必能寶 (PBI) 2007 Q1 法說會逐字稿

Good morning. I want to thank all of you, including those listening in on our web cast today, for joining the executive management team of Pitney Bowes for what we believe will be an informative and interesting discussion concerning our first quarter results, our ongoing business strategies and our opportunities in a changing postal environment.

First, for the benefit of those who are listening in on the Web, let me introduce our speakers today. To my left, your right, is Mike Critelli, who as we announced will on May 14th become Executive Chairman of Pitney Bowes. To my right is Murray Martin, who on May 14th will become President and CEO; and next to Murray is Bruce Nolop, who is our Executive Vice President and CFO.

Before we get started, there are a few administrative topics I would like to go over. First, I hope you all have had a chance to pick up the investor kit which has some examples of different types of mail that will be affected by the recently approved postal rate case and demonstrates how we can help mailers save money. The kit also includes a copy of our annual report and a small memento of this day.

Next, in consideration of your fellow participants, I would ask that you place your cell phones and BlackBerries on vibrate if you haven't done so already. Also, for those listening on our web cast, you can find the slides that we'll be using on today's presentation in (technical difficulty) the restaurants are located just outside this store down the hallway to the right; you take a left and then the rest rooms are right on your right. The fire exits are clearly marked right outside the doors you came in. Also outside the room, there are beverages and a continental breakfast which will remain throughout the morning, so please help yourselves.

If you will turn now to the agenda page, you will see we have a pretty tight schedule which Mike will go over in a second. But before that, I would like remind you that we also have individuals participating in this morning's discussions via our web cast. So when it comes difficult to the question and answer session, please wait for a microphone before you ask your question so everyone can hear you. If during the morning you need anything, please let Steve (inaudible) or myself know and we will do we can to help you out.

Now for the legal and accounting disclosures. Our discussions today will include both historical and expected financial results that are reported on an operating basis. By that, I mean they will exclude the impacts of restructuring expenses, acquisition purchase accounting MapInfo and other specialized we may have incurred in prior periods or may incur in the future. Our guidance also excludes the potential impacts of foreign currency translation and potential acquisitions other than those we have already announced.

I draw your attention to the slides on the screen and the disclosures at the end of the earnings press release in your books. These disclosures explain our use of forward-looking statements and while we may use certain non-GAAP measures when describing our financial results. These disclosures also posted on our web site and as a reconciliation between GAAP and non-GAAP measures as part of our earnings release, which is also on our web site.

At this point, I would like to introduce Mike Critelli, who will start the morning with a brief overview of the quarter's results. Mike?

Thanks, Charlie, and good morning. Thanks very much for joining us for the announcement of our first quarter earnings and an update on our strategies and emerging opportunities. The schedule this morning is that first I will briefly put our quarterly earnings into context, Bruce will review our first quarter results and discuss our outlook for the balance of the year, Murray Martin will discuss our strategies that support that outlook and then I will discuss the opportunities emerging from the postal environment worldwide with a special focus on the recently passed U.S. postal reform legislation and postal transformation initiatives. There will be two times available for q-and-a, after Murray's presentation and again after my postal presentation. Let me turn to our quarterly performance.

During our year-end discussion in early February, we indicated we would have difficult comparisons with our strong first-quarter 2006 performance. As the quarter turned out, these factors did come into play, but we also experienced revenue slippage because of additional factors. However, our outlook for the year remains unchanged and we remain comfortable with the earnings-per-share guidance because our underlying trends are strong and the recently published postal rate case in the United States is stimulating and should continue to stimulate revenue growth.

Our underlying business is strong. We've spent the last six years positioning our company for intense growth and shareholder returns by developing a portfolio of diversified revenue drivers throughout the mail stream. Obviously our portfolio features operations with varying growth rates and margins and as we have previously discussed, there may be times when certain components are stronger than others although on a consolidated basis they deliver value in line with guidance. This quarter for example, we saw stronger performance from parts of the portfolio such as supplies and payment solutions, but we did feel the impact of delayed decision-making and software [in] those parts of our U.S. mailing and international mailing and international production mail businesses that require more extensive customer process re-engineering. The recently approved postal rate case in the U.S. is currently stimulating revenue growth and should help support that growth throughout the balance of the year. Because the rates proposed by the Postal Service modified significantly by the Postal Regulatory Commission introduced new and more complex cost-based rates, mailers experiencing huge rate increases filed protests. This delayed the Board of Governors' final decision on all rates until March 19th, far later than we had planned. The good news is that the rate case, as finally approved, is more favorable than we anticipated and will allow us to recover over time the revenue we did not get in the first quarter. We believe that as the year progresses, customers will continue to turn to us for technologies, services and solutions which help them mitigate the rate increases and improve the effectiveness of their mail stream processes. This gives us confidence in the strength of our performance in the second quarter and the balance of the year. It also helps underscore the importance of my new role as Executive Chairman to continue to help to influence postal environments and policies worldwide to benefit customers and shareholders.

Later I will talk about how the changing postal landscape will translate into growth opportunities for us. As I turn it over to Bruce for a review of the quarter's performance and our outlook, let me reiterate that we are comfortable with that outlook and committed to our strategies for enhancing shareholder returns. Thank you.

Our revenue for the quarter was $1.4 billion and that was a 4% increase from a year earlier. Foreign currency translation contributed about 2% and we also had a similar amount that came from acquisitions.

Overall, the revenue growth was about to 2% to 4% less than we anticipated when we gave our guidance in the quarter, and there are three reasons. First overall, as Mike noted, we experienced softness in our U.S. mailing segment. And, again, as Mike said, we believe that this was caused by uncertainties related to the postal rate case in the U.S. and already since that time and continuing through here in April we're seeing a strong pickup in orders and therefore we believe that we had a transfer of revenue from the first quarter to the second quarter in our U.S. mailing segment.

Secondly, we had weaker results in Europe and this was in both our international mailing and our production mail segments. And third, we experienced some delays in software orders at year end.

As Mike also noted, this is in addition to a couple of factors that we're going to create difficult year-over-year comparisons in any event. First, last year's first quarter had a postal rate increase and that contributed last year about $12 million to revenue. And secondly, in the first quarter we had some large off-site printing orders in our management services business that had about a $10 million revenue impact for us.

The bright spots in revenue growth for the quarter that all came in organic growth double-digit and greater -- supplies, payment solutions, production mail in the U.S. and mail services. Overall, we believe that the lower rate of growth in the first quarter was an anomaly and we -- I believe that we will be back in the 4% to 6% organic growth rate for the remainder of the year.

Earnings per share for the quarter was $0.66. It was at the low end of our guidance of $0.66 to $0.68 and this reflected the lower revenue growth than anticipated but was offset by actions that we took during the quarter to enhance productivity and to reduce costs. Of note, our EBIT margin improved during the quarter. It went from 20.0% last year to this year at 20.3%. So this was a bright spot, and in particular it reflected an improvement in our ratio of SG&A expense to revenue. And this has been a focus of us during the past few quarters and will continue to be a strong focus. We think that we have improvement that we can generate in our SG&A ratio.

Our earnings-per-share was also helped by the decline in shares outstanding. We continued to buy in more shares than any dilution related to stock-based compensation. The shares outstanding this quarter are about 2.5 percentage points below what they were in last year's first quarter.

Cash flow, our cash flow from operations for the quarter was $221 million and our free cash flow was $155 million and this outs us right on track to realize our forecast of $550 million to $625 million of free cash flow for the year. We spent $68 million on capital expenditures in the first quarter and that was $23 million below the depreciation and amortization for the quarter. We used $73 million of our cash to pay dividends to shareholders and we also bought in $90 million of stock during the quarter. We bought in 1.9 million of shares and we paid an average price of $47.26. And then after taking into account various other cash sources and uses, the net effect was we decreased our debt by $22 million during the quarter which leaves the total at about $4.3 billion. As of March 31, about 77% of our debt was fixed rate and 23% was floating rate, so we were at a higher percentage of fixed rate than is our target which is typically 50-50. And as a result, in April we financed the $408 million MapInfo acquisition with floating-rate debt. And so on a pro forma basis, our ratio of fixed-rate debt is now 71% after taking into account the expenditure after the quarter end. We have no long-term debt coming due this year and therefore we have considerable flexibility to respond to potential changes in financing conditions.

Let's turn now to our outlook. Is should note that in terms of our guidance going forward, we're going to widen our range slightly in terms -- especially in terms of our earnings per share and this reflects mostly the changing business mix that as we move into businesses like software, it creates more variability on a quarter-to-quarter. We continue to have every good visibility on a year-over-year basis, but for quarter-over-quarter, we may have some variability. And secondly, as we saw this quarter, while postal reform in the U.S. is very decisively and very strongly positive for Pitney Bowes, it may create some timing questions as new rules are proposed and implemented.

As we look to the second quarter we are forecasting revenue growth in a range of 8% to 11% and for the full-year expect it in a range of 7% to 10%. And again, just to remind everyone, we do not include any potential acquisitions in the forecast so anything we do in terms of acquisitions from here on out would be in addition to those forecasts. We are maintaining our guidance for earnings on an adjusted basis at $2.90 to $2.98 for the year. However, we are changing our GAAP earnings forecast by $0.05 to $2.85 to $2.93, and this reflects solely the change in accounting we are making at MapInfo in connection with the acquisition. It's a $0.05 adjustment rather than our previously estimated $0.04 simply because the acquisition was consummated earlier than we originally had anticipated.

In terms of what the percentage increase is implied by our guidance, for adjusted earnings per share, it's 8% to 11% increase from the prior year and on a GAAP basis our projected growth in earnings per share is 14% to 17%. For the second quarter, we are forecasting adjusted earnings per share of $0.68 to $0.72 which compares with $0.64 last year. On a GAAP basis were projected earnings per share of $0.66 to $0.70 which compares to GAAP of $0.54 last year. Again, the only difference between the GAAP and the adjusted earnings is the change in accounting for MapInfo.

The final item I just want to note to you is that we need took a charge to equity this year in connection with the new accounting rules for tax reserves. This change in accounting, which is called FIN 48, is a onetime adjustment that reflects different standards that are applied to when you can recognize tax benefits. In our case, the adjustment is $84 million and the majority of which relates to capital services assets that we sold to [Cerberus] last year. I want to emphasize that this adjustment to our tax reserves does not affect earnings, does not affect cash flow and does not reflect any change to our judgments concerning potential tax benefits or liabilities. It's simply new accounting standards applied to the same judgments.

So that's the conclusion of my remarks on the first quarter, and with that I will turn it over to Murray to talk about our strategies and outlook.

Thank you, Bruce and good morning. Thank you for joining me this morning for an update on our Company's progress and on the strategies we have underway to deliver long-term growth and increased shareholder value.

As you know, this is the first time I have addressed this group in my new role as CEO designate effective May 14. Let me just say how pleased and honored I am to have the opportunity to lead Pitney Bowes forward. Over the past 11 years and particularly during the last three, Mike and I have worked together to chart a course for Pitney Bowes future of course that capitalizes on the significant potential inherent in our business and is focused on driving greater value for our shareholders, for our customers and for our employees. While our roles have changed, each of us will be directing our attention differently but our mission will remain the same -- to capitalize on the many growth opportunities that we see and to position Pitney Bowes for long-term success. There is no doubt that Mike leaves behind a strong legacy with his focused, energetic and passionate leadership as CEO of this company. There is also no doubt that Pitney Bowes is today stronger, more competitive and a more resilient enterprise. I look forward to following Mike as CEO and to continue to work together with him to make Pitney Bowes a greater company and take it to new heights. We are excited about our prospects and we believe that we are on the right path in order to further leverage Pitney Bowes' unique competitive strengths and its unique market position.

I want to emphasize two things with you this morning. First, we will continue to pursue the same strategies; and second, we are well positioned for immediate and long-term growth. Let's start with our strategies,

First, some background. At the end of 2000, we knew that in order to enhance shareholder value, we needed a more disciplined and focused approach to growth. Our assumption was that sustainable long-term growth would have to be driven by growth in areas related to or adjacent to our core business where we could ultimately leverage our knowledge of the mail stream; our postal relationships, our technologies, our infrastructure and our talents. We wanted to innovate in our current markets, diversify into new spaces and provide customers with a richer array of products, services and solutions. As COO for the past three years, I have been responsible for leading the implementation of these strategies. I believe strongly that our strategies are working and I am committed to them going forward. As a result of these strategies, we are a larger, more global company with a diversified mix of revenue drivers in higher-growth markets. 27% of our total revenue came from outside the U.S. in 2006 and you can compare that with 17% outside the U.S. in 2000.

At this time, over a quarter of our total revenue now comes from businesses acquired since 2001. The growth rate of these businesses is roughly double the growth rate of the businesses we were in when we began our growth strategies. We think that new businesses could constitute over 50% of our revenue by the end of this decade.

To do this, we have six priorities for accelerating growth and sustaining shareholder value going forward. First is growing our cash flow; second, increasing the value we deliver to our customers; third is improving our operational efficiency; fourth, solidify the performance of our core mailing business; fifth, continue our international expansion; and finally, focus on high-growth areas within the mail stream. We will continue our focus on generating strong cash flows and using it to deliver returns to our shareholders through a balanced allocation among dividends, share repurchase and investments in acquisitions.

We are targeting to expand our free cash flow to at least $800 million by the end of this decade from the $523 million we achieved in 2006. This amounts to a compound growth rate of 11%; in other words, a faster growth rate than what we have discussed on net income over the same period.

I also believe that our shareholders' immediate and long-term interests are best served if we focus on providing value to our customers. We have developed the world's most extensive portfolio of solutions to help customers grow their revenues, optimize their processes and control their costs. We plan to build on these capabilities within and across all of our business segments. Many of our largely untapped opportunities lie in helping customers understand how more of our products and more of our services can address even more of their needs. This is particularly true of some of our higher growth areas such as mail services, marketing services and software where customers may not fully understand how we can apply these capabilities to their business challenges. We grew our cross-selling over 200% in 2006 -- that is the sales between our business units -- and we expect that to double again this year. We will ensure that our organizational structure and their incentives are aligned around delivering with the customer needs. We will maintain an unwavering focus on partnering with our customers to make them more successful.

Throughout our transformation into a larger, faster-growing company, we have also become leaner and more operationally efficient. We will drive customer and shareholder value as we focus on continuous process improvement, innovation and efficiency in our own operations. This focus will manifest itself in a number of ways. First, we will make sure that our internal mail streams are as efficient as possible. We are using our growing array of technologies and tools to reduce costs and make us more effective in areas such as direct mail, shipping, customer billing and employee self-service. Second, we will reduce our SG&A expense to 28% of revenue over time. We were pleased with our year-over-year reduction in SG&A ratios during the first quarter which saw our revenue grow at more than twice the rate of SG&A. This is what we had talked to you about the last time we met, that our revenues must grow at double the rate of our SG&A. We are exercising more organizational discipline by operating in a manner that maximizes return and maximizes efficiency. We know that we have to make strategic investments in order to grow. The emphasis here is on evaluating investments in terms of the payoff in enhanced growth and seeking to fund additional growth through this process through process improvements and through employee productivity.

Third, we will continue to focus on being a faster, more nimble organization. Markets, customers, technologies and business environments are constantly changing. We will radically define -- redefine the speed at which we act. We will accelerate product development, we will be more flexible in our partnership arrangements and we will look to eliminate any structural impediments to effective decision-making within Pitney Bowes.

Fourth, we will continue to evaluate our organization to ensure that it is aligned to facilitate growth, to increase operational efficiency and to deliver customer value. As a result, I recently changed our organizational alignment to take advantage of the synergies between our lines of business. In this new configuration, all aspects of our Americas mailing business, including mailing and shipping equipment, small business solutions and mail services, have been brought together into a single organization. At the same time, I have added our Marketing Services operation to the same business unit as our Software group. Marketing Services is a natural entry point to the customer processes within the mail stream that are focused on helping businesses better manage communication with their customers. I believe that these changes will result in a more integrated approach to serving our customers and will provide a good avenue for expanding our products and service set throughout the customer base.

Our core Mailing business remains an important component in our growth equation even as we have systematically changed our business mix to take advantage of the opportunities within the changing mail stream. During the last investor update last fall, I provided you with an in-depth look at our U.S. Mailing business which has the profitability, the cash flow and the base of customers that provide a solid foundation for continued growth. The overall strength and the consistency of the core mailing business gives us the flexibility to enhance our business franchise while investing in growth.

It also has competency that when combined with our new capabilities provide customers with greater value and provide us with greater operational leverage. We expect to see a continued shift to stream revenues which will produce and provide us with even a stronger foundation into the future. We will focus on continuous improvement, on innovation and operating efficiencies as we explore new ways to leverage the bedrock of our mail stream strategies.

Our challenge in this core Mailing business is to maintain growth despite the systematic downsizing of equipment that is being used by our customers. We will meet this challenge by capitalizing upon the opportunities provided by U.S. postal reform, by innovating with new products and value-added features, using our national service capabilities to develop third-party service opportunities, expand our profitable financial services offerings and grow our supplies business in both Pitney Bowes and third-party products.

We also should be able to expand the free cash flow that is generated by this business due to lower capital expenditure requirements in the future. We have already converted the vast majority of our fleet of rental assets and mailing equipment to the new digital configuration and thus should be able to generate significant cash savings as we continue to deploy these assets into the indefinite future. We will continue to invest and grow in markets outside the U.S. in a number of ways. We will introduce more of our products into more markets as the regulatory environment and the market readiness permits. We will have country-specific migrations to digital products and this will continue to drive demand for equipment, for financing and for supplies. We will continue to look for opportunities to take direct control of our distribution channels as we have in markets such as India, Brazil, Korea and Thailand. We are investing in technologies that will enhance our operating efficiencies, particularly as it relates to customer-facing processes. We will see the benefits of these actions over time. As Mike will discuss, the postal environment outside of the U.S. is dynamic and our opportunities must be viewed on a market-by-market basis. This is particularly true of the opportunities for our core mailing technologies which are subject to the regulatory environment and therefore more dependent on where each country is in its postal technology transformation.

In general, our non-regulated offerings, particularly those on our growing software platform, will help us expand in geographies, especially in Asia. In September, Mike led the discussion of our seven reporting segments and the growth drivers within each. We believe there are particularly strong platforms for growth within three of these segments -- Mail Services, Software and Marketing Services. Mail Services is growing substantially faster than the industry as we continue to expand our pre-sort and our international outbound operations geographically through organic and acquired customer base expansion. We are now market leaders in both the U.S., domestic, first-class pre-sort and the international outbound consolidation markets.

In our U.S. domestic first-class pre-sort business, we just opened our 33rd site. We leverage our national network to move mail between our processing sites. This exchange of mail between our processing sites increases mail densities and it enables us to deliver more discounts to our customers and we will continue to expand this program this year. We have substantially increased our position in domestic standard class pre-sort which now represents 10% of letter pre-sort volumes and revenue. This scale of our operation is allowing us to offer more competitive pricing and drop shipment frequencies to large customers and is thus accelerating our growth opportunity in this fast-growing mail segment. Market demand for our special pre-sort program for smaller customers continues to build. It grew over 40% year-over-year. It delivers a value proposition within our core mailing business that competitors cannot replicate on a national basis.

We now manage over 70 million pounds of outbound international mail. This makes us the clear independent leader in this space. Our scale and our competitiveness has favorably impacted the negotiation dynamics for customized pricing agreements with global posts. We will continue to explore global opportunities for these businesses.

We are also building our software equipment and service capabilities to help our customers manage communication with their customers. We will continue to develop solutions that leverage information and data about a customer to generate customized content, to produce it in either physical or digital form and to integrate it in business processes across channels and across customer touch points.

