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Shutterfly Soars

Jeremy MacNealy
August 2, 2007

Personal-publishing service Shutterfly (Nasdaq: SFLY  ) defied gravity with outstanding sales growth in its second quarter. But perhaps even more attractive than the numbers is a new partnership that the company unveiled in its conference call.

Customers are flocking to Shutterfly, which operates an Internet-based "social expression and personal publishing service." In addition to letting users store and share photos online, the service also lets them adorn various types of merchandise with their digital prints. Shutterfly then mails the personalized wares to the customers.

The growth is impressive, but according to CEO Jeffrey Housenbold during the conference call, Shutterfly may just be scratching the surface. He revealed that only 6% of potential customers -- those with digital cameras that are also plugged in to the Internet -- have used a personal publishing service for photo merchandise.

The lack of awareness is one reason Shutterfly is starting to look at strategic partnerships with key retailers. In pursuing that goal, it recently teamed up with Target (NYSE: TGT  ) to make Shutterfly available in key Target stores and on the website.

Shutterfly is also looking at the pet lovers' market as holding great potential. This summer, the company packaged special offers with Del Monte's (NYSE: DLM  ) pet food, and it's currently testing partnerships with ret