Pitney Bowes Downgraded – Analyst Blog

International credit rating agency Standard & Poors has downgraded Pitney Bowes Inc’s (PBI) long-term rating for bonds issued by the company to “BBB+” from “A” with a stable outlook. The BBB+ rating is the lowest investment grade rating possible. The credit rating agency also reduced the rating on the short-term debt securities issued by the company from “A-1” to “A-2”.

Moody’s Investors Service, the second largest credit rating agency in the world, has also initiated a review of the company’s long-term bond rating for a possible downgrade.

The rating action reflects slower growth prospects for the second half of 2010, driven by an extension of leases on old equipment rather than entering into leases on new equipment and stretching of lead time for sale to enterprise customers. The company remains over-exposed to the small and medium sized businesses which have been badly bruised by the economic downturn, much more than larger corporations.

The company is a leading supplier of products and services in the large majority of its business segments. Its meter base and continued ability to place and finance meters in key markets is a significant contributor to its current and future revenue and profitability.

However, all the segments face competition from a number of companies. We believe that its long experience and reputation for product quality, as well as its sales and support service organizations, are important factors in influencing customer choices with respect to its products and services.

Its significant investment in research and development operations differentiates it from competitors. It has many research and development programs that are directed toward developing new products and service offerings. As a result of these efforts, it has been awarded a number of patents with respect to several of its existing and planned products. However, its businesses are not materially dependent on any one patent, any group of related patents, any one license or any group of related licenses.

Pitney Bowes Inc. was incorporated in the state of Delaware on April 23, 1920, as Pitney Bowes Postage Meter Company. Today, Pitney Bowes Inc. is the largest provider of mail processing equipment and integrated mail solutions in the world.

We currently have an Underperform recommendation on Pitney Bowes Inc.