Our recent acquisition of MapInfo is the latest example of how we are building these capabilities within the software segment. Prior to the acquisition of Group 1, our software capabilities were primarily related to addressing. Address accuracy is an important part of delivering value through the mail stream because it helps get the right information to the right person at the right place at the right time. Group 1 significantly expanded our software capabilities. It added a large array of address and data solutions, including applications for the fast-growing location intelligence market. MapInfo enhances our location intelligence capabilities. It enriches our offering, it includes analytics and it extends our global coverage. Location intelligence takes the value of address information to a whole new dimension by going beyond the street address to the actual geospatial coordinates. It is emerging as an important element for businesses and for governments who use information on factors such as longitude and latitude, elevation and mapping boundaries to make better decisions for targeting offerings, for serving customers, for assessing risk and for managing assets.

Last week's New York Times ran an article -- A Building Binge for Bank Branches. It discussed how several banks have turned to MapInfo software and their analytic tools to choose not only the most attractive sites, but also to understand the effect of a new branch on existing networks. For example, whether it might cannibalize existing business. According to IDC, the broadly defined global spatial information management market was approximately $2.3 billion last year and it is expected to grow at around 9% per year.

With our moves in 2006, our Marketing Services segment now consists of capabilities in life event marketing, relationship marketing consulting, digital asset management, Web-based marketing tools and customer loyalty and retention programs. We can enhance our customers' marketing efficiency through linkage with other Pitney Bowes mail stream offerings. When we present to prospective customers, our one company approach differentiates us from the market competition and it stimulates a high degree of customer interest.

Our global strategy for Marketing Services has two components. First, support our U.S.-based global customer with our solutions outside of the U.S.; and second, leverage Pitney Bowes' global channels to deliver Marketing Services solutions to other key markets. Our strategies are working and we will continue to pursue that. We will focus on building up on our successes, looking at the customer processes within the mail stream and creating opportunities to leverage our enterprise-wide capabilities on the customer's behalf. Our priorities for accelerating growth answer sustaining shareholder value include growing our clear cash flow, increasing customer value, focusing on operational efficiency, solidifying the performance of our core mailing business, expanding internationally and focusing on high growth areas within the mail stream. We are confident of our ability to execute on our plans and we are confident in our ability to deliver value throughout the mail stream that no other company can.

Thank you, and now we will be happy to answer your questions.

Good morning, Jay Vleeschhouwer, Merrill Lynch. Bruce referred to the likelihood of growing variability in your business. Can you talk about how you're going to manage that or where you would expect to see perhaps the most variability to occur? Does it reflect itself merely terms of a wide range of earnings estimates on an ongoing basis, or could you just address that issue? Secondly, Murray, you talked about accelerating product development. It has often been said that in this business, at least on the equipment side the business, that the product life cycles are quite long. So where do you anticipate perhaps accelerating your product development? Is it on the equipment side, software or both? And then finally, what do you think sustainable growth is, equipment sales revenue? It was down in the first quarter, which might have just been a onetime phenomenon, but you referred to downsizing trend. So, what do you think the ongoing growth rate could be for that part of the business? Thanks.

First of all on variability, what we find in the software business, it is not quite as predictable in the non-stream segments and the variability usually is a movement from quarter to quarter where there are large transactions. Most of them happen the last week in the last day of a quarter, and this is pretty typical within the software industry. And as our volume of software grows, that does affect and create variability and that is why we have expanded our range of guidance. We don't believe that over a year period of time, it has any significant effect, but it can create periodic adjustments. To work within that, we are very focused on how to continue to move more of that revenue into stream revenue.

Secondly, regarding product development, that is both in hardware and software. As you look at our hardware products in our traditional business, not that long ago they were 10- to 15-year life cycles. We have brought that down significantly and you might recall that when we introduced what we called our Mega series of products, we talked about this, and said the difference in the new technologies will be multiple generations from the same platform. What this has allowed us to do is to reduce that cycle time of a model down to two to three years and that is what our average product life now is in the traditional mailing business. At the same time, we have been accelerating our product development in all other hardware areas to ensure that we are the leading company in all areas, whether that's production mail, the Mailing business or our shipping businesses. At the same time, as we have expanded into software, we are continuously refreshing, adding and expanding our products. We invest 17% to 20% of our software revenues in product development to ensure or that we are the leading-edge software provider. And the third question was?

Equipment sales -- what do we think is the growth rate of equipment sales sustainable?

We take our equipment sales growth rate should be able to stay in its historic levels. It will vary a little bit as migrations occur in different areas around the world, but a lot of that is stream revenue. We will see more of it over time shifting to stream revenue and move from equipment sale into stream revenue. We're experiencing some of that in the UK today where they have changed some of the regulations there in leasing to small customers where you now have to have an 18 month out clause, and that says we have to recognize that as stream revenue. So on the short-term, we see an effect in our equipment sale, but in the long term it is really the same and provides us with a stream of revenues.

Matt Troy, Citigroup. I wanted to start with Europe, Bruce, because you mentioned in your comments there's some weakness there. When I about Europe and the international opportunity, my view was that it was a potential source of operating leverage in 2007 and beyond. I think your long-term guidance anticipates an expanding margin there. I was wondering if you could just put some greater color on what specifically was week in the first quarter. Is there something changing competitively, and what gives you confidence that it should rectify? And I have two follow-ups. Thanks.

In Europe, there were really two main issues. One is in the UK, and last year in the first quarter, there was pricing and proportion, so that's kind of similar to shape-based pricing here in the U.S., and that stimulated revenue in the first quarter of last year. And when we did our plans for the year, we thought in the UK we could overcome what was going to be a drag on a year-over-year comparison, that we could shift the salespeople into new products. And frankly in the field sales in the UK, we weren't able to overcome this loss of what had been a stimulus in the market, and that's the main thing there. We don't expect that to be a long-term phenomenon. We have plans in place to improve the field sales in the UK, and so we think of it as a one-quarter to two-quarter type issue.

The other issue is in the Production Mail segment, and that was across Europe and that is related we believe to the market itself and that products that are going over very well in the U.S., high-speed products, are not going over with the same success in the European market. And that's an area that we're going to try to address through product innovations and other ways to see if we can segment the market and do more customer-focused marketing. But those two issues.

In the last portion, we will be introducing some new products later in the year that are more focused directly at the European market, rather than the higher speed and high integrity of the U.S. market. At the same time, you might recall the investments we were making in reducing our infrastructure cost and outsourcing. That is starting to come through and we're starting to see those benefits. But at the same time we chose to invest in expanding some of our marketing and sales efforts in Europe and we did that particularly in France where we have seen ourselves gaining some market share, but it does cost, that is a rental market so you have upfront expense. We believe it is a wise expenditure to make to expand our channel -- our distribution channel at the same time. But, overall, we believe that the margins will continue to grow in Europe.

Second question would be just relating to MapInfo. I think one announcement said you would provide additional color at this meeting in terms of how it fits into the model, and we certainly got some specifics. I was wondering, Bruce, if you could talk maybe financially in terms of -- one of the sacred cows of the Pitney franchise is the return on capital -- how you reconciled the acquisition, the valuation with a very nice return on capital at the corporate level. And then, just walk us through tactically the next 12 18, 36 months, integration plans.

In terms of the finances, it will be accretive on cash earnings this year in 2007, so right off the bat, it will accretive. It would be slightly accretive 2008 were it not for the accounting change. So in other words, by 2008, we can overcome the amortization of intangibles. And then by 2009, it will be accretive taking into account everything -- intangible amortization, integration expense and the change in accounting. In terms of its return on investment, we will get to a 10% return within three years. How we get there is, first of all, MapInfo itself had a number of programs in place to improve its margin and that would be both its gross margin and to reduce its SG&A expense. And we worked with them and feel very comfortable that those plans are quite doable. In addition, there will be $10 million to $15 million of synergies that we will gain by combining our operation. And just to remind everyone, we already are in the location intelligence business as part of the Group 1 acquisition. We had about $40 million of revenue and we're going to combine many of the functions and get savings, particularly on licensing and R&D that should produce good results for us.

Let me just add to that. In the government marketing space, MapInfo is very strong in the government vertical and if you get a chance to for example look at our Reliavote solution, it works -- which is our voting by mail solution where we think there is a very significant untapped opportunity. It works very synergistically with MapInfo. I called on a customer a couple of weeks ago and up here we're not use to this, but if you get to other parts of the country where you have a lot of special districts -- Maricopa County, Arizona has 6600 different election ballots -- MapInfo is very critical to the government market in enabling basic services to be delivered. And given Pitney Bowes' increasing focus on the government vertical, it's going to fit very nicely with production mail, with mailing and with some of our other software solutions.

As to integration, we will also see benefits across the sales and marketing channels as we look at their mid-market products our distribution capabilities within the mid market, the higher end products that they have and their linkage towards the customers' total picture of the mail stream. And more and more customers and posts around the world want an outlook end to end of what it costs and how to maximize the efficiency within the mail stream. So not only will MapInfo creates synergy to Pitney Bowes, Pitney Bowes will create significant synergy for MapInfo and their expansion by leveraging off of our customer base and their needs.

Caroline Sabbagha, Lehman Brothers. Two questions. I wanted to see where your acquisition focus was going to be. You highlighted three areas for growth. I'm not so sure if that's exactly where the acquisition focus will be to get to that 50% revenue mix. And second question is on divestitures. Is there a potential here -- over the years, you have divested of businesses that you didn't think had the right profile -- are there any businesses in your current portfolio that might fit?

First of all, regarding acquisitions, certainly as we focus on growing the three areas that I mentioned, they're very well targeted as to how we will expand our presence there. But beyond that, we really look at the linkage of those areas to our core. We have a large customer base, a customer base that can be leveraged, so we will be looking for linkage acquisitions and we will be looking at acquisitions that will expand our ability to leverage our distribution channel that exists. So we will be looking in both sides, but certainly the higher growth is in the three areas that I focused. As it comes to reevaluating our business, I believe that we need to always be looking at every business and every subsegment within every business to determine its long-term value and we will continue to do that as we have in the past and look at managing our portfolio of businesses. And at such time we decide that we can generate more value from a divestiture of a piece or a totality of a business, we will do that.

