Tech Beat: Encryption technology

Your mother’s maiden name may be sufficient to protect personal email conversations with friends and family, but when it comes to transmitting valuable company data or private health records, a higher level of security is in order.

Encryption technologies, which essentially transform plaintext data into a coded form so that it is unreadable while it’s in transit, have for years helped companies ensure the safe transmission of credit card numbers over the Internet, or human resources records inside corporate Intranets.

More recently though, companies specializing in encryption have shifted their focus away from the broad consumer market and toward more specialized enterprise applications. Years of conversing over email have led most people to see that, while it may be possible for Internet service providers to intercept individual emails, in most cases they have no reason to do so. Companies, on the other hand, are increasingly transmitting sensitive data over computers and handheld devices and are keenly interested in technologies that will guard this material.

Lots of large software companies like Microsoft Corp. (Nasdaq: MSFT) are active in encryption technology, but because high-tech security is a constantly moving target that regularly requires new solutions, it is an area where young companies with creative approaches to securing data may compete effectively with the established giants.

Zix Corp. (Nasdaq: ZIXI) is one of these smaller companies that has not only tapped into the demand for encryption technology serving enterprise customers, but has helped create new markets around encryption. The Dallas, Texas-based firm offers basic encryption technology for email communications, as well as an e-prescribing service that lets doctors check patient records, order prescriptions over a secure handheld device and then transmit those orders to patients’ pharmacies.

To date, almost 15 million prescriptions have been sent over Pocket Script, the Zix electronic prescription service, helping total company revenues rise to $18.4 million in fiscal 2006 from $14 million the year before. The company posted a net loss of $19.5 million last year, down from a $43.6 million loss the year before.

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