E-Stamp To Abandon Online Postage

SAN FRANCISCO (AP) â€” E-Stamp Corp. said Monday it is getting out of the online postage business, abandoning a ballyhooed concept that it pioneered. <br><br>The Mountain View-based company will lay off

Tuesday, November 28th 2000, 12:00 am

By: News On 6

SAN FRANCISCO (AP) â€” E-Stamp Corp. said Monday it is getting out of the online postage business, abandoning a ballyhooed concept that it pioneered.

The Mountain View-based company will lay off 36 employees â€” about 30 percent of its work force â€” as part of a reorganization that will focus its efforts on helping other businesses order supplies over the Internet.

The work force reductions come on the heels of a 25 percent cutback in July.

E-Stamp's withdrawal notice is the latest sign that online postage isn't delivering on the promise many investors saw in the concept a little more than a year ago.

Just last month, Santa Monica-based Stamps.com laid off 240 workers in an effort to reverse the steady losses in its business.

Meta Group analyst Gene Alvarez said online postage companies are struggling because they didn't make significant inroads among small businesses that rely upon postage-meter machines to send out their mail.

Many of those machines are made by Pitney-Bowes, which is suing E-Stamp for infringing on its patent.

``What we are learning is that you can't be a pure-play online stamp company to survive in this business,'' he said. ``You need to partner with a brick-and-mortar company to survive.''

In an interview Monday, E-Stamp CEO Robert Ewald said ``our biggest competition was the status quo. The idea of buying postage online isn't at the forefront of anyone's mind.''

Consequently, E-Stamp had to spend far more money trying to drum up business than management anticipated, Ewald said. The company spent $47 million on sales and marketing to generate $5 million in revenue during the first nine months of the year.

E-Stamp became the first company to sell stamps over the Internet in August 1999 after winning the approval of the U.S. Postal Service.

The notion of enabling consumers and businesses to avoid long lines at the post office intrigued investors at first.

After E-Stamp raised $125 million in its October 1999 initial public offering of $17 per share, the stock soared as high as $40.38 earlier this year. When investors began putting greater emphasis on profits seven months ago, E-Stamp's honeymoon with investors was over.

Since its inception, E-Stamp has lost $157 million, including $81.5 million during the first nine months of this year.

The stock has plunged so far that E-Stamp received a Nov. 9 notice from the Nasdaq Stock Market warning that the company will be delisted in February unless its shares trade at $1 or more for 10 consecutive days.

E-Stamp's shares gained 13 cents to close at 41 cents on Monday.

E-Stamp stopped shipping its online postage kit Nov. 24. Since its inception, E-Stamp sold 127,000 of its $50 postage kits.

E-Stamp's customers are being encouraged to use Neopost, a worldwide leader in mailroom equipment, for their online postage. E-Stamp said it will accept customer returns of online postage until March 1.

E-Stamp officials emphasized that the company still has adequate funds to pursue its new emphasis on so-called ``supply chain'' management. As of Sept. 30, the company had about $40 million in cash.

The company acquired Infinity Logistics and Automated Logistics Corp. for $9.8 million to launch its entrance into the supply chain management business. Ewald said E-Stamp will consider changing its name in the months ahead.

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On The Net:

http://www.e-stamp.com

http://www.neopost.com