Pitney Bowes Slices Off More Software – SyncSort is the Beneficiary
As Pitney Bowes adds to the Syncsort arsenal of software solutions with the recent acquisitions of SQData and Pitney Bowes Software solutions, the company looks to focus on its core business in the mail and shipping space. Just a few weeks after announcing a cash dividend of $0.05 per share, Pitney embarked on a move that would help the company pay down its near-term debt as it comes to maturity.
On August 26th Pitney announced its intention to shed the bulk of its Software Solutions business for nearly $700M in cash to Syncsort. Pitney looks to maintain their hold in their current markets they serve by refocusing on the client experience for companies that mail and ship by taking out process complexities. By shedding its software business Pitney is continuing its initiative to streamline operations and reduce its overall spend. Performance of Pitney’s software business has been lagging, pointing to a reduction in YOY renewals and an overall reduction in new clients. Pitney notes that one of their key strategies for growth is to increase shareholder value. Over the past few years, Pitney has divested many technologies, including its (DMT) Document Messaging Technologies (now BlueCrest) and their European SMB business.
As Pitney looks to reinvigorate its core focus on mail and shipping, we expect the partnership with the USPS to continue and grow. That said, there is a close watch at how the current and ever-changing US trade war with China will impact Pitney’s bottom line due to its growing business handling parcels from China. With the impending sale to Syncsort and the expected trade war impact, Pitney has adjusted its 2019 earnings forecast down from a range of $.90 / $1.05 to $.65 / $.75 respectively with full-year revenues in the 1 to 2 percent range.
Like so many other companies that have expanded their businesses and quickly grown past their core competencies (e.g., Kodak, HP, Xerox), Pitney finds itself in the same trajectory of diversification and a return to its core. Since the 1902 founding of the Pitney Postal Machine Company to today, Pitney has grown into an international symbol of mail and shipping for the many businesses that use its equipment, software, and services. In the 1950s, Pitney coined the phrase “Metered mail makes the mailer’s life easier,” which still resonates today in the company’s mantra of removing complexity in their customers business. In the 70s, Pitney launched a new brand logo which symbolized the technological changing times from paper-based communication to the introduction of electronic communication channels. One could say that this was the catalyst for Pitney to expand its reach and vision beyond mail and into software and data services. Interestingly, Software Magazine named Pitney one of the largest software companies in 2009, which also marked the company’s turning point toward a downward trend in revenue. By 2001, a cool $1Billion had already contributed to acquisition expansion, including a part of Danka Business Systems. While Pitney continued to grow its portfolio from 2004 onward by adding to its mailing and software service, the company also divested and spun off other sections, most notably financial business Capital Services.
Going forward, it appears that Pitney will continue to invest in Financial Services capabilities and continue its commitment to small and medium-sized businesses. With the sell off of its core software, the company will likely form an ongoing relationship with its buyers, but may also cast a wider net for partnerships that solve the business problems of its customers.