Shannon Cross, Cross Research. A couple of questions and I may be -- Mike, I may be front-running some of your comments on the postal rates changes. But I'm just curious -- is there anything that (inaudible) the postal rate changes that will benefit second quarter? Is there any upfront sort of pre-benefit, or is it all sort of as it runs through? That is the first question.

The shape-based rates took off like a rocket after March 19. They fueled a very strong April. The rates are effective May 14th. So that is front-loaded. The benefits to Mail Services are going unfold as the year goes on and we will talk about those in my remarks as well. But Murray, you may want to speak that regardless.

As we look at Mail Services, there have been some significant changes in the discounting within the Mail Services segment, and what that will do is it will encourage an expansion of pre-sort. So people will have much more value in getting to five digits. And if you're pre-sorting your own mail, you can only get to certain density. As you get the volume, you're going to get much greater. So by combining with Pitney Bowes, customers can experience a larger benefit, even though that are currently in-house doing it themselves. So we believe we will see significant long-term benefit in that area. Secondly, for the small mailers, there's a larger discount available which will stimulate our small mailing aggregation business. I mentioned it had grown by 40%. We see that continuing to pick up as the mid-sized mailers re-look at the value that they can generate by aggregating the mail. And then thirdly, the international component of the business us also seeing benefit. And so that will see a long-term benefit.

Let me just make a broad comment. What made this rate case unusual and really almost unprecedented is, we are used to seeing in rate classes or sub-classes either single-digit changes or at worst low double-digit changes. Just to take that one example that Murray talked about, the discount, the three- to five-digit spread is an important rate spread for us because many customers, particularly large banks and credit card companies, can do their own pre-sorting because they have a lot of three-digit mail, meaning regional. They have the density within a region. Five-digit gets down to the individual post office. And if they have a national customer base, they generally don't have the ability to get the densities. If -- the spread on average will go up a few percentage points per rate case by tenths of a point. In this rate case, the spread was widened by the Postal Regulatory Commission by 47%. So orders of magnitude of change, and I will refer to this in my remarks when I talk about some of the other changes in postal rates. This was a radically different rate case once the Regulatory Commission acted upon it, compared to any that had gone before, at least in the time I have been with Pitney Bowes.

So when you look forward, you're maintaining your guidance, is it is the largest driver of sort of your optimism for the year, or how would you sort of rank them?

The two items that we were mentioned -- the shape-based change, which will be through Q2 and a little tail into Q3, and the regulatory change -- are what makes us optimistic that the January-February, which were really the only two months that were [light] in anticipation of what what's coming caused delays in the U.S., then we will see that pick up and see a positive benefit.

Just back to that pre-sort one more time, on the 47% that Mike was talking about. When you think about the significance of that, the -- most in-house pre-sort or smaller pre-sort operations can get maybe to 20% to 30% of five digits, where we run -- we're now over 65% and climbing. So what that does is allows us to give value back to the customer and maintain some for ourselves to pay for the cost. And this is very important in enhancing the value of mail because it allows the customer to keep that cost down and generate the benefits, and at the same time it expands our business. So it's really at double good.

But will this drive you to be more aggressive with PSI, in terms of expanding out?

We will continue to expand our locations in PSI and we are looking at a variety of ways of partnering with other large in-house mailers where if they can get -- they can either move it all or to keep their five digits and we might process the balance.

And then a last question. Can't you talk a little bit about competition [mail post], others out there, are you seeing any change in the competitive in behavior?

I have not really seen any significant change in the competitive behavior. We have many competitors across all of our businesses and I think the major thing is, we don't have one competitor today. We are in a wide variety of businesses, we are expanding and as weight link those components together, it becomes more and more difficult for any one competitor to compete directly with us. They have to compete in niche offerings rather than the total solution. And as I've mentioned, we've been accelerating our cross-unit linkages, been re-tailoring the organization so that we can maximize the benefits out of this wide range of offerings we have so that our customers can see that value. And that is really changing for us the competitive landscape, and as we look forward over the next five years, we will see continuing change in the area.

Should we expect to see any change in your approach to the capital structure or capital allocation of the Company in terms of larger, more frequent acquisitions or greater share repurchases going forward?

Our current plan is to stay basically the same as we have been on our allocation as to how we allocate the cash. We certainly will look at anything that is available that fits into our current plans and strategies and that will leverage and give us incremental opportunity, but our current mix is what we would expect to continue. Bruce, you --?

Lloyd Zeitman, Bernstein. Murray, you mentioned the cross-selling doubled in '06, you expect it to double again in '07. Could you give us a little color on that in terms of maybe some numbers, and also which areas of the business you find the largest concentrations of cross-selling?

Cross-selling is very difficult for us to measure because we have always had pieces of our business that are sold inside of others. So what we did is we really narrowed this down to specific incrementalism rather than what we are already doing. So we aren't measuring backwards of the stuff we've done, we have said, what can we identify as new? And we expect that to go over $100 million this year of incremental benefit that we can clearly identify that is beyond what we traditionally do where of course we use Pitney products in Mail Services, we use Pitney products in Management Services, we use software products across business. But what are of the true incremental opportunities? And that's the part that we see accelerating at about 100% a year.

(MULTIPLE SPEAKERS). I was impressed by two of the handouts, and one is the direct mail pace with MapInfo map displayed on the front and then the other was the Home Depot USPS Mover Kit. I am most curious about who goes about selling the advertising space to these users and how is that effort being proved and then how do you go about determining your strategic partnerships? You've mentioned that you're going to rely more on partnerships going forward and I wondered if you could talk about some examples of successful partnerships.

Sure. There are really two different pieces to this question. First, let me deal with the Movers Kit. The Movers Kit is with the Imagitas Group which is in our Marketing Services. And with Imagitas, we basically manage the change of address database for America. And we are looking at how to leverage that outside of the U.S. Now inside of there, they work with anyone that wants to partner in that and we have a sales organization that works there. We do go -- we break it into categories. We categorize the offerings that are best suited for the home owner that generate the most value and then we have competitors. We only allow one in the space and we have a competitive bid offering that determines who gets to purchase this space. So it's a very active program as we look. We set our contract periods. We do do testing to get ROI for the advertiser as we expand that space and it has been very attractive. We have had high renewals and many people wanting into that space because it's certainly a time when people spend more money and it's very attractive. And as we get more and more capable of targeting in on who the right person is in the right area, so there is no point in having someone that sells something that isn't in your area. So we can point you directly to the location and you saw that on the envelope that you're referring to where we're tying location, intelligence and marketing together. So those of you that didn't see it, what we did was on the direct-mail piece, I forget, which example do you have there as to what ad is it?

(inaudible - microphone inaccessible)

So if you take, for example, a bank is soliciting for you to come to their branch, we can actually on the envelope draw a picture, a map, pointing you exactly to the location. So when you start thinking about location-based services and marketing, when you look at open ability, you can point to the individual exactly where to go. And that's how we see addressing going far beyond addressing and linking it to geospatial. So if this was a restaurant, it would point you to the restaurant. If it is Home Depot and they have five Home Depots in an area, it will point you to the closest one. So this is a brand new technology that we have that allows you to link it that way and we believe that our information technology base is going to grow significantly. We believe we have the leverage and the capability to do what very few people can by tying together the mail stream, the location-based technology, the address technology, the marketing services, to create a very unique bundle of services for our customers.

(inaudible - microphone inaccessible)

Well, it's evolving now. We launched a Web services site for marketing services for small-business. We are expanding that. We have of course the high-end market which we have a marketing services group that sells that. We launched the small-business via the Web and we will be launching the mid market by our mid market channel in the coming months. So we'll be hitting all three market segments. We really believe that as we enhance the value of the mail that we will benefit because it will generate more mail and we also believe that the effectiveness of the mail is far more important to customers than the volume of mail. So if you put out of 1 million pieces and only 10,000 get read, you be further ahead to put up 50,000 where 40,000 are read. So we really believe we can help customers focus in on getting the right people with the right message and get a much higher open ability and that will really generate more value. And of course, the byproduct makes it much more familiar to our environment.

Just as an aside, and I will touch on this in my remarks. There will be new postal barcoding requirements for the [four-state] barcode which you can see in the Kit. I don't know if you have an example of this. It's on the same envelope. That is a new kind of barcode. That will be required for all postal discount by January 1, 2009. That requires software changes and for some customers it will require new address printing systems which we also sell. And in terms of cross-selling, you have an opportunity to get not only our U.S. mailing address printing technology, but Group 1's software and perhaps we can piggyback MapInfo software into the same sale if it's a particular retail application. And that requirement for the U.S. is out there today and we can begin selling it today. But it will be effective at the end of, the deadline will be the end of next year.

We will also evidence postage on the envelope.

Can I ask you a question about the software business this quarter? It looks like the organic revenues in the software business was down in the low to mid single-digits, I don't know if that's correct or not. Was there anything aside from just delay in orders because of the economic environment -- was there any competition or anything at all that occurred in the quarter? Did it pick up in March or April as you suggested, the U.S. mailing business bid? And do you still expect that it's going to reach your organic revenue growth target of 18% to 15% for the year?

We still expect it to fall within its targeted range. As I mentioned earlier, with the software business, it is a little harder to predict to timing and we had some transactions that did not close at quarter end, but we aren't seeing anything different in the competitive environment. We're seeing ourselves as still leading in those areas and it's a matter of time.

What percentage of those revenues -- I think when you say stream revenues, is -- that means recurring revenues? Okay. What percentage of the software is stream revenues right now?

It's roughly half would be stream, either maintenance or in the case of MapInfo, they have consulting and some other contracts.

