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THE DAY AHEAD: Hardware may put E-Stamp behind

E-Stamp (Nasdaq: ESTM) vs. (Nasdaq: STMP) is shaping up to be a big battle between the young and revenueless. But investors that missed out on seem to be betting on E-Stamp.

That bet has some risks. E-Stamp, scheduled to trade 6.5 million shares today priced between $14 and $16, has what could be a fatal flaw compared to its rival -- hardware. Both companies sell postage over the Internet. went public in June at $11 a share and has the early first-mover lead.

Will hardware requirement hurt E-Stamp?

Why are we financial types worried about hardware? There are no financials to look at -- neither E-Stamp nor has a speck of revenue.

But E-Stamp needs special hardware to print stamps. Software is easy and you can download it. Hardware is a little bit more work.

E-Stamp is asking potential customers to buy its Internet postage software and hardware for $49.99, but it may offer it free from time to time. The hardware requires you to order it through the E-Stamp website and wait for it to ship. You could also trek out to an office supply store or pick up the phone and order.

The company then charges a 10 percent convenience fee when Internet postage is purchased, with a minimum fee of $4.99 and a maximum fee of $24.99 per purchase.

The good news is that E-Stamp doesn't require you to be connected to the Internet.

Now compare that to (chart), which has a partnership with ZDNet, the parent of ZDII, and others. offers free software, needs no hardware and takes the same 10 percent convenience free.

It's just easier to get started with because E-Stamp's hardware could be a barrier to entry. The potential market for selling stamps is huge. For starters, companies need approval from the United States Postal Service. Couple that barrier to entry with the fact that no one likes to go to the post office and you may have a good business model.

Hardware matters in the E-Stamp case because the market for stamps is untested. No one has tried this stamp thing yet and folks normally travel the path of least resistance.

Other than that hardware problem it looks like a draw:

  • is starting service this month and has almost 100,000 potential customers registered. E-Stamp started its commercial service Aug 9 and will be evaluated by the Postal Service when it gets 100,000 customers.

  • Both companies are being sued by Pitney Bowes Inc. (NYSE: PBI) for patent infringement and could face limitations if they lose. Pitney Bowes could squash both of them.

  • Both companies have huge losses. E-Stamp, which has been around longer than, has an accumulated deficit of $39 million through June 30 and has a deficit of $13.9 million.

  • Both E-Stamp and have big backers and strong partnerships.

  • And both are heavily regulated by the U.S. Postal Service.

    The only thing you have to go on is the hardware difference, which could be a big hassle.

    What I learned at Internet World

    1. Everyone has the next big idea.

    2. Foundry (Nasdaq: FDRY) has a big market cap, small booth.

    3. New e-commerce sites either focus on a fanatical customer base (comic book lovers) or take advantage of real-world annoyances (jewelers).

    4. Two companies, not one, had unicyclists in their booths in the e-commerce section.

    5. Venture capitalists attract every Joe Internet with a big idea.

    6. Press folks attract every Joe PR Guy with the next hot company.

    7. Start-up CEOs will ambush you if you don't keep moving.

    8. Rhymes help: The tagline is everything -- "Place and space" et al. If there's not catchy slogan a gorilla suit really helps.

    9. Food, water and neat trinkets attract a crowd. Car raffles lure more.

    10. But most people just want a free tee-shirt.