I've never been terribly impressed by email encryption expert Zix (Nasdaq: ZIXI). It's a micro-cap business in a market full of dancing elephants. Many of Zix's rivals have been bought out in recent months, but the stock is getting a wee bit expensive for that exit strategy, besides the fact that Cisco Systems (Nasdaq: CSCO), EMC (NYSE: EMC), and even dark horse Intel (Nasdaq: INTC) already got their fill of small security experts.

But Zix is making some very smart moves these days:

  • The company has extracted itself from its money-losing electronic prescriptions service and now reports its remains as a discontinued operation.
  • Government requirements for secure communications play right into Zix's hands.
  • Most importantly, the company is learning how to get some help from its friends.

To that third point, a growing network of third-party resellers of Zix services now contribute 53% of the fourth quarter's new business, up from just 33% in 2009. Google (Nasdaq: GOOG) landed more than 10% of those new sales all by itself as part of its larger push into enterprise-class cloud services. Symantec (Nasdaq: SYMC) subsidiary MessageLabs also plays an important role, and Zix has a total of 106 resellers across the country. Their contribution to revenue doubled year over year while total sales from continuing operations grew far slower at 25%.

The stock is still on the pricey side, and I'm not convinced that Zix deserves that kind of premium, but the company may prove me wrong if its third-party sales efforts continue to bear this kind of tasty fruit.

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