There will be less volatility in that space with the MapInfo acquisition simply because it will be a larger quarterly revenue base, it will effectively double. So that will tend to reduce -- one of the concerns we had I think at the business unit level is when you have a $50 million a quarter business, a large order can swing the grow rapidly one way or another within a quarter. When you have something that's closer to $100 million a quarter, a single order or a single of couple of orders cannot have as big of an effect. So we will see reduced volatility simply because there will be bigger critical -- there will be more critical mass in the software business with MapInfo.

The other point I mentioned is that one of the real growth areas is internationally and that will also create more diversification going forward. And we saw this quarter, one of the real bright spots in software was strong growth outside the U.S. and that's going to be one of the areas that really helps bring about this strong organic growth. Again, this is an exception this quarter, but going forward we should be back in our targeted range.

Matt Troy, again, Citigroup. Your share repurchase plan during the quarter, I think it was about $80 million (MULTIPLE SPEAKERS)

$90 million.

$90 million. If we straight line that out, that certainly would be at the high end or above the range you have previously articulated to us. I was wondering if you could just help us, again, when you think about share repurchase, the return assumptions and then taking a step back a little bit more broadly, you've certainly made investments for growth. The concept of LBO or going private is certainly all over the press. The Pitney model, at least at a first blush, screens well. I was wondering if you could just talk about pros/cons of being a public company, being a private company. We've talked about it in the past, just an update on your thoughts.

I will answer the question about repurchase, and then I will let Murray talk about the viewpoints on private equity. In terms of the repurchase, last year, we really front-loaded the repurchase program and what we said this year, we were going to be more balanced as we went about. And our target for the year is $300 million and that continues to be the target. So we're slightly -- you know, $75 million a quarter would be the average and we're at $90 million, so we're above that. But that is more a function of where prices were during the first quarter, which I think as you know, was lower in the beginning months. But we will continue to repurchase those the rest of the year. And in terms of the return, we look at it as a cost of equity and most people who have done analysis view our cost of capital overall 8% to 9%, and so our cost of equity is probably somewhere in the 10% to 12% range. And so that's the kind of return that we expect over time. And also, it directly relates to our target of total shareholder return of 11% to 13%. So it fits right in.

Regarding your question on private equity, firstly we have a growth stretchy that we believe is working. We believe that it will continue to see significant returns going forward. We believe that we can enhance the productivity of our business and continue to see that growth. So we see at this point in time that we're well positioned as a public company. However, we will constantly look at what is in the best interest of our shareholders and balance the two. So we believe that we're in the right position today but we will also always be evaluating where we fit with our shareholders. We think that our return a strong, we think that we have a great future ahead of us, we think we have set the proper trajectory that we don't have any major reshaping that needs to be done which would be an advantage of going private for a time, that there is no impediments that we see that we would gain a specific benefit from. If we saw that, I think we would relook at that.

Okay, Murray, thanks very much. That puts us almost right on time, actually couple of minutes early. We're going to take a 15-minute break, we'll have an opportunity to again look at the product displays, I hope you do, and there will be some refreshments outside. I'd ask you to please come back in about 15 minutes though so that you can be here for when Mike gives his presentation on our potential growth opportunities within the mail stream as a result of postal reform, both here and abroad. So we'll see you in about 15. Thank you.

Okay. At this point I would like to reintroduce Mike Critelli who will give us an overview of the US and international postal environment and how it impacts on Pitney Bowes. Mike?

Thank you, Charlie, and good morning, again. When I became or I become Executive Chairman, one of my priorities will be influencing the postal regulatory environment both within and outside the US. This morning I will analyze what the new postal reform law in the US will mean for us and then briefly discuss the non US environment. We will then finish the morning with another Q&A session.

The postal reform legislation was enacted last December. It is a complex law, and my key message to you is that it will be highly beneficial to Pitney Bowes. Why? But aside from securing the long-term financial viability of the Postal Service, it enables the Postal Service to respond more flexibly to the rapidly changing needs of senders and recipients. This environment will be characterized by market-driven dynamic pricing, more frequent price changes, pricing that rewards mailer actions to reduce postal costs and lots of product and service innovation. An optimal environment for us. Thanks to postal reform mailers will have an even greater need for the products, services and expertise that only we can provide.

Many of you have heard of the concept of Web 2.0, the phrase the media uses to describe the evolution from centrally created content and centrally driven commercial activity to the power that new technology has put into the hands of tens of millions of Web users. Content and commerce development is now distributed among many users, and obviously this has led to an explosion of innovation that is transforming the Internet.

We think about the mail stream as Mailstream 2.0 in the same terms. If Mailstream 1.0 was a system in which the Postal Service created all products and rates or proposed all products and rates and managed all processes centrally, Mailstream 2.0 indicates the potential for more innovative user generated proposals for new rates and products and more systemwide transparency for users. The degree of innovation will be limited only by the imaginations of the people that use the Mailstream because they will have unprecedented freedom to propose and ultimately create new agreements on pricing, service levels and other features.

Postal reform is the enabler. Under the law, the regulator has broad latitude to improve pricing schemes that adapt the mail stream to meet new deeds. The variety of postal discounts will expand dramatically and take on new forms that reflect the almost infinite variety of ways in which the mail stream can be customized.

Now even before postal reform, the Postal Service had the authority to enter into customized contracts with the largest mailers. These are known as negotiated service agreements or NSAs. But only half a dozen NSAs were created over the last several years. Because getting them signed and approved by the postal rate commission under the old law was more cumbersome and risky than it was worth for the vast majority of mailers. Now that postal reform is in place, we will enter a dramatically different era in the way prices are devised and put into place. With new Postal Service flexibility and more user proposed rates, some of the pricing possibilities are quite interesting.

For example mailers, could negotiate for off-peak discounts similar to what airlines offer to fill seats that would otherwise fly empty. Others could negotiate volume discounts based on how much mail they send in a given quarter or year in excess of normal volumes, as Capital One did a few years ago. Mailers could negotiate for lower rates based on providing higher quality mail that needs less handling or processing or is less prone to address problems. These and many other examples I could give you indicate that Mailstream 2.0 will be a much changed place.

In addition, the annual price increases that postal reform allows onto the price cap based on the Consumer Price Index will stimulate demand for mailers to have a system that conveniently and automatically updates their postal rates. The law also encourages the postal system, Postal Service, to add security, expanded retail access and transparency to the mail stream. The concept of "secure sender identified mail" appears in the bill and is to be counted as a factor in setting rates. The bill also enables rates to "promote expanded retail access." Rates based on security and retail access raise the possibility of meter, online postage or self-service meter kiosk discounts.

The law also encourages the use of Intelligent Mail. That is bar coded mail for letters and flats which can be tracked and traced throughout the entire USPS system. This opens the door for precise real-time performance measurement of Postal Service delivery. Our line of variable data printers and our existing software products such as OnRoute make access to these services easier for mailers and us well-positioned to capitalize as their use expands.

An additional future of postal reform is partnerships. The Postal Service has been using worksharing partners for over 30 years, but this approach to managing the system was never codified into statutory law the way it is now. We like these provisions because of our proven ability to provide lower costs, more flexible and more market responsive alternatives to Postal Services, including presorting and remote access through our meters to Postal Service retail products and services. The precise financial impact of the law remains to be seen as the postal Regulatory Commission fashions the specific rules and regulations called for in the legislation, which under the legislation must be in place by June, 2008. However, Regulatory Commission Chairman, Dan Blair, as indicated that he would like to complete much of the commission's work this year if possible.

But, regardless of the timing, the new system will be positive for us and aligned with the mail stream strategies we have been pursuing over the last six years.

Now we have looked over our lines of business to determine the various opportunities that postal reform creates. Many of these opportunities are smaller, by which we mean less than $10 million of potential incremental revenue. There are a large number of these spread across the Company, and we will manage them to ensure we capture as much as possible of this incremental revenue.

We also cannot quantify as yet the opportunities from helping customers create many more negotiated service agreements. However, we have identified four potentially major revenue opportunities arising from postal reform. We define major as a business opportunity that could grow into over $100 million of annual incremental revenue for us.

I will spend a few minutes discussing each of these. The first area is the whole value proposition of secure funds and information management through the meter. The new regime with more frequent price changes, more customized pricing and pricing more precisely tailored to postal costs places a greater premium on systems that can work well in a more complex and more fast changing pricing environment. We expect that more mailers will prefer the convenience of a simple user-friendly desktop system that puts all their Mailstream expenses on a single monthly statement. They can be confident that the system will automatically update over the Internet the price they are charged based on the rules that the Regulatory Commission develops.

In fact, we believe that the ability to download new rates over the Internet is a key competitive advantage for us versus competitors like Neopost and Francotyp. To affect a rate change, these competitors currently must issues new physical rates firmware media to their entire customer bases along with instructions on how to install it. It is like having to have a new CD shipped to you every time you want to download a song. Most Pitney Bowes customers simply accessed the Internet through the keypad on their meter similar to downloading a song from iTunes, and the new rates download automatically to their system. We have had this competitive advantage for almost five years, but it will become far more meaningful when new rates change at least every year and get more complex as time goes on.

We also continue to encourage the postal Regulatory Commission to follow the leads of other postal regulators such as those in Britain, Ireland and the Nordic countries and direct the Postal Service to grant a discount to mailers for using a postage meter. Mailers help the Postal Service avoid billions of dollars of incremental costs to create, print, ship, store and sell postage stamps. And postage meters help shorten lines at post offices, reduce retail staffing costs and improve services to other postal customers. Given the clear trend towards cost-based pricing by the Postal Service and its emphatic endorsement by the Regulatory Commission in the most recent rate case, the case for meter discounts will get easier to make.

One reason the Postal Service has been reluctant to give this discount has been that it would be difficult for consumers to obtain. Because businesses use accounts for the vast majority of metered mail. However, with the spread of self-service meter kiosks in high traffic consumer locations like corporate and college campuses, we hope to overcome this argument. But even without this incentive, it is clear that postal reform has enhanced the value of the postage meter. As a result, we expect to see incremental placements of our high-end meters and higher revenue per meter.

