Posted at 3:41 a.m. PST Monday, Jan. 15, 2001
E-Stamp can take brave step for dot-coms
BY SCOTT HERHOLD
Stocks.comment columnist
Mr. Marcelo Gumucio
Chairman of the Board
E-Stamp Corporation
2051 Stierlin Court
Mountain View, Calif. 94043
Dear Mr. Gumucio:
Your company is due to make its annual financial report next month, with the ordinary hemming and hawing and the fulsome rhetoric about the future. If your executives are good, they'll make losing tens of millions of dollars for the year sound like an exciting step forward.
Mr. Gumucio, I think your board has a chance to make an even more important statement, one that could put E-Stamp (ESTM) on the cutting edge of the Internet, while demonstrating savvy, innovation and boldness. The E-Stamp board should have a serious discussion about closing the company's doors and returning its cash to the stockholders.
That's right. Consider folding up shop and calling it quits. Summon the moving vans, give employees a decent severance, and sell the furniture.
I know, you'll tell me that shareholders don't invest in an online postage company to see it fold and have the money returned. And I'm aware, too, that you could just as easily write me a letter, suggesting the world would benefit quite nicely if I quit this column.
The difference is that you still have money in the bank. At the end of last quarter, you announced that you had about $40 million in the bank. At Friday's closing price of 25 cents a share, the total value of all your stock is about $9.6 million.
Say you spent your reserve down by another $10 million to $12 million. That still leaves enough in the bank to more than triple your market capitalization. Put another way, for each buck a shareholder has in your company, he or she would get nearly $3 back.
Am I unfairly picking on E-Stamp? Well, yes, in a way. A search of the Bloomberg data service tells me that there are 150 Internet stocks that have more cash in the bank than their market capitalization. That list includes many of the forsaken dot-coms: Ashford.com, Autoweb.com, eToys.
The litany of E-Stamp, as we both know, is one of dashed hopes and brawling competition. Your founders were actually the first with the idea of selling postage online -- but first doesn't always mean best. E-Stamp required users to buy a piece of hardware, called a ``vault,'' to hold information about transactions.
In an age of point-and-click, this was an outmoded answer, and E-Stamp was eclipsed by Stamps.com (STMP), a Santa Monica company that offered an all-software answer. But Stamps.com, too, suffered with the market's rejection of dot-coms, falling from a high of $88.25 a share last November to $2.69.
Add to that the presence of established players in the postage meter field -- Pitney-Bowes Inc. and Neopost Industrie -- and you had an uphill battle from the first. You wound up spending more money on lawyers in patent disputes than you'd like.
Last November, your CEO, Robert ``Bo'' Ewald, announced that you were withdrawing from the online postage business to focus on warehouse-management and digital shipping -- helping a company navigate its way around various express-mail services.
This is not a bad idea: Your online postage business, after all, wasn't going anywhere. And Ewald gives a reasonable explanation of his hopes for the future, promising that E-Stamp will shortly reveal a new product in its chosen niche.
When I asked him if he saw a path to profitability, he told me, ``Absolutely. It's our belief that we can create shareholder value in a big market . . . What we're seeking to do is build a sustained business. As we're able to demonstrate that, the stock price will reflect it.''
I could be wrong. I have been before. Bo Ewald is a very decent man. But my gut tells me that it's too late. The supply-chain business is already a very crowded one, with a number of formidable competitors, including big players like I2 Technologies and more targeted players like EXE and Manhattan. And the FedEx's of the world don't particularly need help communicating with customers.
Your low stock price brings an added double whammy: Unless the company engineers a reverse stock split -- always a sign of desperation -- it runs the danger of being delisted from the Nasdaq exchange. And the possibility of raising new money from capital markets has all but vanished.
I know that what I'm suggesting will cost a number of people -- 75 or so -- their jobs. I know that many of them have worked long hours with no stock-option reward. But you've already laid off a third of your workforce. And what's kinder: Prolonging the agony, or giving people a chance to get on with their lives?
Mr. Gumucio, it's time to think about taking the courageous step. It may offer a shining example to other suffering dot-coms. Stop the bleeding. Call it quits. |
