Does Postal Reform Need Pitney Bowes?

Pitney Bowes (PBI) posted lower profits and other disappointing metrics. The stock, of course, drops. The financial press release was issued Monday at 6:30 am ET well before market open.

Commenting on the quarter, Chairman and CEO Michael J. Critelli noted:

The underlying trends in our business remain solid. However, our revenue growth this quarter was softer than anticipated, due to delays in orders for mailing equipment and software in the U.S. and weaker sales in Europe....

Mr. Critelli then went on to completely ignore any activity in Europe and focus entirely on U.S. activity. Pitney Bowes is gambling that the U.S. postal rate increases will stimulate additional sales of products and software. Forward looking companies who need to be concerned about postal rates and who invest in IT would already have eyeballed the offerings and are probably not waiting for the rate increase to purchase productivity enhancing equipment. I find it hard to believe that the rate increase will be a significant driver.

Delays in orders for mail equipment excuses continue to be suspicious. Go to your own mail room and see if they have the new Pitney Bowes stuff. Ask them if it works and what they have had to return. There is anecdotal evidence that the return rate is disturbingly high for a what is supposed to be a new product. Management may not yet realize it, but the product is not impressing and costs are piling up for returns and reshipment. Because it’s a busted sale, management may be looking at reports that indicate order delays.

There have been two press releases within 48 hours of the financial results being made public. They are all major marketing messages signaling that Pitney Bowes is poised to profit from changes at the post office. If the mailers yawn, Pitney Bowes will have trouble. I predict some serious oxygen deficient yawning.

PBI 1-yr chart: