Stamps.com 2003 Annual Report Download - page 17

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Table of Contents
Our relationship with subscribers and credit card companies could be harmed if our billing software fails.
We have in the past experienced problems with our billing software, causing us to ineffectively bill our customer base. If our billing software
fails and we fail to effectively bill customers, our cash flow and results of operations will be affected adversely.
Risks Related to Our Industry
US Postal Service regulations and fee assessments may cause disruptions or discontinuance of our business, may increase the cost of
our service and may affect the adoption of PC Postage as a new method of mailing and shipping.
We are subject to continued US Postal Service scrutiny and other government regulations. The continued availability of our services is
dependent upon our service continuing to meet US Postal Service performance specifications and regulations. The US Postal Service could
change its certification requirements or specifications for PC Postage or revoke the approval of our service at any time. If at any time our
service fails to meet US Postal Service requirements, we may be prohibited from offering this service and our business would be severely and
negatively impacted. In addition, the US Postal Service could suspend or terminate our approval or offer services which compete against us,
any of which could stop or negatively impact the commercial adoption of our service. Any changes in requirements or specifications for PC
Postage could adversely affect our pricing, cost of revenues, operating results and margins by increasing the cost of providing our service.
The US Postal Service could also decide that PC Postage should no longer be an approved postage service due to security concerns or other
issues. Our business would suffer dramatically if we are unable to adapt our services to any new requirements or specifications or if the US
Postal Service were to discontinue PC Postage as an approved postage method. Alternatively, the US Postal Service could introduce
competitive programs or amend PC Postage requirements to make certification easier to obtain, which could lead to more competition from
third parties or the US Postal Service itself. If we are unable to compete successfully, particularly against large, traditional providers of postage
products like Pitney Bowes who enter the online postage market, our revenues and operating results will suffer.
In addition, US Postal Service regulations may require that our personnel with access to postal information or resources receive security
clearance prior to doing relevant work. We may experience delays or disruptions if our personnel cannot receive necessary security clearances
in a timely manner, if at all. The regulations may limit our ability to hire qualified personnel. For example, sensitive clearance may only be
provided to US citizens or aliens who are specifically approved to work on US Postal Service projects.
If we are unable to compete successfully, particularly against large, traditional providers of postage products such as Pitney Bowes
who enter the online postage markets, our revenues and operating results will suffer.
The market for PC Postage products and services is new and is competitive. At present, Pitney Bowes has a software-based product
commercially available. If any of our competitors provide the same or similar service as we provide, our operations could be adversely
impacted.
If PC Postage becomes a viable market, we may not be able to establish or maintain a competitive position against current or future competitors
as they enter the market. Many of our competitors have longer operating histories, larger customer bases, greater brand recognition, greater
financial, marketing, service, support, technical, intellectual property and other resources than us. As a result, our competitors may be able to
devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more
resources to Web site and systems development than us. This increased competition may result in reduced operating margins, loss of market
share and a diminished brand. We may from time to time make pricing, service or marketing decisions or acquisitions as a strategic response to
changes in the competitive environment. These actions could result in reduced margins and seriously harm our business.
If the market for PC Postage develops, we could face competitive pressures from new technologies or the expansion of existing technologies
approved for use by the US Postal Service. We may also face competition from a number of
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