Stamps.com 2013 Annual Report Download - page 19

In addition, state and federal laws and regulations are increasingly enacted to protect consumers against identity theft. These laws and
regulations will likely increase the costs of doing business and if we fail to implement appropriate security measures, or to detect and provide
prompt notice of unauthorized access as required by some of these laws and regulations, we could be subject to potential claims for damages and
other remedies, which could adversely affect our business and results of operations.
We are exposed to various risks associated with the credit and capital markets.
Our cash equivalents and investments are comprised of money market, U.S. government obligations, asset-
backed securities and public corporate
debt securities. The current global economic crisis has had an unprecedented negative impact on the global credit and capital markets. We have
unrealized losses on certain securities in our investment portfolio. Further sustained declines in the fair value of these securities could lead to an
increased risk that an other than temporary impairment exists. Uncertainties in the credit and capital markets or credit rating downgrades on any
investments in our portfolio could cause impairment to our investment portfolio, which could negatively affect our financial condition, cash
flow, and reported earnings.
Our results are impacted by the macroeconomic environment, which has experienced a severe global economic downturn during the
past few years.
We believe the performance of our PC Postage business is influenced by macro-economic trends. The United States economy has been
experiencing a financial downturn characterized by high unemployment, limited availability of credit, increased rates of default and bankruptcy
and lower levels of consumer and business spending. A continuation of this economic downturn, or a weak recovery from the downturn, could
negatively affect our business, operating results and financial condition in a number of ways. For example, customers may leave our service,
and efforts to attract new customers may also be adversely impacted. In addition, customers may delay or decrease spending with us or may not
pay us, or may delay paying us.
Risks Related to Our Industry
Postal Reform may negatively affect or cause disruptions to our services and business.
The USPS has reached its Congressionally mandated debt limit and faces an ongoing fiscal liquidity crisis. It has embarked on cost cutting
initiatives and has asked Congress to enact various Postal Reform measures. Among the measures proposed are cutbacks in delivery schedules
(such as Saturday delivery), mail processing capability, and retail post office hours and locations. Any such changes actually approved and
implemented may adversely affect the products and services we are able to offer our customers and could therefore seriously harm our business.
Additionally, absent Congressional action, the fiscal crisis could interrupt basic USPS operations, as well as payments to USPS suppliers such as
Stamps.com, each of which could also seriously harm our business.
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, financial difficulties
within the USPS or other issues. Our business would suffer dramatically if we are unable promptly 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.
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