A second major opportunity for us is related to postal network logistics. Pitney Bowes' Government Solutions, which is in the Pitney Bowes Management Services Reporting segment, is already a provider of logistics service to the Postal Service, with approximately $40 million in annual revenue under contract. This Postal Service logistics market is currently valued at $750 million annually. Our status as a trusted Postal Service supplier and partner make this a very attractive opportunity for us, and the government solutions team is developing strategies to capitalize on it.

A third opportunity we see with postal reform is an expansion of worksharing. We are already the number one player in the national letter presort market through Pitney Bowes mail services, and we think postal reform will help us capture additional first-class and standard mail.

What makes this opportunity especially appealing is that we have already built the national network to capitalize on it. We now operate 33 presort centers nationwide, up from the original 12 that we acquired from the PSI Group in 2002. So we have the capacity and the customer relationships in place to handle a greater volume of mail so we can get more of this business without significant capital investment.

There are three forces converging to make our mail services presort offerings more compelling. Number one, greater postal discounts than ever for mail presorting, particularly in the spread between three and five digit discounts.

Secondly, more benefits than ever from our size and scale given the increasing volume of mail for which we alone can achieve the highest possible discounts, and Murray referred to that in an answer to one of the questions.

And third, more challenging mail preparation rules which would require significant capital investments by large mailers who are considering whether to continue to presort their own mail. For example, as I mentioned earlier, by January 1, 2009 Postal Service rules will require the application of a new Intelligent Mail bar-code on any mail piece to qualify it for postal discounts. You saw it when we answered the one question this morning on the MapInfo application. That, what is called four state bar-code, will be mandatory to get postal discounts by January 1, 2009.

A fourth opportunity is in tightening standards for address quality. This has already been identified by the Postal Service as a highly effective approach to taking $2 billion of costs out of the postal system. Eliminating bad addresses means the entire system operates more efficiently. Through Group 1 Software we already have the industry's leading address quality tools, and these software packages will increase in value as the Postal Service raises the standards for address quality in order for mailers to qualify for the discounts to which they have become accustomed. The Postal Service has already announced that mail lacking precise and accurate delivery addresses will no longer qualify for discounts after this August.

Let me give you an example. The two envelopes shown here illustrate the point. The envelope on the left is addressed to 36 Shields Road, which does not exist. The correct address is 39 Shields Road. Under the current rules, the envelope on the left can be delivered and can qualify for a postal discount. After August the Postal Service will not deliver mail bearing a non-existent address, and the mail piece will not qualify for any postal discounts.

So you're looking at people who -- at discounts at close to $0.10 per piece that will get lost unless people have what is called -- this is called Delivery Point Validation Software. We have software tools that will verify that every piece of mail is destined for a valid address. The same software tools will analyze and correct non-existent addresses to ensure the mail piece is delivered and qualifies for discounts.

Now I would like to shift in the US from the long-term view of postal reform to a more near-term look at the rate case that will take effect in two weeks. This rate case is an early indication of how the key players will interpret postal reform legislation, and it bodes well for mailers and for us.

While there were some differences between the Postal Service and the Regulatory Commission rate proposals, they agree that the postal network must more closely match prices and costs. From Pitney Bowes' perspective, the Postal Service proposal was good, and the Regulatory Commission's response was much better. In holding the overall first-class price increase to $0.02 and for consumers offering the Forever Stamp, the Regulatory Commission voted to keep the mail stream as healthy as possible for first-class mail. But it made up for this shortfall in Postal Service projected revenue by recommending larger increases for larger and bulkier pieces of mail, which are most costly for the Postal Service to process and should, therefore, bear more expense. The Postal Service had drawn in its proposal a sharp wedge between the price of a 1 ounce letter, $0.42 in the proposal, and a 1 ounce flat, which was $0.62. But the Regulatory Commission widened the gap even further from $0.41 for a letter to $80 for a flat.

This creates two opportunities for Pitney Bowes. First, we have sensors that we can retrofit under our existing meters they can detect the shape of the mail piece, which is a onetime revenue opportunity that we are now capturing.

Over the longer term, this price differential will drive more mailers to either consider folding and inserting equipment or a redesign of their mail pieces to help avoid the nearly 95% flat surcharge created by the Regulatory Commission. We have given you a lot of samples of letters, flats and parcels in your kit to help you understand how this new pricing will work. This shift to shape based pricing is radical, and the degree of change was evidenced by the strong opposition to proposed rates received from those mailers most affected by it. This points to an important paradox relative to postal reform and transformation. The more radical the change proposed by the Postal Service or regulators that benefits Pitney Bowes, the more opposition it will draw with a greater likelihood of delayed implementation. And that is why in part we have modeled the less certain timing of favorable developments into our quarterly projections as we gain new experience and more experience with the new system.

The Regulatory Commission also expanded the discounts available to mailers who presort their mail on their own using group Group 1 Software tools or through companies like Pitney Bowes mail services. The discount expanded by $0.007 per automated mail and by $0.018 for not automated mail. Considering our current presorting volumes, this provision alone provides tens of millions of dollars in incremental discounts we can share with our customers, and it makes our unique postage discount program for smaller mailers far more attractive in a competitive situation.

The expanded presort discount also makes meters more attractive because of their ease-of-use in a presort process. The Regulatory Commission also expanded the presort discount for drop-shipped standard mail. In other words, instead of putting mail into the entry point at the point of origin, drop shipping at closer to destination. We already processed approximately 1 billion pieces of such mail through mail services, and the expanded discount will help us grow this part of the business as we indicate mailers on ways to mitigate the coming rate increase.

Another Regulatory Commission also provides benefits to us. The incremental cost of a second ounce of a first-class mailing was reduced from a range of $0.225 to $0.24 to $0.125 to $0.17, giving mailers a strong price signal to combine two 1 ounce mailings into a single 2 ounce mailing when feasible. Our production mail business and Group 1 have householding software that facilitates such a combination and that will benefit from this new pricing structure.

The final Regulatory Commission ruling that we like is the recognition that the cost of special services such as signature confirmation or registered mail are much higher when delivered at the Postal Service retail counter than when delivered through devices located at the customers' own place of business. These special services are available now at a steep discount through our DM series of network postage meters, again making our meter-based solution much more attractive.

The bottom line is that postal reform will be positive for Pitney Bowes in 2007, and we expect to realize an additional benefit in 2008 as mailers adjust to the new system.

With respect to the non US environment, I will briefly make the following observations. There are no regional or global standards relative to postal rules, regulations and processes. Every country is developing unique systems. So with direct operations in 27 countries outside the United States and products in over 100 additional countries, we operate under unique rules in every country. The EU, which successfully created a common currency in 12 countries, a central bank, free movement of people, borderless trade and a number of other common standards and rules, has more divergence in postal standards and processes today than it did before the issuance of its 1997 postal directive. The 2009 date for full-market opening will operate differently in every one of the EU markets, and many countries including France will likely remain closed to full competition until sometime after 2009. Therefore, we will not secure revenues and profits through common globalized products and services, but by resourcefulness in addressing all of the unique conditions in place in each of these countries.

Thus far, where there has been licensed competition outside the United States, it has uniformly focused either on large volume commercial and government customers, on market niches perceived to be underserved by the National Postal Services such as the periodicals market, or on the unaddressed mail market served in America by newspapers.

That being said, there are winning strategies that we are employing and will continue to employ in this highly divergent worldwide environment.

First, National Postal Services, and I believe later on their competitors, have a common challenge in marketing to small and medium-sized businesses and in collecting revenue and mail from these customers. Both welcome our technology and our distribution capability to reach these customers and to devise secure, affordable revenue and mail collection systems, especially in more competitive markets. In fact, in competitive markets or in markets in which Postal Services are under pressure to operate more cost efficiently, Postal Services are moving away from stamps and permit mail for small businesses. As a result, while our small business growth has flattened out in the US, it continues strong and will continue to be strong outside the US.

Second, rates and rate structures are changing more frequently in both competitive markets and markets in which the National Postal Services have a monopoly. For example, as contrasted with the infrequent rate changes that took place before 2004, France has had rate changes in each of the last three years, and we expect another rate change late this year. We also believe, and this is a critical point, that National Services will seek ways to differentiate business mail from consumer mail to give themselves more pricing flexibility for business mail.

Already the Royal Mail is looking for an opportunity to introduce pricing which would result in higher rates for some geographic delivery zones than for others for business mail. Given the fact that rate flexibility and complexity and business mail helps us, we like this trend.

Competitors and National Postal Services -- this is number three -- are increasingly looking for global partners who can help them win new business from large customers. Our investment in the growing outbound and inbound international mail sector is yielding benefits. Our International Mail Express business is now the largest independent aggregator of outbound mail from the United States. We also represent large mailers through Pitney Bowes management services operations in the US, Canada and virtually all Western European markets. The increased scope and scale of our international mail network, the mail personally control, will allow us to leverage our position for improved revenue growth and profitability in the years to come.

We are also retooling our International Management Services business to take more complete advantage of our position as a large handler of other people's mail.

Fourth, most of the large National Postal Services are speaking seeking to achieve the twin goals of expanded retail access everywhere and reduced dedicated bricks and mortar retail in less densely populated areas. Our self-service kiosks, which are being piloted in the UK and which are being sold here in the US and other markets, can be a significant growth driver as National Postal Services seek to have more profitable and technology-based interfaces with consumers.

Fifth, many National Postal Services are seeing the advantage of online postage for parcel shipments. That is why the US, Canada Post and in this most recent quarter, Royal Mail, have already entered into partnership agreements with eBay. So we are now in Europe with eBay and Pitney Bowes, and why many others are interested in pursuing this program.

Sixth, we will continue to see benefits from network digital technology migration and for more cost-based pricing initiatives from National Postal Services. But these technology migration opportunities tend to be less predictable in timing. They will be lumpier from quarter to quarter in terms of revenue growth opportunities when they come, largely because of spikes and troughs and equipment sales, although the lumpiness will abate over time due to higher occurring supplies, service and financing revenues.

