Stamps.com 2007 Annual Report Download - page 16

compete against us, any of which could stop or negatively impact the commercial adoption of our services. 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 services.
The USPS 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 USPS were to discontinue PC Postage as an approved postage method. Alternatively, the USPS 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 USPS 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.
The USPS could decide to suspend or cancel the current market test of PhotoStamps, and may do so in the event that there is
sufficient cause to believe that the market test presents unacceptable risk to USPS revenues, degrades the ability of the USPS to
process or deliver mail produced by the test participants,
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exposes the USPS or its customers to legal liability, or causes public or political embarrassment or harm to the USPS in any way.
If the USPS decides to suspend or cancel the market test of PhotoStamps, our revenues and operating results will likely suffer.
Additionally, the USPS could decide to amend, renegotiate or terminate our credit card cost sharing agreement, which is a
key agreement that governs the allocation of credit card fees paid by the USPS and us for the postage purchased by our
customers. If the USPS decides to amend, renegotiate or terminate our credit card cost sharing agreement, our revenues and
operating results will likely suffer.
In addition, USPS 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 USPS projects.
Finally, any approved USPS market test or new service which benefits us could also ultimately be suspended or cancelled by
the USPS, causing disruptions to our business.
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. 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 USPS. 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