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From Forbes.com magazine.
http://www.forbes.com/home/2002/10/09/1009verisign.html
What a surprise...
NEW YORK - For a company that has a government-sanctioned monopoly on the domain-name database that makes the Internet work, you'd think that VeriSign would be in the catbird's seat.
Instead, it looks as if the Internet infrastructure outfit's best days are behind it. VeriSign's (nasdaq: VRSN - news - people ) three main business segments--domain names, digital security certificates and telecom--are either on the wane or as yet unproven.
Its finances reflect this status: As the result of an acquisitions spree, VeriSign took a $5 billion writedown in this year's second quarter. The company, which reported pro forma net income of $233 million for 2001, actually posted a loss of $13.35 billion on sales of just under $1 billion. "On a generally accepted accounting principles basis they have not been profitable for some time," says Bear Sterns analyst Chris Kwak.
While VeriSign runs the registry that lists Web site names and their corresponding numerical addresses used to route Web traffic, this is no longer lucrative. The company has already lost its monopoly on the profitable part of the business, which is selling and registering addresses. (As keeper of the domain name database, VeriSign still gets $6 for every .com, .net and .org name no matter which firm registers it.)
Yet VeriSign stubbornly continues to charge $35 to register a name for a year while dozens of other companies have sprung up that are willing to do the same thing for ten bucks, or less, a pop. Perhaps that's why it has been steadily losing market share: It dropped to 34.5%, from 37.5%, in April, according to industry research from SnapNames. "I scratch my head at the company's insistence that price is not an issue," says Merrill Lynch (nyse: MER - news - people )analyst Ed Maguire.
The company nevertheless seems optimistic. "When the market picks up again, we'll be there," says Robert Korzeniewski, executive vice president of corporate development.
Behind VeriSign's tough stance on price cuts lurks marketing that can at best be called aggressive. In March, the company sent mailers to domain name owners whose addresses were up for renewal. Many in the industry deemed these mailers misleading: VeriSign offered only a three-year renewal at $69 with no mention that they could renew for just one year for much less. Even worse, the notes went out not just to those who'd originally registered with VeriSign but also to other companies' customers.
"They make fraudulent requests of customers and are stealing business from other companies," says Gartner Group analyst Ted Chamberlin. "The majority of calls I get about VeriSign are people asking me, 'Who else can I use besides them?'" GoDaddy, a privately held company based in Arizona, filed suit against VeriSign in June, accusing it of fraud and deceptive advertising. VeriSign settled that suit on Oct. 7 for undisclosed terms. It still faces a lawsuit filed in California over the campaign, which is also being investigated by the U.S. Federal Trade Commission and the Postal Inspection Service.
With domain names now a commodity, VeriSign and competitors like New York-based Register.com (nasdaq: RCOM - news - people ) and GoDaddy are all offering extra services such as e-mail accounts and Web site development tools. But, says Yankee Group analyst Paul Ritter, "The problem with the industry is that the differentiator is price. There isn't much of a difference in quality from one Web tool to another."
VeriSign's digital certificate segment suffers from another set of problems. Like domain names, VeriSign was also a pioneer in creating and selling the certificate technology embedded in Web browsers that assures online shoppers that retailers are legitimate and also encrypt any transactions. The trouble: The rush of retailers in need of certificates is long over and cheaper startups like Geotrust are taking market share.
VeriSign wants to expand into business certificates, which it says would give companies a secure way to let employees access their computer network remotely. But Merrill's Maguire is doubtful, and Soundview Technology analyst Walter Pritchard says, "It's a heavy solution for a simple problem."
VeriSign points out that the Tivoli division of IBM (nyse: IBM - news - people ) resells VeriSign's corporate product, and says it has high hopes for getting its certificates embedded in appliances like cell phones and cable modems. It has such a deal with GoodLink, a company that makes a device that competes with Research In Motion's (nasdaq: RIMM - news - people ) Blackberry. Intel (nasdaq: INTC - news - people ) and VeriSign recently announced an agreement to "optimize" their respective laptop technologies to make wireless access to corporate networks more secure. But while Intel is recommending that manufacturers install VeriSign's product, it's up to them to do so.
And then there is VeriSign's awkward effort to break into telecom. It has its eye on the day when voice networks merge with the data network that VeriSign's domain name database keeps humming. In December 2001, the company paid $1.2 billion for Illuminet and $300 million last February for another telecom, HO Systems.
"The networks won't converge anytime shortly," admits Korzeniewski, "but as they bridge we think we are uniquely positioned to offer services to carriers and enterprises."
Bear Sterns' Kwak agrees that convergence is inevitable. "But," he adds, "the question is what's the timing and how do you make money off of it?"
