In the wake of Edward Snowdon's revelations it appeared the encryption line would expand its reach, as well. Despite expanded marketing efforts, though, none of the company's products have shown any acceleration. In fact, new orders unexpectedly hit an air pocket in the September quarter. Revenues are recurring. And the renewal rate is high. So reported results are likely to stay intact. But a major upswing has become a less certain outcome.
Zix probably will report some good quarters over the next 2-3 years. And even the bad quarters won't be terrible. New orders in the September period, as low as they were, probably exceeded cancellations on existing contracts. Widespread adoption of the technology may never happen, though. Corporate technology spending is tight. There are lots of competing programs. Encryption is certain to be used for critical applications. But it may turn out to be one of those good ideas that never completely catches on.
The stock price is near where we originally recommended it. Our advice is to sell the stock and redeploy the proceeds in a Special Situation with better defined growth prospects.
( Click on Table to Enlarge )