Back to top

Analyst Blog

The U.S. government’s plan of relinquishing control of the system for assigning website addresses is expected to hurt VeriSign’s (VRSN - Analyst Report) growth prospects going forward.

The National Telecommunications and Information Administration (NTIA) intend to transfer key domain name functions to the global multi-stakeholder community. As a first step, it has asked the Internet Corporation for Assigned Names and Numbers (ICANN) to bring together all global stakeholders to develop a proposal for the transition.

VeriSign, which operates the infrastructure for the .com, .net and.gov, stated that the NTIA decision will not affect its operations in any way as its Internet functions are much different from those included in the announcement.

Further, the company clarified that functions performed by VeriSign that come under the purview of the NTIA announcement have been performed as a community service spanning three decades without compensation and hence their non-renewal will not affect profitability going forward.

Nevertheless, this announcement seems to be a major setback for VeriSign. It is likely to be an overhang on the registration business, which is a major contributor of revenues (contributed nearly $1.0 billion revenue in 2013).  We believe that the less U.S. control will increase risk for VeriSign as it will reduce company’s ability to renew .com and .net contract price as per its own terms.  

Nevertheless, the whole process of relinquishing control will take some-time. Hence, we believe that it will have no significant negative impact on VeriSign’s near term results.

We believe that increasing domain name registration, the renewal of the .com contract and the price hike in .net domain name will boost VeriSign’s top-line in the near term. Additionally, VeriSign has significant growth opportunities from its network security products as Distributed Denial of Service (DDoS) attacks continue to grow.

However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to the .com contract renewal remain the primary headwinds in the near term. Moreover, significant competition from AT&T Inc. (T - Analyst Report), Qihoo (QIHU - Snapshot Report) and Verizon (VZ - Analyst Report) in the network intelligence and availability (NIA) segment remains a major concern.

Currently, Verisign has a Zacks Rank # 2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%