Pitney Bowes, Inc.

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Pitney Bowes, Inc.

One Elmcroft Road
Stamford, Connecticut 069260700
(203) 356-5000
Fax: (203) 351-6835
Web site: http://www.pitneybowes.com

Public Company
1920 as Pitney-Bowes Postage Meter Company
Employees: 28,700
Sales: $3.86 billion (1996)
Stock Exchanges: New York
SICs: 3579 Office Machines, Not Elsewhere Classified; 3861 Photographic Equipment and Supplies; 3661 Telephone & Telegraph Apparatus; 3669 Communications Equipment Not Elsewhere Classified; 6159 Miscellaneous Business Credit Institutions; 7389 Business Services, Not Elsewhere Classified; 3578 Calculating & Accounting Equipment; 8741 Management Services

Pitney Bowes, Inc. (PB) is the worlds largest manufacturer and supplier of postage meters and mailing equipment. The company originally built its reputation on its postage meter invention and other paper-mail processing products, but has recently been expanding its scope to keep up with the onset of the electronic information age. With respect to product development, PBs main areas of focus now lies in traditional paper mailing systems, facsimile systems, copier systems, and computer software solutions. The company also provides business support services and financial services to customers worldwide. PB remains the worlds leader in the production and leasing of postal meters, which are used by postal services in countries around the world.

The Early Years

Pitney Bowes beginnings can be traced to the year 1902, when Arthur Pitney patented his newly-created postage-stamping machine. He then spent the next 12 years fine-tuning it and attempting to gain acceptance and financial backing for the product from the postal service. Pitneys machine offered a solution for the U.S. Post Office, which was confronted with the impracticality of the adhesive postage stamp in the face of the increasing volume of mail. The postage-stamping machine would stamp the mail at its source, while also keeping track of the amount of postage used. This method helped save labor and also decreased costs for both the postal service and the businesses using the machine. Although achieving impressive results when tested by the post office in Pitneys hometown of Chicago in 1914, ultimate approval of the machine did not come until after World War I.

Meanwhile, in New York, Walter Bowes Universal Stamping Machine Company was doing brisk business with the U.S. Postal Service, providing stamp-cancelling machines on a rental basis. Bowes also had some international success, selling his machines in Germany, England, and Canada. In 1917 Bowes moved his operations to Stamford, Connecticut, a location which evolved into the company headquarters for years to come. Although Bowes machine was profitable, he worried that Pitneys similar invention would render it obsolete. Thus, in April 1920, the two men decided to pool their resources.

The merger of Pitneys American Postage Meter Company and Bowess Universal Stamping Machine Company created the Pitney-Bowes Postage Meter Company. The day after the merger officially took effect, Pitney and Bowes succeeded in pushing legislation through Congress to allow all classes of mail to be posted by meters instead of stamps, and the Pitney-Bowes postage meter was licensed for use throughout the postal system.

By 1922, PB had branch offices in 12 cities and 404 postage meters in operation. In the same year, Bowess previous international experience paid off and PBs postage meter was approved for use in England and Canada. PB experienced early growing pains, however. As the meter gained exposure in the early 1920s, demand for the machines began to outpace the companys ability to manufacture, distribute, and service them. Also, it was felt in many quarters that PB enjoyed a government-created monopoly. Thus, in its first decade of existence, PBs scope of operations was limited by government regulation lobbied for by PRs competitionrestricting PB from reaping the advantages of its technologically superior product.

Expansion Efforts in the Early and Mid-1990s

In 1924, Arthur Pitney retired from the company after a dispute with Bowes and started a company of his own, manufacturing postage-permit machines to compete with PBs meters. Even without Pitney, the company name remained Pitney-Bowes, due to the recognition factor the name had earned throughout those first four years. After the co-founders departure, however, uncertainty reigned at PB, and Walter Wheeler II, Bowes stepson, was promoted from New York branch manager to general manager in Stamford in an attempt to utilize new leadership and find new direction.

PBs share of the market was still uncertain because of the postal services equivocation on postal regulations. Permit mail required counting to assess fees, while metered mail did not; but the postal service, wary of establishing a monopoly for PB, required all mail to be counted. Although PBs future hung by a thread during the early and mid-1920s, by 1927 the company had 2,849 meters in operation and branches in 20 cities. Finally, after a congressional hearing at which Arthur Pitney testified by letter against preferential treatment for the system he invented, a bill to impose uniform regulations on permit and metered mail was killed in the Senate. The postal service was free to exercise its preference for the more efficient, reliable, and safe postage meter. From that point on, first-class mail was posted only by meter or adhesive stamp.

