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VeriSign sells Network Solutions
Anick Jesdanun
OCTOBER 17, 2003
FACED with a sagging demand for domain name registrations, the company that runs the bulk of the internet's addressing system is selling most of its direct-sales unit, Network Solutions.
VeriSign is to sell 85 per cent of the Network Solutions subsidiary that, along with dozens of competitors, sells the internet equivalent of real estate to individuals, groups and companies.
But the company will retain full ownership of the master databases for ".com" and ".net," including the controversial Site Finder search service that it recently agreed under pressure to temporarily suspend.
The databases represent all names registered, while Network Solutions and rivals feed those databases with information on the domain names they sell.
Network Solutions has seen its market share drop to 28 per cent in the quarter ending June 30, from 62 per cent in 2000 when VeriSign bought both the database and the registration units for $US19.6 billion ($24.5 billion) in stock.
Venture capital firm Pivotal Private Equity is buying Network Solutions for about $US100 million in cash and debt.
The deal, expected to close later this year, comes just two years after VeriSign renegotiated its contract with internet regulators to avoid having to split the two halves into independent companies. As part of that deal, VeriSign agreed to cede control of ".org" names.
"I think what the company is trying to do is basically show a growth story and get rid of a deadweight," said Gene Munster, an analyst with US Bancorp Piper Jaffray. "Even though they made such a heavy investment in this business and were so confident this would be part of the future, they recognise the fact that it's not."
VeriSign spokesman Tom Galvin said the planned sale stemmed from a strategy sale.
"Over the last, even slightly less than a year, our strategy became very clearly focused on providing the underlying infrastructure for telecommunications and internet networks," he said.
In addition to serving as the internet's traffic police by running key domain name computers, VeriSign offers internet authentication and security services, along with billing and routing services for phone calls.
VeriSign gets $US6 annually per ".com" and ".net" registered, whether it is through Network Solutions or a rival. Though the total number of domain names has dropped since the dot-com boom, VeriSign has about 27.5 million such names as of June 30, generating $US165 million.
The company also is trying to capitalise on its pivotal role over the net's core by directing queries for mistyped and non-existent domain names to its Site Finder service, which offers suggestions on where a user might have wanted to go.
VeriSign, which describes the service as a navigational aide, gets unspecified revenues from search engines that power Site Finder.
But Site Finder has caused some applications, including junk email filters, to fail because they had depended on getting error messages when domain names don't exist. The internet's key oversight body pressured VeriSign to suspend the service while it investigates, a process that would take at least a few more weeks. The company has agreed to give at least 30 days notice before restoring Site Finder.
On the registration side, Network Solutions has been losing market share to lower-priced rivals, Mr Munster said. He said Network Solutions charges about $US27 a name, while the industry average is closer to $US15 ($US6 goes to VeriSign; the registration company keeps the rest).
The planned sale should help reduce criticisms from rivals who say Network Solutions has an unfair competitive advantage because it is linked to VeriSign's master lists and could get first word of expired domain names available for re-registration. Company officials have insisted the two businesses are run separately, and a sale provides greater assurance of that.
"Arms' length is good," said Michael Froomkin, a University of Miami law professor who follows domain name policies. But because VeriSign retains Site Finder, Froomkin said, "that doesn't get them out of that debate."
The Associated Press
VeriSign sells Network Solutions
Anick Jesdanun
OCTOBER 17, 2003
FACED with a sagging demand for domain name registrations, the company that runs the bulk of the internet's addressing system is selling most of its direct-sales unit, Network Solutions.
VeriSign is to sell 85 per cent of the Network Solutions subsidiary that, along with dozens of competitors, sells the internet equivalent of real estate to individuals, groups and companies.
But the company will retain full ownership of the master databases for ".com" and ".net," including the controversial Site Finder search service that it recently agreed under pressure to temporarily suspend.
The databases represent all names registered, while Network Solutions and rivals feed those databases with information on the domain names they sell.
Network Solutions has seen its market share drop to 28 per cent in the quarter ending June 30, from 62 per cent in 2000 when VeriSign bought both the database and the registration units for $US19.6 billion ($24.5 billion) in stock.
Venture capital firm Pivotal Private Equity is buying Network Solutions for about $US100 million in cash and debt.
The deal, expected to close later this year, comes just two years after VeriSign renegotiated its contract with internet regulators to avoid having to split the two halves into independent companies. As part of that deal, VeriSign agreed to cede control of ".org" names.
"I think what the company is trying to do is basically show a growth story and get rid of a deadweight," said Gene Munster, an analyst with US Bancorp Piper Jaffray. "Even though they made such a heavy investment in this business and were so confident this would be part of the future, they recognise the fact that it's not."
VeriSign spokesman Tom Galvin said the planned sale stemmed from a strategy sale.
"Over the last, even slightly less than a year, our strategy became very clearly focused on providing the underlying infrastructure for telecommunications and internet networks," he said.
In addition to serving as the internet's traffic police by running key domain name computers, VeriSign offers internet authentication and security services, along with billing and routing services for phone calls.
VeriSign gets $US6 annually per ".com" and ".net" registered, whether it is through Network Solutions or a rival. Though the total number of domain names has dropped since the dot-com boom, VeriSign has about 27.5 million such names as of June 30, generating $US165 million.
The company also is trying to capitalise on its pivotal role over the net's core by directing queries for mistyped and non-existent domain names to its Site Finder service, which offers suggestions on where a user might have wanted to go.
VeriSign, which describes the service as a navigational aide, gets unspecified revenues from search engines that power Site Finder.
But Site Finder has caused some applications, including junk email filters, to fail because they had depended on getting error messages when domain names don't exist. The internet's key oversight body pressured VeriSign to suspend the service while it investigates, a process that would take at least a few more weeks. The company has agreed to give at least 30 days notice before restoring Site Finder.
On the registration side, Network Solutions has been losing market share to lower-priced rivals, Mr Munster said. He said Network Solutions charges about $US27 a name, while the industry average is closer to $US15 ($US6 goes to VeriSign; the registration company keeps the rest).
The planned sale should help reduce criticisms from rivals who say Network Solutions has an unfair competitive advantage because it is linked to VeriSign's master lists and could get first word of expired domain names available for re-registration. Company officials have insisted the two businesses are run separately, and a sale provides greater assurance of that.
"Arms' length is good," said Michael Froomkin, a University of Miami law professor who follows domain name policies. But because VeriSign retains Site Finder, Froomkin said, "that doesn't get them out of that debate."
The Associated Press
