(FORTUNE Magazine) – FedEx

FedEx (FDX, $67) is picking up the gauntlet thrown down when rival UPS acquired Mailboxes Etc. in 2001. The $2.4 billion cash deal, announced on Dec. 30, gives FedEx immediate and direct access to tens of thousands of consumers who previously never used its services. The company is hoping that the Kinko's brand name and its 1,200 retail outlets can help it grab a stake in the lucrative retail shipping business.

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Kinko's

In recent years the king of copying has remade itself into a one-stop shop for small and midsized businesses and walk-in customers, offering online access, computer rentals, faxing, and videoconferencing. But FedEx is mainly looking for locations to pick up packages. The two companies have had an exclusive shipping arrangement since the late 1980s. It's expected that FedEx will try to double the number of Kinko's outlets. Deutsche Bank analyst John Barnes says the deal gives FedEx a "foundation to build on."

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What it means to you

Turning the deal into a big boost for profitability is another story. For starters, FedEx isn't just getting access to retail customers; it's getting all those copier machines, spiral bindings, and a whole bunch of other stuff it doesn't know much about. And it's paying a premium to do so--Kinko's generates just $2 billion a year in sales. The bottom line: With FedEx shares already trading at more than 20 times estimated profits, investors don't "absolutely, positively" have to buy in now. Predicts analyst James Valentine at Morgan Stanley: "The Kinko's acquisition might cause some investors to rethink why they own the stock." --David Rynecki