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Pitney Bowes Concludes Divestiture of Software Solutions Unit

Zacks Equity Research

Pitney Bowes Inc. PBI completed the divestiture of its Software Solutions business to Syncsort, in a transaction worth approximately $700 million.  However, the deal excludes Pitney Bowes’s software and data business in Australia, whose divestitures are likely to be completed in the first quarter of 2020.

The divestiture of Pitney Bowes’s Software Solutions business to Syncsort was initially announced on August 2019.

Proceeds from the divestiture will be utilized by Pitney Bowes for reducing debt burden. As of Sep 30, 2019, the company had cash and cash equivalents (including short-term investments) of $651.9 million and long-term debt (including current portion) of $3.069 billion.

During the third quarter of 2019, financials pertaining to Software Solutions business were recorded under discontinued operations.

Pitney Bowes Inc. Price and Consensus

 

Pitney Bowes Inc. Price and Consensus

Pitney Bowes Inc. price-consensus-chart | Pitney Bowes Inc. Quote

 

Divestures as Growth Strategy

Sluggishness in the Software Solutions business has been a headwind for Pitney Bowes. The unit has been reeling under reduced license revenues, lesser renewal deals and softness in new license deal wins. Such downturns compelled management to undertake the divestiture.

Apart from lowering debt burden, the move is likely to enable the company to focus on other profitable businesses. This, in turn, is likely to boost shareholders’ value in the long run.

In 2018, the company completed the deal with Platinum Equity to divest its Document Messaging Technologies (DMT) production mail and supporting software business. In the beginning of 2019, Pitney Bowes divested its SMB businesses that is based across six European countries — Sweden, Denmark, Norway, Finland, Italy and Switzerland — to BAVARIA Industries Group AG to enhance go-to-market strategy.

Bottom Line

We note that the company is on track with its business transformation process, which aims to accomplish three major objectives — stabilizing its SMB business, enhancing operational excellence and leveraging digital commerce business to maximize growth. Progressing along these lines, we expect that divestiture of weak businesses will enable the company to refine its portfolio and utilize resources more prudently.

Additionally, we note that the Global Ecommerce business unit has continued to be one of the strongest growth drivers of Pitney Bowes. During the third quarter, Global Ecommerce revenues surged 20% on the back of strong performance of the domestic parcel platform. Moreover, continued investments to augment growth in the segment bode well.

Such well-chalked efforts along with Pitney Bowes’ strategies to introduce offerings and expand its clientele are likely to boost revenues in the long run.

Zacks Rank and Stocks to Consider

Pitney Bowes carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Cirrus Logic, Inc CRUS, Qorvo, Inc QRVO and CommVault Systems, Inc CVLT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Cirrus, Qorvo and CommVault are currently pegged at 15%, 10.1% and 10%, respectively.

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