Stamps.com 2013 Annual Report Download - page 20

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.
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.
The USPS could modify or terminate agreements and other financial compensation arrangements.
The USPS could decide to amend, renegotiate or terminate agreements or financial compensation arrangements that exist now or in the future.
For instance, if the USPS decides to amend, renegotiate or terminate our credit card cost sharing agreement, which is an agreement that governs
the allocation of credit card fees paid by the USPS and us, our revenues and operating results could suffer. In addition, if the USPS decides to
amend or renegotiate our arrangement under which we are compensated directly by the USPS for customers or integration partners who print a
certain amount of Priority or Priority Mail Express postage, our revenue and operating results may be negatively impacted. If the USPS decides
to terminate our agreement under which we are compensated directly by the USPS for customers or integration partners who print a certain
amount of Priority or Priority Mail Express postage, our revenue and operating results will suffer.
The USPS could modify or terminate discounts our customers receive.
The USPS could decide to amend or terminate the discounts our customers and integration partners receive. Customers using our services
receive discounted postage rates compared to USPS retail rates on certain mail pieces such as First Class letters, domestic and international
Priority Mail and Priority Mail Express packages, and other discounts available to high-volume shipping customers. If the USPS decides to
withdraw certain discounts or even remove the discounts entirely, our revenue and operating results will suffer. If the Postal Regulatory
Commission decides the discounts are unlawful and requires the USPS to cancel or change them, then our revenue and operating results will
suffer.
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 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.
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