Yale junior Fred Smith received a "C" for the term paper in which he outlined his concept for an express transportation company. After serving in the Marine Corps, Smith honed his college brainstorm and, with $138 million in start-up capital, founded Federal Express. Offering overnight parcel deliveries and other courier services, FedEx quickly established itself as an integral part of the new, fast-paced global economy.

Bigger, better, shorter

The bigger FedEx has grown, the shorter the company's name has become. The world's largest express shipping company, once known as Federal Express, later became FedEx. The holding company temporarily changed its name to FDX in 1998 after Federal Express merged with the trucking and logistics firm, Caliber System. In January 2000, however, the company ditched the FDX moniker, and returned to the familiar "FedEx" label. Today, FedEx ships to nearly every address in the world - at least to the ones that matter. In press releases, the company boasts of how it "connects areas that generate 90 percent of the world's gross domestic product in 24-48 hours with door-to-door, customs-cleared service and a money-back guarantee."

To deliver its three million packages every working day, FedEx uses about 44,700 drop-off locations, more than 600 airplanes, and 40,900 trucks. After the Caliber System merger, FedEx included six operating divisions: FedEx; RPS, the second-largest small-package shipping business; Roberts Express, the world's largest express trucking firm; Viking Freight, a leading regional trucking company; Caliber Logistics, a logistics outsourcing firm; and Caliber Technology, an order fulfillment operation.

The giant and the niche-dwellers

When FedEx announced in October 1997 that it was buying Caliber System for $2.4 billion, observers warned that the merger could disrupt FedEx's already profitable express shipping business. Observers were wrong. FedEx finalized its Caliber System merger in January 1998, and by the end of that year, the new company, FDX, was posting a seven percent increase over the same quarter the year before. Domestic income grew 30 percent that period, from $168 million to $217 million. The company claimed that its tough cost controls and low fuel prices contributed to this short-term growth. FedEx subsidiaries that came from Caliber Systems also grew. RPS, the largest subsidiary besides FedEx, grew 14 percent for the period, while Viking Freight grew seven percent.

In the long-run, the merger strengthened FedEx's overall health. UPS largely rebounded from a crippling 15-day strike in 1997, and now the two companies compete head-to-head for the express-shipping business in most markets. While FedEx does battle, several smaller companies continue their reliable service for niche markets, such as logistics operations, business-to-business transportation, overseas shipping, and small package delivery. FedEx has ensured its long-term survival by buying several of these smaller companies.

Beware the postman, and other predictions

If there's one thing that could upset the FedEx-UPS death match, it's the post office. The United States Postal Service already offers tracking for its Express Mail service. It also offers a program that can track packages sent using its popular Priority Mail service. Even without the guarantee, Priority Mail draws customers. Before agreeing to withdraw them, the USPS used television ads that mocked the complicated pricing schemes of competitors FedEx and UPS to tote its $3.20 two- to three-day service as the fastest-growing delivery option.

In late 1998, labor troubles threatened FedEx's glowing corporate reputation. With pilots near a strike and the holiday shipping season in jeopardy, FedEx made plans to outsource a slice of its flight operations. But a week before Christmas, the pilots' union agreed to a contract. Even so, FedEx stuck to its backup plan. The company remained calm through the turmoil.