Revenues Grow at VeriSign

Internet infrastructure services provider VeriSign Inc. (VRSN) reported revenues of $179 million from continuing operations for the fourth quarter of 2010, up 13% year over year and up 4% from the prior quarter. The results beat the Zacks Consensus Estimate of $177 million.

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.

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

The base of registered names for .com and .net totaled 105.2 million active domain names, up from 103.5 million names at the end of September and growing 9% year over year. The company added 7.6 million net new domain names in the quarter, up 4% year over year. VeriSign experienced an average daily query load of 61 billion in the third quarter, down from 66 billion in the previous quarter and 52 billion in the year-ago quarter.


Excluding stock-based compensation expense and non-recurring items, operating margin came in at 44.3% compared to 43.1% in the previous quarter and 35.4% in the year-ago quarter. The improvement in margin was driven by streamlining of the company’s business and deferment of certain expenses in the first quarter of 2011.

VeriSign reported a net loss of $40.5 million or 23 cents per share primarily due to a $109 million payment of contingent interest to holders of the 3.25% Junior Subordinated Convertible Debentures due 2037 in connection with a special dividend in December.

On December 10, VeriSign announced a special cash dividend of $3.00 per share of its common stock or $518 million that was paid on December 28, 2010. VeriSign ended the quarter with a headcount of approximately 1,050 compared to 1,100 employees at the end of the previous quarter.

Excluding one-time items but including stock-based compensation expense, net income came in at 26 cents per share, in line with the Zacks Consensus Estimate. This compared to a net income of $92.0 million or 49 cents per share in the year-ago quarter.

VeriSign used $47 million of cash in operating activities and used $12 million in capital expenditures. The company also repurchased 0.4 million shares for $14 million in the quarter.

VeriSign ended the quarter with $2.063 billion, a decrease of $488 million in the prior quarter. As of December 31, 2010, deferred revenue was $663 million, an increase of $9 million from the previous quarter and $77 million from the year-ago quarter.

For 2010, VeriSign reported revenues of $681 million, up 10% year over year. Net loss came in at $831 million or $4.64 per share compared to a net income of $245.6 million or $1.28 per diluted share in 2009.


Going forward, management expects revenues between $750 million and $780 million in 2011, up 10% to 14% year over year. Excluding one-time items and stock based compensation expense, gross margin is projected around 78%.

The results did not impact the share price. Shares of VeriSign were down 0.76% in after-hours trading to close at $32.65. In regular trading, the stock gained 0.18% to close at $32.90.

VERISIGN INC (VRSN): Free Stock Analysis Report

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