Pitney-Bowes began to grow and diversify, producing machines for stamping, counting, canceling, and metering mail. PBs 1929 profit of $300,000 represented a 100 percent increase over that of the previous year. The company expanded abroad as well, establishing cross-licensing and patent-sharing agreements with similar firms in Great Britain and Germany. Throughout the 1930s, government restrictions on the metered-mail business eroded, and Pitney-Bowess field of operations grew wider. By the end of 1933 there were 9,620 PB postage meters in service.

The Great Depression meant retrenchment at Pitney-Bowes, as it did in most sectors of the economy. PB was fortunate to be in a growth industry and did not face critical financial difficulties, but its profits shrunk considerably during these years. The company was forced to cut wages by ten percent and also suspended stockholder dividends. The union movement received a boost during the Depression, but found little support at PB, which had provided benefits to its employees for years. PB emerged from the Depression earlier and healthier than most firms, partly due to the nature of its product, and partly due to the leadership of Walter Wheeler. He became the company president in 1938.

Pitney-Bowess success in the industry and the further relaxation of postal service restrictions on metered mail stimulated competition in the production of postage meters. Many small firms sought a share of the market, as did some heavy hitters like IBM and NCR. Nonetheless, PB consistently kept ahead of its competition. Its development of the omni-denomination meter in 1940 was a breakthrough in the industry. Not only was PB prospering, with over 27,000 meters in service in 1939, but the U.S. Postal Service had a $2 million dollar budget surplus in fiscal 1939, largely due to the efficiency of the metered-mail system.

Like most other large manufacturers, PB converted its plant to defense production during World War II. PBs wartime priorities, as established by Walter Wheeler, were maximum production of war goods, maintenance of meters in operation to handle American mail, and planning for postwar manufacture of new products. The production of postage meters was completely halted during the war. Instead, PB manufactured re-placement parts for guns, aircraft, and radios, and was a four-time recipient of the army-navy E Award, given for excellence in wartime production.

Post-World War II Diversification

In 1945, anticipating the broadening of its product base, Pitney-Bowes Postage Meter Company shortened its name to Pitney-Bowes, Inc. By the end of 1947, the number of PB postage meters in service had more than doubled to over 60,000 in less than ten years. PB expanded and modernized its plant and office space in Stamford to accommodate projected growth. Two years later, PB introduced a desktop postage meter, which brought small business customers within its reach. Further diversification continued with the acquisition of the Tickometer Company, whose namesake product counted paper items such as labels and tickets. PB simplified the Tickometer machines design and promoted its use for many new purposes. For the most part, though, PB limited its diversification to fields related to those functions performed in mail rooms.

Throughout the 1940s and 1950s, Wheeler worked hard to maintain good labor-management relations and progressive incentive, benefit, and profit-sharing plans. This was reflected in a high rate of productivity at PB, and in the decision of the majority of workers not to seek union representation. The wisdom of this strategy was demonstrated by PBs continual out-performance of its competition during those years.

Company Perspectives:

The number of ways to communicate has increased dramatically, adding digital and electronic options to mail, overnight packages, photocopies and facsimile documents. Pitney Bowes is keeping pace with these innovations. We do this by adding value to every message we touch, measured in terms of reduced cost and increased reliability, security, privacy, convenience, effectiveness and impact.

By 1957, however, due to the virtual disappearance of domestic competition, PB was faced with government antitrust action. The company cooperated fully with investigators. Wheeler even went so far as to prepare a 12-volume history of Pitney-Bowes and submit it to the Department of Justice. Wheeler maintained, as he always had, that it was PBs productivity, efficiency, and personnel relations that made it difficult for other companies to compete, not anti-competitive practices. PB eventually agreed to sign a consent decree that required the company to license its patents to any manufacturer who wished to compete, at no charge.

In 1960, when Walter H. Wheeler retired as president and chief operating officer, PB had 281,100 postage meters in ser-vice and metered mail accounted for 43 percent of U.S. postage. PBs gross income was over $57 million. Furthermore, products other than postage meters accounted for 20 percent of the companys gross income, a result of PBs increasing diversification measures.

Entering the 1960s, diversification became an even more important facet of PBs strategy. Because PB no longer had a monopoly in the postage-meter market, diversification into new product areas was necessary for company growth. In 1967, the company established a copier-product division whose first product was a tabletop office copier. Although PB was a latecomer to a market already dominated by Xerox, its copiers had two advantages: they were reasonably priced, and included excellent service packages. Service had long been a hallmark of PBs operations because the U.S. Post Office never allowed PB to sell its meters, only lease them. PB was responsible for the day-today operations of every meter it leased, so a large service fleet was already in place. This service team made expansion into other markets much more manageable.