That is a question that VeriSign hasn't been able to answer for any of its businesses for quite some time.
quack
http://www.forbes.com/home/2002/10/09/1009verisign.html
What a surprise...
NEW YORK - For a company that has a government-sanctioned monopoly on the domain-name database that makes the Internet work, you'd think that VeriSign would be in the catbird's seat.
Instead, it looks as if the Internet infrastructure outfit's best days are behind it. VeriSign's (nasdaq: VRSN - news - people ) three main business segments--domain names, digital security certificates and telecom--are either on the wane or as yet unproven.
Its finances reflect this status: As the result of an acquisitions spree, VeriSign took a $5 billion writedown in this year's second quarter. The company, which reported pro forma net income of $233 million for 2001, actually posted a loss of $13.35 billion on sales of just under $1 billion. "On a generally accepted accounting principles basis they have not been profitable for some time," says Bear Sterns analyst Chris Kwak.
While VeriSign runs the registry that lists Web site names and their corresponding numerical addresses used to route Web traffic, this is no longer lucrative. The company has already lost its monopoly on the profitable part of the business, which is selling and registering addresses. (As keeper of the domain name database, VeriSign still gets $6 for every .com, .net and .org name no matter which firm registers it.)
Yet VeriSign stubbornly continues to charge $35 to register a name for a year while dozens of other companies have sprung up that are willing to do the same thing for ten bucks, or less, a pop. Perhaps that's why it has been steadily losing market share: It dropped to 34.5%, from 37.5%, in April, according to industry research from SnapNames. "I scratch my head at the company's insistence that price is not an issue," says Merrill Lynch (nyse: MER - news - people )analyst Ed Maguire.
The company nevertheless seems optimistic. "When the market picks up again, we'll be there," says Robert Korzeniewski, executive vice president of corporate development.
Behind VeriSign's tough stance on price cuts lurks marketing that can at best be called aggressive. In March, the company sent mailers to domain name owners whose addresses were up for renewal. Many in the industry deemed these mailers misleading: VeriSign offered only a three-year renewal at $69 with no mention that they could renew for just one year for much less. Even worse, the notes went out not just to those who'd originally registered with VeriSign but also to other companies' customers.
"They make fraudulent requests of customers and are stealing business from other companies," says Gartner Group analyst Ted Chamberlin. "The majority of calls I get about VeriSign are people asking me, 'Who else can I use besides them?'" GoDaddy, a privately held company based in Arizona, filed suit against VeriSign in June, accusing it of fraud and deceptive advertising. VeriSign settled that suit on Oct. 7 for undisclosed terms. It still faces a lawsuit filed in California over the campaign, which is also being investigated by the U.S. Federal Trade Commission and the Postal Inspection Service.
With domain names now a commodity, VeriSign and competitors like New York-based Register.com (nasdaq: RCOM - news - people ) and GoDaddy are all offering extra services such as e-mail accounts and Web site development tools. But, says Yankee Group analyst Paul Ritter, "The problem with the industry is that the differentiator is price. There isn't much of a difference in quality from one Web tool to another."
VeriSign's digital certificate segment suffers from another set of problems. Like domain names, VeriSign was also a pioneer in creating and selling the certificate technology embedded in Web browsers that assures online shoppers that retailers are legitimate and also encrypt any transactions. The trouble: The rush of retailers in need of certificates is long over and cheaper startups like Geotrust are taking market share.
VeriSign wants to expand into business certificates, which it says would give companies a secure way to let employees access their computer network remotely. But Merrill's Maguire is doubtful, and Soundview Technology analyst Walter Pritchard says, "It's a heavy solution for a simple problem."
VeriSign points out that the Tivoli division of IBM (nyse: IBM - news - people ) resells VeriSign's corporate product, and says it has high hopes for getting its certificates embedded in appliances like cell phones and cable modems. It has such a deal with GoodLink, a company that makes a device that competes with Research In Motion's (nasdaq: RIMM - news - people ) Blackberry. Intel (nasdaq: INTC - news - people ) and VeriSign recently announced an agreement to "optimize" their respective laptop technologies to make wireless access to corporate networks more secure. But while Intel is recommending that manufacturers install VeriSign's product, it's up to them to do so.
And then there is VeriSign's awkward effort to break into telecom. It has its eye on the day when voice networks merge with the data network that VeriSign's domain name database keeps humming. In December 2001, the company paid $1.2 billion for Illuminet and $300 million last February for another telecom, HO Systems.
"The networks won't converge anytime shortly," admits Korzeniewski, "but as they bridge we think we are uniquely positioned to offer services to carriers and enterprises."
Bear Sterns' Kwak agrees that convergence is inevitable. "But," he adds, "the question is what's the timing and how do you make money off of it?"
That is a question that VeriSign hasn't been able to answer for any of its businesses for quite some time.
quack
