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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