The following year, PB acquired Monarch Marking Systems, which soon grew into the largest U.S. supplier of price-marking, merchandise-identification, and inventory-control equipment and supplies. By the end of the decade, PBs sales of postage meters, while still growing, accounted for only just over 50 percent of its total sales. Pitney Bowes dropped the hyphen from its name in 1970.

The 1970s and 1980s

In the early 1970s, PB began to experience financial losses that stemmed from a joint venture with Alpex Computer Corporation to manufacture point-of-sale terminal systems. PB was forced to write off its 64 percent investment in the venture, at a loss of $42 million. More modest losses from this venture continued to mount for several years, due to disputes with the Internal Revenue Service over allowable write-offs and an $11 million lawsuit filed by Alpex.

By the late 1970s, however, PB was back on track. The company established leasing companies in the United States and in the United Kingdom in 1977 to support marketing efforts for its business products. This was a record year for the company, with both postage meters and price-marking systems posting record sales. In 1979 PB made a major acquisition, adding the Dictaphone Corporation and its subsidiaries Data Documents and Grayarc to the company, for a $124 million price tag. The purchase made PB the worldwide leader in sales of voice-processing and dictation equipment, while still enjoying a 90 percent controlling share of the postage-meter market.

In the early 1980s, PB made moves to solidify its standing as the countrys leader in the mail-room and office equipment market. It first filled a gap in its copier line in 1981 by arranging a marketing agreement with the Ricoh Company of Japan to make its tabletop model available in the United States. This increased the number of copier models marketed by PB to eight. PB also received a $111 million contract from the post office to help further automate the handling of mail by developing computers to read envelopes and parcels. PB then entered the facsimile-machine market in 1982, and soon became the leader in new placements of facsimile equipment. The company became one of the top suppliers of fax machines to large and medium-sized businesses in the United States, and began seeking new international markets by the late 1980s.

Keeping in line with company policy to compete mainly in markets in which it was guaranteed a prominent share, in 1987 about 80 percent of the companys sales were in industry segments that PB led. The Data Documents subsidiary, however, deviated from this standard, and was sold in 1988. The company also laid off 1,500 workers and underwent a costly retooling in 1989, and began to push more sophisticated mailing systems, like its Star system, which picked the most efficient carrier method for each package. PB also got a boost from the U. S. Post Office, which began pushing big mailers to use bar-code envelopes.

The 1990s and Beyond

Entering the final decade of the century, PB saw its sales surpass the $3 billion mark for the first time in company history, topping off at $3.2 billion in fiscal 1990. Furthermore, the companys extensive sales force had earned PB a 45 percent share of the market for fax machines in corporate America. Following the course charted by that success, the company continued to penetrate the domestic market for business machines with the introduction of another line of copiers in 1991. This line of machines, the 9000 series, was targeted mainly at large businesses. 1991 also saw the introduction of computerized software programs focusing on automated freight management, address and mail list management, and medical records transcription.

The 1990s ushered in the information age, which included an increase in communications by electronic means, in the form of both facsimile and electronic mail. PB attempted to keep pace with the worlds new communication needs, shifting its operations from a mechanical base to that of computerization and software solutions. In order to ease the transition, the company instituted a program of self-directed work teams on both the production floor and in the management ranks. PB also trained its management and sales teams to become proficient in the use of computers. The changes helped to integrate the ideas and actions of everyone in the company, while also technologically enabling PB to more easily expand its scope in line with technological advances.

Meanwhile, PB worked to maintain its standing as the countrys leading producer of mail room equipment. In fact, its work in that area was honored in 1993, when the company was featured in the National Postal Museum in Washington, D.C., a recognition of numerous PB innovations throughout history. The company also continued to expand worldwide, nailing down deals with three other countries in 1994. PB introduced its popular Paragon mailing system in Germany, while it also began to aid China and Mexico in the modernization and automation of their postal systems.

The following year, PB sold its Dictaphone subsidiary to an affiliate of Stonington Partners, a New York investment group, for $450 million. The company also divested its Monarch Marking Systems subsidiary, selling it for $127 million. More sales and service offices were opened in Europe, and product development efforts utilizing new technology continued. An important introduction in late 1995 was a computerized mail tracking and accounting system called PostPerfect.

Nearing the end of the century, PB was manufacturing and distributing its products worldwide. After building its reputation on the success of the postage meter nearly 80 years earlier, PB had diversified to include traditional paper mailing systems, facsimile systems, copier systems, and computer software solutions, while also providing business support services and financial services to customers. The companys commitment to growththrough expansion, diversification, and research and development effortswas apparent as PB tackled new technological advances and entrances into foreign markets with ease. The companys secure market positions and strong management should provide a solid base for continued expansion and diversification in the years to come.