Seventh, although postal address quality initiatives outside the United States are far behind US Postal Service efforts, we expect them to come, and we are better positioned than ever because of the combination of our Group 1 and MapInfo international capabilities.

My final comment is that we have been able to make a significant difference in the timing and direction of the US postal reform legislation and US Postal Service transformation initiatives. And in my new role, we will continue to do so. Without us, the reform legislation would not have happened, and the transformation initiatives would have been slower and less favorable to Pitney Bowes.

In my new role, I can enable Pitney Bowes to have a significant impact on high opportunity non US initiatives and can help deliver better results for the business segments affected by non US postal trends. With the greater focus I can give to this effort, as well as the greater focus in the regulatory rollout here in the United States, I will help Murray and Bruce and the team give you more specific guidance than we have been able to do today and accelerate growth opportunities.

Thanks very much.

Yes, Matt?

Matt Troy, Citigroup again. I had a question more broadly on direct mail. If you look at the underlying numbers, the mail stream certainly is healthy. If you look at the drivers, things like TiVo, Do Not Call Registry, spam blocking software, that certainly facilitated some of the growth there. Yet at the same time we are hearing an undercurrent for some pockets of the consumer world to get rid of non source (inaudible) junk mail. Can you talk about the strategic value to the Postal Service? Do you see a growing movement to be more restrictive in that kind of mail going forward?

I think that is a very good question in terms of another area in which I'm going to focus. We at Pitney Bowes strongly believe that mail should have value both to senders and to recipients, and that most of the complaints relative to the mail are four three reasons.

One is what I would call the saturation mailing done in the direct mail arena, which by the way we participate very little in. Our production mail and our software are really designed for targeted mailings as opposed to saturation mailings, and we believe that direct marketers who currently do mass standard mail mailings will inevitably have to shrink the amount of that and grow targeted personalized mailings that we believe will benefit Pitney Bowes.

Secondly, the Postal Service has to be far more aggressive in calling out duplicates and undeliverable mail, which our Group 1 Software addresses. We cannot continue to have mail continue to go to residents who have moved -- I get a lot of -- just as an aside -- I get a lot of letters from people or comments from friends of mine who say, my son moved out of here five years ago, and he is still getting the mail. Or the people who used to live here 15 years ago, I'm still getting mail addressed to them.

The reason for that is that the US Postal Service had not put into place either penalties or incentives to get direct marketers to upgrade their address quality software. We thought that was going to be a growth driver for Group 1 Software. The Postal Service backed off on it, and every single signal I'm seeing would suggest that the Postal Service is going to have to take aggressive action to get rid of this poor address quality in its system if it's going to stay within the price cap and continue to grow its brand.

And third, there is a lot of activity to generate appropriate voluntary Do Not Mail Registries that are more targeted. We will be working with the Direct Marketing Association and with a coalition called Mail Moves America. Our view of the average mail recipient is that if you think of the analogy of the remote control device, people want -- do not want just an on/off switch. They want to be able to block out certain channels. They also want to receive more of certain kinds of mail and less of others. And where we are already in that market is with our catalog and magazine request cards that are in the Imagitas mailing kit. And we would like to do more of that kind of recipient-based service. So I think that the broad trend plays very well to Pitney Bowes' strength and probably hurts our -- in the production mail arena definitely hurts our saturation mail-based production mail competitors.

Jay Vleeschhouwer, Merrill Lynch. You spent much of your presentation talking about leverage from postal reform. Could you talk about growth opportunities that are occurring anyway independent of reform? I'm thinking of some of the technology and market trends that your peers in the imaging world upstream from you -- the Xerox's, HP's, Kodak's of the world -- talk about in terms of variable data printing and the whole range of three-letter acronyms like that. Is that part and parcel of reform? Is it occurring anyway? And how do you latch onto that trend that is occurring upstream from you in terms of production and dissemination?

I will have Murray answer the bulk of that. I will just touch upon the specific issues related to reform. As cost-based pricing comes into play, there are a number of things -- and these kits will illustrate it -- if you take a look at some of the tools we have given you. People will redesign kits to reduce the weight.

For example, today if you are in a 4-ounce -- if you have a 4-ounce flat versus a 3-ounce flat, it is a $0.24 difference. Under the new regime that spread -- if you have an envelope that is a letter at 3 ounces, it is $0.75. If it migrates up to 4 ounces, it is $1.31.

So we expect to get opportunities to redesign customer kits and marketing pieces. Also, to put into place two-sided printing. And given the cost of some of this exotic marketing material, address quality is going to become a better investment because of the cost of wastage in a higher rate environment. But I would like Murray to speak to the other opportunities that are non postal reform based.

Thanks for that lead-in. We spend a lot of our resources expanding in those basis. Group 1 and MapInfo in particular are involved in the data management, data mining that goes in advance and also with Group 1 in the preparation of the documents themselves, in creating that variable capability. Also, with our Mtext acquisition, we provide the capability to go across platforms and use multiple printers rather than being locked into a single printer. Then you moved into our DMT organization where we are very involved in transpromo mail, which means taking transactional documents and converting them into promotional and transactional combined. So the things that you're talking about that the print area wants to do, we actually supply the software that is behind that. We are involved with them in their expanding market space and, of course, in ours.

At the same time then, that either flows into PSI or IMEX for the processing of that mail. So we are really involved from the end-to-end from the creation of the document, the distribution of the document, the processing of the document and then in the end, the management of the information with our analytics capability. So we really are very much in that document process. We are not supplying those particular pieces of hardware that are part of the loop, but we actually help them with their components.

Just as a follow-up, identify these revenue specific (technical difficulty)--

For some reason it cut out.

The question because the microphone cut out, could we identify the revenue specific to components.

I don't have those off the top of my head, but if you think about the Group 1 component, there is a reasonable percentage of Group 1 that falls inside of that space. And in the DMT organization, the transpromo is not the largest segment, but it is the fastest-growing segment. We will look at whether we can give you a better definition on the size of that later.

One number I can add is on document composition. Just that software piece alone in 2006 was $58 million, so it is already a good business for us.

Yes, Shannon, just wait for the microphone.

Could you talk a little bit about print ink and some of the things you're doing in that area? And then I have got a couple of follow-ups.

As I mentioned, we're leveraging our national service organization, and print ink allows us to do that. And what that is for those of you that might not be familiar with it, it is leveraging the capability of print management, which provides midsize customers with the opportunity of combining service, supplies and technology into one offer that is on the usage basis. We have -- that is the space we acquired print ink in, and it leverages our national organization that is already in place to support it. At the same time, it accelerates the third-party supplies business which I also discussed.

And then can you talk a little bit about from the standpoint of -- my mind just went blank -- sorry, from the standpoint of margins as we look that one thing PSI and some of the rate changes and things that are going on there, and then I had another margin question which will (inaudible) while you answering that one.

As you can see, the mail services margins have been increasing significantly over the last three years. As we have build out the network during the buildout, there is a delay, but you can see them moving up quite rapidly. 0We expect that to continue. We said that they should pass the 20% mark.

And then I just remembered, my question is really with regard to the opportunities within the postal outsourcing. As we look at that, I think you said you had $40 million in revenue coming from that today going -- well, market opportunity of $750 million. How do we think about margins? Where is that really -- I mean most of that I would assume is currently done by the post office. But ability for Pitney to do it better, just how do we think about that as we go forward?

As we look at postal -- we would rather call it partnering than outsourcing. There are a number of opportunities. One, the reason that the Postal Service looks to Pitney Bowes is we have the technology, we have the capability and the expertise to change the processes, and change it from a manual intensive as it has been to a more automated process. And that is where we bring the value. We see that being in the double digits in margins and with very good return on capital.

We also have more flexibility in terms of being able to develop the labor that we have. People can do a wider variety of tasks. There's more crosstraining, more career development opportunity. So we both get the benefit of technology change, process change, and we can apply more people development compared with a very rules bound approach the Postal Service is forced to use.

And one final question. When we sort of visit the general economic outlook sort of as we look forward to the year, obviously there have been some of the enterprise hardware companies that have noted weakness. You had weakness, although it does not sound like it is due to the same reasons that they alluded to. Is there anything you can talk about in terms of, if we look to a potential slowdown in the economy, what that would mean for Pitney versus what you're seeing within both small to medium, as well as some of the enterprise level customers?

First of all, I would just confirm, we're not seeing any effect on our revenue that we would call economically sensitive. That areas that historically have been economically sensitive have been production mail and management services. And in both cases, the underlying trends (technical difficulty)--.

So I would say that in general I think more than ever Pitney Bowes is not going to be subject to variability related to the economy and that we will continue to be relatively insulated from those kinds of (inaudible).

And the other thing I would note is that, as I mentioned in my remarks, we have variable rate debt, and so we have a natural hedge to the extent that the economy slows, and assuming that there's some correlation with interest rates, we often get that offset. So that would not be a concern in our forecast going forward.

[Lamont Richardson], [Payne Capital Management] Canaan, New Hampshire. We live in a very small, sparsely populated, rural area in the vicinity of Hanover, NH. And I'm told by the local postmaster, postmistress, that UPS and FedEx are dumping increasing quantities of flats, small packages, etc. into the local post office for the last mile delivery.

Now are you involved in that in any way with metering? In other words, they are laying off on the Postal Service the most expensive facet of the operation, delivering a small parcel in a very sparsely populated area. Is this happening nationally, and what are the implications for you folks?

First of all, we are not involved with that. That tends to be in a case where they would go to a large catalog mailer and take all of that catalog mailer's output and aggregate it, and then, as you said, take advantage of the flat pricing in the last mile.

I think -- and we are not -- we don't tend to be involved in those large -- if it is UPS, certainly we do not tend to be involved. They tend to have customized bulk rates with these large customers. Where I think it will go in the long run is that the Postal Service will price in a more granular fashion and eliminate these arbitrage pricing opportunities like this one. If you do have -- we advocated in the response to the Regulatory Commission filing that the Postal Service do much more, we call it component level pricing, because we think it benefits us in a lot of ways the more granular pricing gets.

