Stamps.com 2001 Annual Report Download - page 29

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the "Selected
Financial Data" and our financial statements and the related notes thereto. This discussion contains forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results including those set forth in
"Risk Factors" beginning on page 9 of this report.
Overview
Stamps.com(TM) provides easy, convenient and cost-effective Internet-based services for mailing letters, or shipping packages or parcels
anywhere in the United States and at anytime. Our core mailing and shipping service is designed to allow individual consumers, home offices or
small businesses to print US postage or shipping labels using any ordinary PC, any ordinary inkjet or laser printer, and an internet connection.
Our enterprise shipping service, which we divested in May of 2001, allowed customers to print shipping labels, schedule a pick-up, track a
package and apply enterprise-wide business rules to manage and account for mailing and shipping costs.
During 2001, we have continued to implement the business strategy that we began in October 2000 to decrease our operating losses and
enhance our ability to achieve profitability. This strategy involved an initial restructuring in October 2000 to focus on our core business of
Internet postage and shipping that reduced our total number of employees by approximately 40% to approximately 315 employees, which
included full time, part time and contract employees. We also implemented other cost-cutting programs, including a significant reduction and
redeployment of our sales and marketing expenses to those programs that demonstrated the best return on investment. In October 2000, we also
combined our Enterprise and E-Commerce Business Units to reduce duplication of costs and effort. Additionally, we exited some of our
longer-term fixed-price marketing deals in favor of variable cost marketing deals, and we restructured our customer support operations. We
took a one-time charge in the fourth quarter of 2000 of $11.5 million that consisted primarily of employee severance, reserves established for
exiting contractual arrangements and fixed asset write-offs.
In February 2001, we continued with our strategy to decrease our operating losses and enhance our ability to achieve profitability. We reduced
the total number of employees by approximately 50% to 150 employees, including full time, part time and contract employees and we
continued cost cutting efforts, including the termination of fixed-cost marketing deals and the redeployment of sales and marketing expenditures
to programs that had a higher return on investment. We took a one-time charge of $11.0 million in the first quarter of 2001 consisting of $7.7
million related to restructuring, employee severance and fixed asset write-offs, $2.3 million related to exiting contractual arrangements and $1.0
million related to the write-off of an investment in EncrypTix, a venture which had intended to develop our technology for on-line ticketing.
In May 2001, we sold the iShip multi-carrier shipping service assets to United Parcel Service for $2.8 million. In addition, in May 2001, we
terminated our marketing relationship with a direct selling organization called Cydcor Limited as a result of low return on investment from that
marketing channel.
In August 2001, we continued to execute our business strategy to decrease our operating losses and enhance our ability to achieve profitability
by reducing our headcount by approximately 25% to under 70 employees, contractors and temporary employees. Due to this reduction, we took
an additional charge in the quarter ended September 30, 2001, of approximately $200,000 consisting of employee severance.
On November 16, 1999, we announced the formation of a subsidiary, EncrypTix, Inc., to develop secure printing opportunities in the events,
travel and financial services industries. In February 2000, we invested $1.0 million and granted EncrypTix a license to our technology.
EncrypTix raised approximately $35.0 million in private financing. On March 12, 2001, EncrypTix ceased operations and effected a general
assignment of its
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2002. EDGAR Online, Inc.