UPS Crossing Bridge to New Economy

Tuesday’s announcement that UPS will offer a new online electronic bill presentment and payment service for business-to-business (B2B) transactions marked yet another milestone in the company’s drive to become an e-commerce monolith.

Through an alliance with Internet payment companies Bottomline Technologies and Princeton eCom, UPS Capital, the company’s financial services division, will allow businesses to track the status of their invoices and make payment adjustments.

UPS says the service will cut administrative costs and streamline business transactions through online dispute resolution, payment scheduling and payment automation.

Battling Old Economy Image

The launch of the new bill payment service gives UPS some additional steam as it continues its aggressive foray into e-commerce. In some ways, UPS has had to dance a bit faster than its competitors, as many investors and consumers still perceive the company to be a doddering relic from the old economy.

As the leading carrier of goods purchased over the Internet, UPS has developed many business-to-business and business-to-consumer innovations, but the company still has to sell itself as a viable player in the new economy.

That effort has included investing about $1 billion (US$) a year in information technology, and strategically timing new product and service launches — such as the new bill payment service — to capture maximum attention from industry and consumers.

“Since so many businesses depend on UPS to deliver goods and information, handling bill presentment and payment is a logical step for a company that facilitates millions of business-to-business transactions every day,” said Avivah Litan, a research analyst at GartnerGroup.

“UPS will be able to integrate this new offering into its already established e-commerce and e-logistics business units,” Litan continued, “and is positioning itself to offer a comprehensive e-commerce solution to its customers.”

The new service is first being tested in pilot projects, after which it will be offered to a wider market.

Financial Picture Solid

So far, UPS appears to be successful in recasting itself as a new economy player. After generating excitement among investors by raising $1.2 billion with its November IPO, the company’s stock skyrocketed. It has since been somewhat erratic, but last week’s stellar report of first quarter earnings could go a long way toward solidifying its image.

Revenues for the quarter ended March 31st climbed 14 percent to $7.2 billion from the $6.3 billion reported during the same period one year earlier. Net income rose to $813 million, or 67 cents per share, compared to $499 million or $44 cents per share in Q1 1999.

Upon issuing the Q1 figures, UPS also confirmed plans to repurchase shares next month with proceeds from the IPO.