Fire damages growth at Pitney Bowes
A fire at a Dallas-area mailing facility in February dampened revenue for Pitney Bowes Inc., even as the company responded to its customer base and overhauled its sales structure to accelerate its move into digital communications.
Via its Stamford headquarters and a large facility in Shelton, Pitney Bowes is among Fairfield County”™s largest employers, selling mail franking and sorting systems to corporations and providing such services on an outsourced basis.
During the quarter, Pitney Bowes also pushed ahead with a series of digital products based on a new cloud-computing platform, including an email marketing service.
Mail services revenue was impacted by a fire that destroyed a 400,000- square-foot building in Grand Prairie, Texas, that had been Pitney Bowes”™ largest presort facility. No employees were hurt in the fire that broke out at 3 a.m., and in a conference call with investment analysts CEO Murray Martin said Pitney Bowes retained “virtually all of its customers” due to its ability to reroute mail through other facilities.
“We”™re quite confident that we have insurance coverage that will keep us whole on this,” Martin said. “We”™ll be up and running in the second quarter. And it takes several months to kind of iron out the process and to get it to full productivity, but we expect that certainly in the fourth quarter we should be running at prior levels of productivity ”“ and if anything, with a new facility and all, the opportunity to do even better.”
Separately, the company reported experiencing little operational disruption from the Japan earthquake and tsunami.
Pitney Bowes revenue was off 2 percent in the first quarter to about $1.3 billion, but profits rose by more than $6 million to $86 million total. Despite the dip in sales, Martin indicated the company”™s business is moderating as the economy recovers and as it follows an inexorable shift toward digital communications as the preferred channel by its business customers, away from paper envelopes and cards.
“The way we look at it, the number of messages between (our) customers and their customers is not declining,” Martin said. “It is really a matter of how it”™s delivered in either physical or digital form. We”™re now launching into a hybrid mode where we will help our customers deliver those messages in whichever form their customers choose to receive it. And we believe the business model is such that we will be able to have the same or more from the digital than we had from the physical. So regardless of speed of transition, as we”™re now moving into the digital side of the communication, we believe that declines will be offset and taken up on the digital side.
“It”™s hard to predict what that long-term mix shift is, but what we”™re doing is positioning the company so that we”™re attacking the total delivery channel and not just one side. That will give us the ability to both offset any shifts and to create growth as we expand the offerings.”
After assessing its sales channels to the small and mid-size business market, Pitney Bowes shifted “a fair number of accounts” in Martin”™s words to an “inside account” model ”“ one typically used by high-tech companies to describe a focus on reaching sales prospects through telephone and web-based communications ”“ rather than direct account management, which typically involves a face-to-face visit.
“This creates a short-term disruption as we shift the accounts and re-establish those connections,” Martin said. “We expect an initial reduction and then the curve to come back. And we”™re pleased to see it returning back to where we expect it to be. This will give us the long-term benefits of how the coverage is delivered and how the customers are interacted with; and it”™ll also enable us to take our cloud-based solutions to that customer group in a much easier and cost-effective manner.”