Stamps.com 2006 Annual Report Download - page 17

If we are unable to compete successfully, particularly against large, traditional providers of postage products such as Pitney Bowes, our
revenues and operating results will suffer.
The PC Postage segment of the market for postage is relatively new and is competitive. At present, Pitney Bowes and Endicia.com are
authorized PC Postage providers with commercially available software and Zazzle.com and FujiFilm offer a competitive product to
PhotoStamps using Pitney Bowes technology. If any more providers become authorized, or if Pitney Bowes or Endicia.com provide enhanced
offerings, our operations could be adversely impacted. We also compete with other forms of postage, including traditional postage meters
provided by companies such as Pitney Bowes, postage stamps and permit mail.
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.
We could face competitive pressures from new technologies or the expansion of existing technologies approved for use by the U.S. Postal
Service. We may also face competition from a number of indirect competitors that specialize in electronic commerce and other companies with
substantial customer bases in the computer and other technical fields. Additionally, companies that control access to transactions through a
network or Web browsers could also promote our competitors or charge us a substantial fee for inclusion. In addition, changes in postal
regulations could adversely affect our service and significantly impact our competitive position. We may be unable to compete successfully
against current and future competitors, and the competitive pressures we face could seriously harm our business.
If we do not respond effectively to technological change, our services and products could become obsolete and our business will suffer.
The development of our services, products and other technology entails significant technical and business risks. To remain competitive, we
must continue to enhance and improve the responsiveness, functionality and features of our online operations. The Internet and the electronic
commerce industry are characterized by rapid technological change; changes in user and customer requirements and preferences; frequent new
product and service introductions embodying new technologies; and the emergence of new industry standards and practices.
The evolving nature of the Internet or the postage markets could render our existing technology and systems obsolete. Our success will
depend, in part, on our ability to license or acquire leading technologies useful in our business; enhance our existing services; develop new
services or features and technology that address the increasingly sophisticated and varied needs of our current and prospective users; and
respond to technological advances and emerging industry and regulatory standards and practices in a cost-effective and timely manner.
Future advances in technology may not be beneficial to, or compatible with, our business. Furthermore, we may not be successful in using
new technologies effectively or adapting our technology and systems to user requirements or emerging industry standards on a timely basis.
Our ability to remain technologically competitive may require substantial expenditures and lead time. If we are unable to adapt in a timely
manner to changing market conditions or user requirements, our business, financial condition and results of operations could be seriously
harmed.
Our operating results could be impaired if we or the Internet become subject to additional government regulation and legal uncertainties.
Due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to
the Internet, relating to user privacy, pricing, content, copyrights, distribution, characteristics and quality of products and services, and export
controls.
The adoption of any additional laws or regulations may hinder the expansion of the Internet. A decline in the growth of the Internet could
decrease demand for our products and services and increase our cost of doing business.
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