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Verisign urged to dump .com

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mole

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VeriSign urged to dump domains
by David Shabelman (thedeal.com)
Updated 08:15 PM EST, May-24-2002

SAN FRANCISCO — In real time, VeriSign Inc.'s March 2000 acquisition of Network Solutions Inc. was relatively recent. In the Internet world, however, that's ages ago. And with VeriSign's prospects souring, some analysts are calling for the company to dump its once highly valued domain name registration business acquired in the deal.

Bear, Stearns & Co. analyst Chris Kwak said VeriSign's registry unit faces declining market share, pricing pressures and "serious overhang in terms of negative news." VeriSign purchased Network Solutions in for $21 billion in stock, but Kwak values the company Network Solutions at $450 million to $520 million.

"Why not get rid of the business that's going to be the biggest pain in the butt to you?" he asked. "All the negative news [about VeriSign] the past year and a half has been on that business."

In reporting first quarter earnings, VeriSign said it registered 600,000 new domain names, flat compared with the fourth quarter of 2001. The company said it ended the first quarter with 12 million active domain names under management, down from 13.6 million at the end of 2001.

Kwak said VeriSign could end 2002 with fewer than 9 million registered domain. He expects that figure to drop to fewer than 7 million by year-end 2003 before stabling off at about 6 million in 2004.

VeriSign spokeswoman Cheryl Regan declined comment on whether the company would consider selling the registry unit, and she said the company does not break out revenue figures for the business.

The domain name sector is no longer as important for VeriSign since the company diversified its business, Kwak said.

In February the company closed a $340 million deal for H.O. Systems, a provider of billing and customer-service solutions to wireless carriers. In December VeriSign also closed on its $1.2 billion stock purchase of Illuminet Holdings Inc., which provides routing services to telecom carriers. VeriSign built its business providing Web site security.

Other VeriSign watcher are less sold on the company's unloading the registry unit.

Jordan Klein, an analyst with New York-based UBS Warburg LLC, said divestiture is an option if the business does not improve. But he expects the registry to stabilize at 9 million to 10 million names and said that VeriSign will have more success if the economy improves in the second half of the year.

"So far, they haven't proven they can get these unique names to sign up for other services," Klein said. "If they can do that, there's potential for a lot of growth. If they sell it off, they're going back on their whole strategy and admit that it's not working."

Nitsan Hargil, senior analyst with Friedman, Billings, Ramsey, also is against selling the registrar business. The division remains profitable and brings in revenues when Verisign's overall revenues are declining, he said.

"VeriSign is under the gun both for the decline in business from the old Network Solutions business, but more importantly it's newer business are not showing growth, so it makes it a more risky strategy to head in that direction alone," Hargil said.

Kwak said both Redmond, Wash.-based Microsoft Corp.'s MSN Internet portal and Santa Clara, Calif.-based Yahoo! Inc. would be prime candidates to acquire the VeriSign assets. But don't expect a deal anytime soon, he added.

"I don't think [VeriSign] management is completely against the idea, but I think they do want to take another shot at rebuilding the business," he said.
 
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mole

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United States: Verisign Enjoined From "Domain Slamming"
24 May 2002

VeriSign, Inc., the preeminent domain name registrar, has been enjoined by a federal judge in Maryland from continuing its controversial marketing campaign involving the mailing of notices to domain name registrants encouraging them to re-register their Internet domain names with VeriSign. The injunction, issued on May 14, 2002, was granted as part of a lawsuit filed against VeriSign the previous day by BulkRegister, a domain-name seller based in Baltimore. In the lawsuit, BulkRegister alleges VeriSign is engaged in a "slamming" campaign aimed at BulkRegister’s domain name customers intended to deceive them into switching their accounts to VeriSign. The term "slamming" refers to an outlawed practice by long distance telephone providers to trick consumers into switching their providers.

The suit is reported to allege two counts of false advertising, one count of tortious interference with contractual relations and one count of tortious interference with economic opportunity. U.S. District Court Judge Frederic N. Smalkin agreed with BulkRegister that VeriSign likely engaged in deceptive behavior. "The plaintiff has shown ... that the current 'renewal' notice sent by defendant to plaintiff's domain-name registrants is misleading and likely to cause confusion among such registrants," Smalkin wrote. The Court ordered VeriSign to immediately stop sending the notices to BulkRegister customers.

The Friday before the BulkRegister lawsuit was filed, press accounts report that Verisign’s mass markets Executive Vice President, Champ Mitchell, attended an analysts meeting about VeriSign’s shrinking customer base and told the analysts: "For a long time we just laid there and let everybody take our base away. Those days are over and they will not return." VeriSign is also reported to have recently laid off 10 percent of its staff, after posting a quarterly loss of 9 cents per share. Earlier this year, a similar "slamming" charge was made against VeriSign by registrar Go Daddy Software, which also objected to allegedly deceptive "renewal notices." Last month, a Canadian registrar settled charges with the Federal Trade Commission that it duped Internet domain name holders into needlessly registering variations of their domain names on false pretenses. The Canadian registrar agreed to pay $375,000 in consumer redress.

Why This Matters: VeriSign, which has pursued its controversial marketing strategy despite its competitors’ cries of foul, seems to have deliberately set an aggressive course to turn the tide of its financial fortunes.

This article originally appeared in ADLAW By Request, a publication of Hall Dickler Kent Goldstein & Wood LLP
 

beatz

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"MSN Internet portal and Santa Clara, Calif.-based Yahoo! Inc. would be prime candidates to acquire the VeriSign assets"
Brrr...i don't think MSN or Yahoo being the replacement would be so much better - on the other hand everything is better than VS operating the registry AND being a registrar at the same time.
 

mole

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Bill won't bite. The last thing he needs is an old economy model for his .net initiative.
 
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