On Sept. 1, 1920, the U.S. Postal Service (USPS) authorized a new firm named the Pitney Bowes Postage Meter Co. to market the Model M Postage Meter, the first commercially available product of its kind. The fortunes of the once-ubiquitous meter, just like those of the company that built and leased it, have paralleled the glory days, and subsequent secular decline, of first-class mail.
Pitney Bowes (PBI) is one of only five companies authorized by USPS to lease meters. In addition, today’s meters have leading-edge capabilities so mail can be delivered without ever leaving the office. Pitney Bowes wouldn’t comment on market-share specifics but said “we can safely say that we are the market share leader of USPS metered and online postage.”
But there’s no getting around the fact that it has been a rocky 20 years for the company. The advent of email has reduced demand for letter processing and deliveries, and with it the need to lease physical meters to determine postage rates. What’s more, the rise of internet-based postage services has further eroded the value of the meter, and with it Pitney Bowes’ share of the mailing market.
Pitney Bowes rode high from 1983 to 1998, splitting its stock four times during that span. But a glance at its chart since mid-1999 tells a much different story. In June 1999, before commercial applications for the World Wide Web became mainstream, Pitney Bowes’ stock traded at $65.31 a share. As of mid-afternoon Monday, shares traded at $5.56 a share.
By contrast, Stamps.com (NASDAQ:STMP), which was founded in 1996 with a subscription-based model that focused on serving USPS and mailers through e-commerce and not the physical meter, has enjoyed great success by enabling small businesses and home-based enterprises to be their own mailrooms.
The success has not been without volatility, however. Stamps.com’s shares soared as high as $281 a share by June 2018. Shares cratered into the low $30s in May-2019 in the wake of Stamps.com’s move to end an exclusivity agreement with USPS and market its services to other companies. Shares have thundered higher since then, closing on Monday at $249.34 a share.
From 2015 to 2017, Pitney Bowes made several investments in an effort to pivot away from mail and the meter, and to rebrand as a technology provider. In May 2015, it acquired online shopping services provider Borderfree for about $395 million. The company also acquired the cloud-based software developer Enroute Systems Corp. for an undisclosed amount. In mid-2016 it acquired Maponics, a provider of “geospatial boundary and contextual data,” for an undisclosed amount.
In a major push into the parcel business, Pitney Bowes in September 2017 acquired Newgistics Inc., an e-commerce and retail logistics company, for $475 million. According to a communique to accompany the centennial of the postage meter, the company’s global e-commerce division has grown annual revenue from $12 million to $1 billion.
Jerry Hempstead, who heads a parcel consulting firm bearing his name, said Pitney Bowes and Stamps have valid business models though they come at the market differently. Hempstead said the postage meter is “going the route of rail locomotives. Yes, we need them but perhaps not as many as we’ve needed in the past.”
Stamps.com’s model may have gained momentum over the past six months as the coronavirus pandemic has moved many businesses and workers into work-from-home environments and away from their offices, according to Hempstead. Shares fell to $105 a share in mid-March before climbing to current levels.
