On May 14, the day Murray Martin became chief executive officer of Pitney Bowes Inc., the U.S. Postal Service began charging 2 cents more for letters mailed in the United States.
Pitney Bowes is still paying for the change, and Martin”™s 2 cents on the matter is that it will take the company at least another quarter to recover.
In the third quarter, Pitney Bowes suffered its largest year-over-year decline in quarterly equipment sales in at least four and a half years. While the Stamford company increased overall revenue 5 percent to $1.5 billion, that was down from growth predictions of between 8 percent and 11 percent the company had forecast. Profits fell 14 percent to $128 million.
The company”™s stock dropped 15 percent after it released its third-quarter results, the biggest drop since October 2000.
At the end of 2006, Congress passed postal reform legislation that, among other goals, increased rate predictability while increasing price flexibility and encouraged the use of high-tech meters at corporate sites to lessen the strain on the U.S. Postal Service.
Under previous CEO Michael Critelli, Pitney Bowes eagerly supported the legislation, anticipating an immediate boost to its business selling and leasing bulk mailing equipment for large organizations, and managing mailroom operations at those customer sites.
As it turns out, many customers have been slow to upgrade their meters as they digest the changes.
“We”™ve got about 49,000 meters left in migration between 2007 and 2008,” Martin said. “What we have seen ”“ which was really a surprise to us ”“ is the migration rate on meters has dropped by about 50 percent. What we are now expecting is that customers that would normally have upgraded earlier are saying, ”˜I”™ve got until the end of 2008, beginning of 2009. I have no urgency to move forward.”™”
For analysts accustomed to neither snow nor rain nor gloom of night staying Pitney Bowes from hitting its quarterly targets, it made for a quarter that “was very un-Pitney like,” in the words of Matt Troy, an analyst with Citigroup Inc.
Pitney Bowes also encountered slower sales in Europe, where a labor strike in the United Kingdom”™s mail service lowered volume, and attributed part of its U.S. results to financial services companies here reeling from the subprime mortgage decline. Pitney Bowes said outsourcing contracts it hopes to win from the U.S. government have been delayed, without specifying why.
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The company warned it expects worse-than-expected results for the current quarter. Martin promised to examine “all aspects” of Pitney Bowes operations and investments to maximize the company”™s profit potential.
What that means for the company”™s Fairfield County work force is unclear. At last report, Pitney Bowes had about 4,000 employees on its home turf. Pitney Bowes plans to vacate an office in Colonie, N.Y. and move 120 of those workers into its Pitney Bowes Software office in nearby Troy, N.Y., while making plans to hire 50 additional finance workers there.
Pitney Bowes picked up the Troy office in its acquisition earlier this year of MapInfo, which has 300 employees in its 210,000-square-foot facility.
The company indicated it is taking advantage of tax incentives for job creation; sales-and-use tax exemptions; a possible payment in lieu of real estate taxes; and potential reimbursement for training costs of employees.
Troy-region officials said they would support Pitney Bowes”™ efforts to secure Empire Zone certification for the property, which could result in New York state income tax credits.
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