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E-Stamp Refuses To Be Licked

The alternatives facing the growing list of Internet have-nots are somewhat limited: 1) Die a slow death; 2) Get acquired at a bargain price; 3) Retool your business model in hopes of reversing your declining fortunes.

Online postage services provider E-Stamp is opting for No. 3. Having recorded a paltry $1.3 million in sales last year against losses of $55.4 million and being surpassed in total customers by rival provider Stamps.com , E-Stamp is expanding its offerings beyond postage software and services for consumers.

E-Stamp plans to begin selling software that enables businesses to track package deliveries and manage warehouse orders. To accomplish this, E-Stamp whose market capitalization has dwindled to $112.5 million from more than $1.5 billion last November announced on Thursday it was buying two private companies for a total of $7.5 million.

The two companies, Infinity Logistics and Automated Logistics, have the same CEO but different business models. Infinity develops and sells the package-tracking and warehouse management software, while Automated offers shipping and supply-chain management software and services. More important for E-Stamp, Automated also boasts a list of business customers that includes Oracle, Novell, Mazda, Intel, and Hitachi.

Those are only the latest moves by ESTM to diversify its revenue stream. Last week the company cut a deal with a subsidiary of Swissair that would allow travelers to make plane reservations online and print out valid airline tickets from their home or office computers. The company also is exploring use of its Internet ticketing technology for the entertainment and events industries.

I think these are smart ways for E-Stamp to better leverage its proprietary technology. But is it too little, too late? The market may think so, for shares of ESTM were down 8 percent to 2 7/8 early Thursday afternoon, even as the Nasdaq was up more than 2 percent. (Officially, ESTM is down 94 percent from its all-time high of 44 7/8 set last Nov. 22.)

You can't blame investors for being skeptical, for E-Stamp has dug itself a sizeable hole. Despite a healthy increase in revenues for Q1 ($1.5 million, or more than in all of 1999), E-Stamp fell further into the red, with first-quarter net loss reaching $29.7 million, or 82 cents per share. Add that onto the $75.8 million in accumulated losses through last year, and ESTM's prospects for a comeback appear slim. While the company deserves credit for fighting the good fight, ESTM is shaping up to be a bargain buyout candidate.



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