VeriSign reported second-quarter 2014 results with earnings and
revenues both registering year over year growth. However, the
company provided tepid full-year guidance. We believe that growing
gTLD customer base, international expansion through IDNs, strong
growth in the NIA services and investments on developing new
intellectual properties will boost revenues and profitability in
the long run. Additionally, VeriSign has significant growth
opportunities from its network security products as DDoS attacks
continue to grow. The company's partnership with Juniper is a
positive in this regard. However, the negative impact of search
engine adjustments on domain monetization and increasing operating
expenses related to the .com contract renewal remain the primary
headwinds in the near term. Moreover, significant competition in
the NIA segment remains a major concern. Also the entry of some big
names like Google in the market is a headwind. Thus, we maintain
our Neutral recommendation and set a price target of $57.00.
Based in Reston, CA, VeriSign Inc. (VRSN) provides Internet
infrastructure services that include domain name registry services
and infrastructure assurance services. Through its only reportable
segment Naming Services, the company provides Registry services and
Network Intelligence and Availability (NIA) services.
Registry services operate the authoritative directory of .com,
.net, .cc, .tv, and .name domain names. With respect to the .com,
.net and .name, the company has agreements with the Internet
Corporation for Assigned Names and Numbers (ICANN) that makes it
the exclusive register of these domain names. With respect to .com
the company has an agreement with the U.S. Department of Commerce
In Jun 2012, ICANN approved the renewal of the company's
agreement to serve as the authoritative registry operator for the
.com registry. The term period for the agreement started from Dec
1, 2012 through Nov 30, 2018. Subsequently, in Nov 2012, DOC also
approved VeriSign's renewal agreement with ICANN.
Besides ICANN, the company has agreements that make it the
exclusive registry for the .tv and .cc country code top-level
domains (ccTLDs). Additionally, the company provides back-end
systems for all .gov, .jobs and .edu domain names based on these
agreements. It also provides internationalized domain name (IDN)
services that enable web-users to access websites in their local
VeriSign charges fees for operating different domain names
except .edu registry. The .com and .net fees are charged as per
agreement terms with ICANN and any price increase is subject to
prior approval of the DOC for the .com domain. The .name fees are
charged as per terms of agreement with ICAAN, while fees received
for operating the .gov registry are based on the terms of agreement
with the U.S. General Services Administration (GSA).
NIA provides infrastructure assurance services to organizations
and also offers iDefense, Managed Domain Name System and
Distributed Denial of Service protection Services.
VeriSign reported revenues of $965.1 million in 2013. The U.S.
contributed 60.6% of revenues, while Europe, the Middle East and
Africa (EMEA), Australia, China, India, and other Asia Pacific
countries (APAC) and other countries (that include Canada and Latin
American countries) contributed 17.6%, 13.5% and 8.3%,
VeriSign faces competition in the domain name registry market
from 16 registries for the operation of 18 generic top-level
domains (gTLDs) who have agreements with ICANN. The company also
competes with more than 250 Latin script ccTLD registries and 38
IDN ccTLD registries as well as from outsourced domain name service
providers such as Neustar, Inc., Afilias Limited, ARI Registry
Services and Nominet UK, Inc.
The company also competes with search engine providers such as
Google, Microsoft and Yahoo! and social networking services
VeriSign Inc. (VRSN): Read the Full Research
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