Stamps.com 2009 Annual Report Download - page 18

TABLE OF CONTENTS
Risks Related to Our Industry
USPS regulations or fee assessments may cause disruptions or discontinuance of our business.
We are subject to continued USPS scrutiny and other government regulations. The availability of our services is dependent
upon us continuing to meet USPS performance specifications and regulations. The USPS could change its certification
requirements or specifications for PC Postage or revoke or suspend the approval of one or more of our services at any time. If at
any time we fail to meet USPS requirements, we may be prohibited from offering our services, and our business would be
severely and negatively impacted. In addition, the USPS could suspend or terminate our approval or offer services that 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, such as Pitney Bowes, who enter the online postage market, our revenues and
operating results will suffer.
The USPS could decide that PhotoStamps should no longer be an approved product for such reasons as the belief that
PhotoStamps presents an unacceptable risk to USPS revenues, 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 were to discontinue PhotoStamps, our revenues
and operating results will 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 that 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 (a wholly owned subsidiary of Newell Rubbermaid) are authorized PC Postage providers with commercially
available software. 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
14