low-end and corporate customers.

"I think they are getting out there a little slow, but I do think that they have the correct strategy," said James Corridore, an equities analyst at S&P Equities Group. "They have decided not to focus solely on the low-end of the Internet like E-Stamp and Stamps.com because they feel there is no way to make money there."

Corridore also said that the Net players, at some point, will shift their attention to the high-end market, but will face obstacles in the process.

"You have to have the capabilities to meet the needs of corporate clients, and no one can match the capabilities of Pitney Bowes," Corridore said. "The [Pitney] brand is synonymous with mailing."

Some analysts, however, said that the Pitney brand name might actually haunt the company.

"Pitney has basically controlled the prices and the monthly leasing fees they were charging to small business owners because the company is almost the only game in town," said Melissa Shore, an analyst at research firm Jupiter Communications. "Small-business owners are going to be excited by the prospect of seeing what competitors have to offer."

Pitney's competitors in offline postage metering include Postalia and Neopost.

Learning new tricks
While Pitney may be an old hand in the postage industry, there are some new tricks that the company will have to learn. Pitney will have to move quickly to cut marketing alliances and distribution deals to catch its competitors who have been signing deals at a fast clip.

"Pitney has never had to rely on those types of advertising or partnerships so [Pitney] is at a competitive disadvantage on the Web," Shore said.

Pitney's Weiss said the company is marshalling its forces for a marketing blitz once all the elements of its product Pitney Works are in place.

"We recognize fully that alliances are a major part of doing business correctly on the Internet," Weiss said.

Till such time, Pitney appears to be almost at a standstill while its Net rivals are putting their stamp on the Internet.