Pitney Bowes 2007 Annual Report Download - page 22

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4
Marketing
Our products and services are marketed through an extensive network of direct sales offices in the U.S. and through a number
of our subsidiaries and independent distributors and dealers in many countries throughout the world. We also use direct
marketing, outbound telemarketing and the Internet to reach our existing and potential customers. We sell to a variety of
business, governmental, institutional and other organizations. We have a broad base of customers, and we are not dependent
upon any one customer or type of customer for a significant part of our revenue. We do not have significant backlog or
seasonality relating to our businesses.
Credit Policies
We establish credit approval limits and procedures at regional, divisional, subsidiary and corporate levels based on the credit
quality of the customer and the type of product or service provided. In addition, we utilize an automatic approval program
(AAP) for certain leases within our internal financing operations. The AAP program is designed to facilitate low dollar
transactions by utilizing historical payment patterns and losses realized for customers with common credit characteristics.
The program dictates the criteria under which we will accept a customer without performing a more detailed credit
investigation. The AAP considers criteria such as maximum equipment cost, a customer’ s time in business and payment
experience with us. We base our credit decisions primarily on a customer’ s financial strength.
Competition
We are a leading supplier of products and services in our business segments, particularly postage meters, mailing equipment
and related document messaging services and software, management services, mail services and marketing services. Our
meter base and our continued ability to place and finance meters in key markets is a significant contributor to our current and
future revenue and profitability. However, all of our segments face strong competition from a number of companies. In
particular, we face competition for new placements of mailing equipment from other postage meter and mailing machine
suppliers, and our mailing products, services and software face competition from products and services offered as alternative
means of message communications. In addition, the financing business is highly competitive. Leasing companies,
commercial finance companies, commercial banks and other financial institutions compete, in varying degrees, in the markets
in which our finance operations do business. Our competitors range from very large, diversified financial institutions to
many small, specialized firms. We offer a complete line of products and services as well as a variety of finance and payment
offerings to our customers. We finance the majority of our products through our captive financing business and we are a
major provider of business services to the corporate, financial services, professional services and government markets,
competing against national, regional and local firms specializing in facilities and document management throughout the
world.
We believe that our long experience and reputation for product quality, and our sales and support service organizations are
important factors in influencing customer choices with respect to our products and services.
Research, Development and Intellectual Property
Our significant investment in research and development operations differentiates us from our competitors. We have many
research and development programs that are directed toward developing new products and service offerings. As a result of
our research and development efforts, we have been awarded a number of patents with respect to several of our existing and
planned products. We do not believe our businesses are materially dependent on any one patent or any group of related
patents or on any one license or any group of related licenses. Our expenditures on research and development were $186
million, $165 million and $166 million in 2007, 2006 and 2005, respectively.
Material Supplies
We depend on third party suppliers for a variety of services, components, supplies and a portion of our product
manufacturing. We believe we have adequate sources for our purchases of materials, components, services and supplies for
products that we manufacture or assemble. However, as we continue to shift from direct manufacturing to assembly of our
products, we rely to an increasing extent on third-party suppliers.
Regulatory Matters
We are subject to the U.S. Postal Service’ s (USPS) regulations and those of foreign postal authorities, related to product
specifications and business practices involving our postage meters. From time to time, we will work with these governing
bodies to help in the enhancement and growth of mail and the mail channel. See Legal and Regulatory Matters in
Management’ s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K.