VeriSign reported strong third-quarter 2014 results with both
earnings and revenues growing year over year. We believe that gTLD
prospects, international expansion through IDNs, growth in the NIA
services and investments in intellectual properties will boost
results over the long run. Additionally, VeriSign has significant
growth opportunities in its network security products. However, the
negative impact of search engine adjustments on domain monetization
and increasing operating expenses related to marketing remain the
primary headwinds in the near term. Moreover, intensifying
competition in the NIA segment is a major concern. Thus, we
maintain our Neutral recommendation and set a price target of
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 registrar 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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