Principal Subsidiaries

Adrema Leasing Corporation; Adrema Maschinen und Auto-Leasing GmbH (Germany); Adrema Mobilien Leasing GmbH (Germany); Andeen Enterprises, Inc. (Panama); Artec International Corporation; Atlantic Mortgage & Investment Corporation; B. Williams Holding Corp.; Cascade Microfilm Systems, Inc.; Chas. P. Young Health Fitness & Management, Inc.; Colonial Pacific Leasing Corporation; Datarite Systems Ltd. (U.K.); Dodwell Pitney Bowes K.K. (Japan); ECL Finance Company, N.V. (Netherlands); Elmcroft Road Realty Corporation; Financial Structures Limited (Bermuda); FSL Valuation Services, Inc.; Harlow Aircraft Inc.; Informatech; La Agricultora Ecuatoriana S.A. (Ecuador); Norlin Australia Investment Pty. Ltd. (Australia); Norlin Industries Limited (Canada); Norlin Music (U.K.) Ltd. (England); PB Forms, Inc. (Nebraska); PB Funding Corporation (Delaware); PB Global Holdings, Inc.; PB Leasing Corporation; PB Leasing International Corporation; PB CFSC I, Inc. (Virgin Islands); PBL Holdings, Inc.; PB Nikko FSC Ltd. (Bermuda); PB Nihon FSC Ltd. (Bermuda); Pitney Bowes AG (Switzerland); Pitney Bowes Australia Pty. Limited (Australia); Pitney Bowes Austria Ges.m.b.H. (Austria); Pitney Bowes Canada Holding Ltd. (Canada); Pitney Bowes Credit Australia Limited; Pitney Bowes Credit Corporation; Pitney Bowes Data Systems, Ltd. (U.K.); Pitney Bowes de Mexico, S.A. de C.V.; Pitney Bowes Deutschland GmbH (Germany); Pitney Bowes Espana, S.A. (Spain); Pitney Bowes Finance, S.A. (France); Pitney Bowes Finans Norway AS (Norway); Pitney Bowes Finance plc (U.K.); Pitney Bowes Finance Ireland Limited; Pitney Bowes France S.A.; Pitney Bowes Holdings Ltd. (U.K.); Pitney Bowes Holding SNC (France); Pitney Bowes Insurance Agency, Inc. (Connecticut); Pitney Bowes International Holdings, Inc.; Pitney Bowes Italia S.r.l. (Italy); Pitney Bowes (Ireland) Limited (Ireland); Pitney Bowes Leasing Ltd. (Canada); Pitney Bowes Macau Limited (Macau); Pitney Bowes Management Services, Inc.; Pitney Bowes Management Services Canada, Inc. (Canada); Pitney Bowes Management Services Limited (U.K.) Pitney Bowes Oy (Finland); Pitney Bowes Limited (U.K.); Pitney Bowes Properties, Inc.; Pitney Bowes Real Estate Financing Corporation; Pitney Bowes Servicios, S.A. de C.V. (Mexico); Pitney Bowes Shelton Realty, Inc.; Pitney Bowes Svenska Aktiebolag (Sweden); Pitney Bowes World Trade Corporation (FSC) (Virgin Islands); RE Properties Management Corporation; Remington Customer Finance Pty. Limited (Australia); Remington (PNG) Pty. Limited (Papau New Guinea); Remington Pty. (Australia); ROM Holdings Pty. Limited (Australia); ROM Securities Pty. Limited (Australia); Sales and Service Training Center, Inc, (Georgia); TECO/Pitney Bowes Co., Ltd. (Taiwan) (50%); Time-Sensitive Delivery Guide, Inc.; Towers FSC, Ltd. (Bermuda); Universal Postal Frankers Ltd. (U.K.); Walnut Street Corp.; 1136 Corporation; 75 V Corp.

Further Reading

Babyak, Richard J., Low-Cost, High-Tech, Appliance Manufacturer, March 1994, p. 36.

Cahn, William, The Pitney-Bowes Story, New York: Harper and Brothers, 1961.

Day, Charles R., Jr., Faceless But Fantastic, Industry Week, November 15, 1993, p. 7.

Hitchcock, Nancy A., Can Self-Managed Teams Boost Your Bottom Line?: How Pitney Bowes Establishes Self-Directed Work Teams, Modern Materials Handling, February 1993, p. 58.

Paley, Norton, Fancy Footwork, Sales & Marketing Management, July 1994, p. 41.

Taylor, Thayer C., Does This Compute? Sales & Marketing Management, September 1994, p. 115.

Robin Carre

updated by Laura E. Whiteley