So some of these averaging and arbitraging opportunities that people like UPS and FedEx take advantage of, if the Postal Service literally starts to price at the component level, that little advantage should over time disappear. Today the rate structures -- and this gets to my more fundamental point about cost-based pricing -- the rate structures have a lot of averaging in them, and a very smart player like UPS or FedEx can figure out how to take advantage of averaging. Once the averaging disappears, which we hope it does for business originated mail, we think that that benefits us in a variety of ways. But we're not involved in that process.

This is not accelerating under the postal reform, is it?

No. (multiple speakers). This has been going on for a few years. It is a result of some rates the Postal Service put in under the old law because it had to follow its traditional costing methodologies.

One of the things that is going to happen here is that the Postal Service little by little will see its entire parcel business shift to the competitive arena where it is going to have our pricing flexibility. As it is now about -- under the new law and I have not zeroed in on this because it does have a big impact on Pitney Bowes -- but 90% of postal, parcel voice will now be categorized as competitive product where it will have more pricing flexibility, and only about the remaining 10% will remain in what is called the market dominant space, which is where we would participate what is called single piece parcel. Small business that is sending out a package, along with letter mail. That stays in the monopoly, but bulk shipments, like something coming out of L.L.Bean or Land's End, with the Postal Service a little bit more pricing flexibility going forward.

Carol Sabbagha.

Just a question on electronic bill presentment. Where do you see that market currently in terms of how many bills are going electronically to the customer? How do you see it developing? What have been the issues that have prevented it from catching on as much as people thought? And do you think the postal rate reform and the potential for yearly pricing increases impacts that?

Let me just speak to the last piece, and then I will have Murray talk to the implication of the business. This should actually reduce any progression toward alternative electronic media because what tends to drive decisions to move to electronic media away from physical mail are rate spikes, particularly in the first-class arena.

It has been an interesting behavioral thing that the Postal Service would say that since the 1970 law, their average rate increases have tracked Consumer Price Index and they have been right. But if it goes up 3% a year for four years, that does not cause behavior change by mailers as much as if it goes up 10% in one year after three years of no price increases.

So the marketplace does not like rate spikes. This law will tend to reduce significantly the frequency of rate spikes. This rate case had a lot of rate spikes in it but not in the first-class transaction mail space. It really whacked the small catalog companies and the small magazine publishers, which historically have never been touched by big rate increases and where there really had not been a good matching of pricing and costing. But Murray can perhaps talk to the electronic bill presentment, and I will give you some overview from our futures analysis that (inaudible) does.

As we look at this, we really see electronic payment going up, and that seems to be common. But we have not really participated that much in the return mail of that segment.

As far as electronic bill presentment, that has stayed relatively flat as far as usage. There have been more and more people presenting; however, the demand from the customer remains for hardcopy. And the reasons, there are a number of them.

Number one, most people want a hardcopy of their bill to file. So it is really a passing of costs in saying, print it out. And it is usually not that convenient at present to print it out. It is expensive. It usually includes color. And if you look at a lot of those statements that print, it is a lot of pages. So it is much more convenient to get the hardcopy electronically, pay it and file it, but also have the convenience of looking at it online. I think of myself, I often look online if I want to find something, but I always for my records use the hardcopy that is presented.

So we're not seeing a major shift of any sort there. It is really staying pretty much status quo at this point in time.

Very interesting observation. Even in those markets, like the Nordic countries which are way ahead of us in broadband penetration, people continue to want their paper statements. We monitor research all around the world, and we see a slow steady progression toward electronic bill presentment. But except in those cases where the governments force it, we're not seeing any accelerating growth that is affecting our business.

Is there anything preventing mailers from unilaterally deciding to just give you your bill electronically? Like, for example, our firm does not give us health insurance electronically -- I mean in paper anymore. Everything has to be electronically. Is it something by law, or is it just that 50% or 40% of the consumers don't have access?

There are some legal issues associated with certain kinds of documents like Explanations of Benefits, which are growing explosively in the health care arena where those in many states have to be sent in paper form. But there are other kinds of documents; you see our Reliavote application. Voting by mail has doubled in the last 10 years and continues, and there's a big movement toward voting by mail. So there are a lot of legal and cultural drivers toward paper, and there's customer preference as well.

Customers, as Murray said, where it is a document that is significant, if it had passed an attribute of either being needed for tax purposes or that it is complicated to read online like a credit card statement, you tend to see it stay in paper form. Where it is a company controlled document and communication to its employees, companies can decide how they want to present. But that is not a big part of the mail Stream. B2E is not a big part of the mail stream.

The other area that you see is, if a company was to force elimination, number one the customers have choice as to who they do business with. But number two, there's a significant marketing opportunity. As you look at what we were talking about earlier on transpromo and providing promotion within that, it would take that opportunity away because people don't spend the time or want to look at it on a Web-based document.

So there is a revenue effect there as well, and we see more people starting to look at that again as a revenue opportunity in how to maximize their revenue flow by being more personalized in the communication with the individual about the types of things they are interested in. So that by looking at what information a customer uses, you should be able to supply things of interest rather than generic.

One last question here on, if you could take a second in your marketing services business, the competitive landscape seems awfully complicated with companies like Experian and Equifax sort of moving into that business. You have [eXiom] and maybe Harte-Hanks presumably targeting that as well. Could you spend a second and then just describe what your advantages are in this market versus your --?

Well, first of all, let's head towards the marketing side of it, rather than just the data. We use the data from marketing. But the real focus here is to provide more value for the customer in delivering the message and how they do it rather than just analytics around the data.

An example would be Kraft Foods. Kraft Foods is having -- has had a problem with shelf space in the store as to having non-Kraft similar products being promoted. And so they said, how do they communicate with their customer? And we work with them to create a whole different experience. Because what is the individual really looking for? They are looking for a dining experience. They want to be able to put a meal together, they are not going to buy Kraft Foods. They are going to buy a meal.

So what they created with us or we created for them is a whole magazine, which is now the largest distribution magazine out there, on delivering food for targeted audiences. So you have a working mother that wants to come home and have nutritious value food that is quick and easy to prepare that they don't have to think about.

So that is where the recipes go. They help them with providing their choices and go and make the choice of selection. That is the type of thing we do with marketing services. And inside of that is taking the information as to what the targeted market is, etc. which we might actually use some of the firms you mentioned within our total offering as to create the appropriate targeting. So it is much more of a consultative role in the marketing side and then utilizing our components plus our partners' components to change the total experience.

Let me just give you an example. We have a contract with a major telecom in marketing services. They would use a national advertising agency, and they would use perhaps an eXiom or an Experian for their national customer base. But they have a large retailer network, some of which is locally owned and some of which is owned by the national telecom. We would be the player that would help the local distributor manage a mailing to a local customer base. We would also provide the accounting for co-op marketing budgets and the digital asset management that is required to make sure that the brand is properly protected in those local mailings. So we would work in partnership with the national advertising agency or the national database provider.

So we see our solutions as complementary to and really providing a broader range than what some of these others can provide. And we will not own customers -- we are not in there owning a large database with all the costs that that assumes. Other questions?

I don't know if you want to make any -- given -- Murray is going to be handling these calls and meetings going forward, and this is a transitional meeting. I might be coming on as a guest speaker at some point, but I want to say thank you for those of you that I have worked with over the last 11 years. But I also think given the transition maybe Murray could speak briefly about some of his things that -- a little bit about his background and his approach to the business. We are in alignment, but there are some nuances that perhaps Murray could share with you before we conclude.

Thanks, Mike, and Mike, thanks for your leadership over the last 11 years.

As you look forward, there are number of things that you can consider. Number one, we are totally in alignment as to where our strategic direction has been, where we are going and how we're going to get there. And what the proportion is of organic growth, of building technologies inside, expanding our acquisitions.

But, as you look at my focus, I come from 40 years of sales, marketing and operations. So my focus really begins with the customer, and what is it that the customer needs and how do we deliver superior value to the customer? Because, as we deliver that value, we will see the benefits within the organization. And then take that and apply my operational experience in driving the operations what I call relentlessly, and that is having a clear vision, a clear focus and a clear determination of what it is we want to do and then driving that within the organization to gain the efficiencies, the productivity that we really should be entitled to.

And what that does in the end, of course, is enhance shareholder value. And I do like to make money. And it has been my history and track record over the last 40 years, whether it is in startups, whether it is in turnarounds, whether it is building the international business and being an international person who spent most of my life outside of America. I have a different perspective on international and how multiple cultures and societies work and how to integrate that into our business.

So I believe that we will continue to expand. I mentioned we have gone from 17 to 27 recently. We will continue to grow, and as I say to my international businesses, I'm not sure that America is as big as the rest of the world or not. So it is a significant opportunity there. The GDP in Europe is larger than it is in America. So we have big opportunities. And look at Asia and the opportunities that we have there. There are exciting spaces outside of what we do, and we can leverage our competencies, our capabilities that we have built in America.

As you look at the acquisitions we have made, we can take those technologies and move them into evolving market spaces, which to me set us up for long-term growth. And I really believe that we need to continue to build long-term sustainable growth in this Company. We need to deliver significant returns in the near-term, but we also need to have an equal balance in the long-term to ensure the health and the vibrancy of the Company. And that is only done by developing people and individuals, and one of my major focuses always has been on the creation of individuals that have the capability and the experience to grow into the future.

So I look forward to continuing to expand that, to see more and more people and talent coming to Pitney Bowes and growing within Pitney Bowes, which will enable us to deliver superior shareholder return for the long period, and that is my focus and my commitment.

Okay. Thank you very much, Murray. Thanks to all the management team for coming here today, and more importantly thank you to all of you for showing up. If you have any questions or any follow-ups, please feel free to give me a call. And if you are ever in the neighborhood of Stamford, please come by and visit us. Thank you.