Contact: Brenon Daly
One conclusion to draw from the recent pickup in divestitures is that dividing corporate attention often means diluting corporate returns. Consider the situation at Zix Corp. The Dallas-based company has a small but growing business selling email encryption. In mid-2003, Zix moved into electronic prescriptions through its $1.5m acquisition of the assets of PocketScript. The plan was to expand its business of providing secure communications to the billions of prescriptions written every year in a less costly and more secure way.
However, after nearly six years of trying to realize those goals, Zix has little to show for it. Revenue from the e-prescriptions unit totaled just $5.4m, or 19% of Zix’s overall sales, in 2008. Sales at the division last year slipped 11% from the year before, compared to a 26% increase in its core email encryption business. (And we would note that both units employed some 73 people, giving an idea of the relative returns of each unit.)
Moreover, the e-prescriptions division has only one-third the number of subscribers that Zix estimates would be required to cover the costs of developing the service, according to the company’s own calculations. And now, Zix has acknowledged that it may never get the business to that level on its own. The firm hired Allen & Co late last week to advise it on ‘strategic alternatives’ for its e-prescriptions unit.