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VeriSign Applies for new gLTDs

VRSN

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VeriSign Inc. (VRSN - Analyst Report) recently applied for nine Internationalized Domain Name (IDN) transliterations of .com and three IDN transliterations of .net.

The applications submitted by VeriSign represent approximately 12 out of the 14 new generic Top Level Domain (gTLD) applications. The company submitted the applications through the Internet Corporation for Assigned Names and Numbers' (ICANN) new gTLD program.

IDN aims to make the Internet more user-friendly to end users all over the world by enabling them to identify themselves using their native language scripts. VeriSign has applied for IDN transliterations of .com in nine non-Latin based scripts.

Management expects these non-Latin based transliterations of .com and .net to open more options for global Internet users.

VeriSign has also applied for verisign and .comsec along with the 12 IDN transliterations of .com and .net. Additionally, applicants for approximately 220 new gTLDs selected Verisign to provide back-end registry services.

However, revenue from new gTLDs is not expected to be material before 2013. VeriSign views the introduction of new gTLDs as an adjacent growth opportunity. This should positively impact results in the coming years.

VeriSign’s registry, security and communications services are essential for the smooth functioning of the online world.

Meanwhile, in the past few years, VeriSign undertook a restructuring plan that streamlined its business, selling off non-core businesses while relocating its headquarters.

It remains to be seen how the streamlined company generates a growth trajectory given the change in management. Although the fundamentals remain solid, earnings estimates have declined marginally after the company reported disappointing results for the first quarter of 2012.

However, we maintain our Neutral recommendation. Our recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Hold.

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