PhillyDeals: Analyst: Use Postal Service as cutbacks model

The U.S. Postal Service, which is weighing which of its 30,000-plus post offices to shut as e-mails, texts, apps, and Kindles replace printed matter, is a model of how to cope with online displacement of traditional business, according to Nick Del Deo, telecom analyst at Bernstein Research in New York.

Letters and shipments by the Postal Service - "the world's largest distribution system," the report says - have fallen more than one-sixth since 2004, as more traffic moves online, Del Deo notes.

At the same time, U.S. law requires the service to extend mail service to new homes and businesses - and they have grown 6 percent since 2004, Del Deo told clients in a recent report.

So the Post Office has been walking, driving, and shipping in more places, with fewer resources.

At the same time, the Postal Service has laid off one-sixth of its workers (many of them managers), shut back-office facilities, and generally done a respectable job of cutting costs, especially considering how Congress won't let it raise prices faster than inflation.

There's a lesson here for your phone company, Del Deo says:

Verizon and AT&T have to offer service to everyone in their territory, even as fewer people use landline phones.

So, like the Post Office, they've trimmed management ranks and sold marginal business lines to cut costs, while expanding wireless services to grab new customers.

But future cuts are going to be more difficult, Del Deo warns.

At the Post Office, with fewer workers, retirement and benefits costs are up. For phone companies, the remaining operating costs - maintenance, electricity, network operations - "will be much more difficult to purge from the system."

Pilot Freight Services, of Lima, Delaware County, plans to expand its new Mexico City facility and add new ones in Toronto and Amsterdam as it follows customers overseas, chief executive officer Richard G. Phillips Jr. tells me.

Pilot says it shipped $424 million in packages for General Electric Co., Dell Inc., Best Buy Co. Inc., and hundreds more retail and industrial clients last year, up 31 percent. That beats the 9 percent one-year sales increase at UPS Inc. and 12 percent increase at FedEx Corp., according to their most recent numbers.

Will Pilot need new investors to back its growth? "I get calls every day. But the family's happy" owning and running the 40-year-old company, Phillips said. Plus, he said, "we have a nice relationship with our lender," Citizens Bank.

Eric A. "Ric" Andersen has left Silver Lake Partners L.P., the Silicon Valley, multinational tech-investment firm that has bought and reorganized big tech companies such as Ameritrade, Nasdaq OMX Group Inc., Sabre, Seagate Technology, and Wayne-based SunGard Data Systems Inc., to join Milestone Partners, of Radnor. Andersen will be a partner and a member of the investment committee.

"There is a huge difference in scale between Milestone, which has around $300 million in its current funds, and Silver Lake, which has about $9 billion," Andersen said. So why make that move? "We're just about to hit the fund-raising trail. We will be raising a larger fund," Andersen said of Milestone.

Managing partners John Shoemaker and Scott Warren want to buy more small companies (like current properties Mariner Finance and Blaschak Coal Corp.), and they wanted to add a partner with Andersen's operating experience: A graduate of Bucknell and Wharton, he spent 24 years as an IT manager at PricewaterhouseCoopers L.L.P. and International Business Machines Corp. in Philadelphia before joining Silver Lake five years ago.

The Tuesday column noted that the foundation set up by the late Kennametal Inc. founder Philip McKenna and his cousin Alex McKenna has backed the Commonwealth Foundation and its conservative, cost-cutting agenda for Pennsylvania.

Out in Latrobe, Pa., Kennametal spokeswoman Christine Reitano wants everyone to know that, while the company "is very proud of its McKenna legacy," Kennametal's own donations and public activities "are not directed by the Commonwealth Foundation."