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Nov. 16, 2012, 8:01 a.m. EST
Stamps.com beats up the U.S. Postal

By Barry Randall
When Stamps.com /quotes/zigman/92950/quotes/nls/stmp STMP +3.68% announced earnings on Oct. 25, the company didn't just deliver a great performance. It delivered a rebuke to a lot of people who think the company is a left-over dot-com dinosaur. Some of these detractors are short-sellers who have sold short nearly 6% of Stamps.com's outstanding shares. But like another of our holdings in the Crabtree Technology portfolio on Covestor, Shutterfly /quotes/zigman/101900/quotes/nls/sfly SFLY -0.21% , Stamps.com has used this misperception to its advantage. It has carved out a dominant niche in a huge and profitable segment: electronic postage. The bulk (93%) of Stamps.com's business is its core Internet-based PC Postage offering. This enables businesses both large and small to print U.S. Postal Service-approved postage with just a PC, printer and Internet connection. Although similar services are offered by both the USPS itself, as well as competitors like Pitney Bowes /quotes/zigman/238474/quotes/nls/pbi PBI -0.29% , Stamps.com customers seem willing to pay about $21 per month for a better user experience. This might include, for example, its unique ability to natively integrate with Microsoft Word in order to use that program's automated mail merge and envelope printing functionality. We'll discuss Stamps.com's specific quarterly performance in a moment, but right now, let's place the company in some context. First, compare Stamps.com's third-quarter year-over-year quarterly revenue growth of 16% with that of its archrival, Pitney Bowes, which reported its own third quarter on Nov. 1. Pitney's revenue of $1.22 billion represented a decline of 6% from its year-earlier quarter. Looking "under the covers" at Pitney doesn't increase one's confidence, either: Equipment sales (mostly its traditional postage meters) declined 4% year-over-year and its more modern software offerings...
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