VeriSign Misses, Shares Down - Analyst Blog

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VeriSign, Inc. ( VRSN ) reported a net income of $68.0 million or $0.42 per share in the first quarter of 2012 compared to net income of $40.3 million or $0.24 per share in the year-ago quarter and net income of $53.8 million or $0.34 per share in the fourth quarter of 2011.

Excluding one-time items but including stock-based compensation expenses, net income came in at $0.37 cents per share, missing the Zacks Consensus Estimate of $0.39.

In 2010, VeriSign sold the Authentication Services business and closed down the operations of non-core Content Portal Services (CPS).


The continuing operations of the company consist primarily of the results of the Naming Services business, which comprises Registry Services and Network Intelligence and Availability (NIA) Services. NIA Services include the Managed Domain Name System (Managed DNS), iDefense and Distributed Denial of Service (DDoS) mitigation businesses.

VeriSign reported revenue of $206 million in the first quarter of 2012, up 13% from the year-ago quarter and up 1% sequentially.

Internet adoption, e-commerce and online advertising continued to be drivers of our Registry business growth. 

The base of registered names for .com and .net totalled 116.7 million active domain names, up from 113.8 million names at the end of December quarter and growing 8.1% year over year. The company added 2.86 million net new domain names in the quarter, up 4% year over year. The company also processed a record 8.9 million new domain name registrations, an increase of 7.7% year over year.

Operating margin came in at 48.1%, compared to 45.6% in the previous quarter and 36.1% in the fourth quarter of 2011.

VeriSign generated $110 million of cash from operating activities and used $13 million in capital expenditures. The company repurchased 1.8 million shares for $68 million.  VeriSign still has $763 remaining under its current share repurchase authorization.

VeriSign ended the quarter with $1.35 billion of cash and equivalents, up from $1.31 billion at the end of the prior quarter. Deferred revenues came in at $783 million, an increase of $55 million from the previous quarter.

Guidance

At the end of March 2012, the Internet Corporation for Assigned Names and Numbers (ICANN) posted renewal terms negotiated between Verisign and ICANN for the .com Registry Agreement.

The terms of the agreement remains pretty much the same as the existing agreement except for new provisions regarding indemnification and audit rights, which is consistent with the other five largest generic top level domain (gTLD) registry agreements (including the .net agreement).

Verisign applied for 14 new gTLDs including 12 transliterations of .com and .net through ICANN's new gTLD application process. This is expected to close in May 2012. Additionally, applicants for approximately 220 new gTLDs selected Verisign to provide back-end registry services.

However, revenue from new gTLDs is not expected before 2013 and is not expected to be material in 2013.

Meanwhile, VeriSign's search for a new CFO ends as the company named George E. Kilguss, III as CFO effective May 14. George brings over 25 years of solid financial experience to VeriSign.

Going forward, management now expects revenues between $870 million and $890 million in 2012, up 12% to 15% year over year and up from the previous guidance of $865 million - $890 million in 2012.  Excluding one-time items and stock based compensation expense, gross margin is projected around 80%. VeriSign expects to exit the fourth quarter of 2012 with an operating margin of 52%-54%.

The disappointing results did not impress the investors as shares lost 3.59% in after-market trading to close at $40.52. In regular trading, shares gained 0.67% to close at $42.03.


 
VERISIGN INC ( VRSN ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

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