Near-term challenges - Top Stories

Information Superhighways Newsletter, Dec, 2001

The company's stock is one of the few that's managed to avoid the Internet collapse, still trading at nearly $40 -- but it's well below it's year's high of almost $100 and has fallen 20 percent since its third-quarter earnings report. Analysts pointed to slowdowns in both domain name renewals and deferred revenue growth as concerns.

While the domain name database did shrink, that was mostly due to the last gasps of the speculative dot-coin bubble and a purge of free, promotional domain names, said chief financial officer Dana Evan. That leaves reliable, paying customers who have proven that they will buy more services, she said.

Meanwhile, the events of Sept. 11 and delays in the launch of the new .biz and info domains also slowed deferred revenue growth, but recurring revenues, which represent about 80 percent of the total, compensate for that, said Evan.

While many companies have taken financial hits because of cuts in corporate spending, VeriSign's subscription-based business model has enabled it to expand operating margins and predict up to 40 percent revenue growth next year. Its sales this year are approaching $1 billion already.

In general, analysts foresee bright long-term prospects, even a "juggernaut," if VeriSign can execute on its plan, said Stephen Sigmond of RBC Capital Markets.

"The big challenge is correcting this perception some people have that they're just a domain name company, and clarifying the message," he added.

Sclavos is confidently aiming high, with the goal of being one of the top five technology companies in the world within the next 10 years.

""We want to be known in the same breath as Oracle, Cisco, Microsoft, and Intel," he said.