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VeriSign (VRSN - Analyst Report) recently announced that more than 6.1 million domain names were registered in the fourth quarter of 2012. According to its recently published “The Domain Name Industry Brief”, domain name registrations increased 2.5% sequentially to 252 million at the end of the fourth quarter.

For the eighth consecutive quarter, domain name registrations improved by more than 2.0%. On a year-over-year basis, worldwide registrations jumped 11.8% (26.6 million). Excluding .tk (this registry offers both free and paid domain names), year-over-year growth rate was 8.9% in the fourth quarter of 2012.

Country Code Top-Level Domains (“ccTLDs”) increased 21.6% year over year and 5.0% sequentially to 110.2 million in 2012. The growth was across all Top-Level Domains (TLDs) as both .com and .net grew substantially during the quarter. On a combined basis, .com and .net domain names improved 6.4% year over year to approximately 121.1 million.

New .com and .net registrations were 8.0 million, slightly better than 7.9 million reported in the year-ago quarter. Renewal rate for .com and .net was 72.9% in the last quarter, up 40 basis points on a sequential basis. In the fourth quarter, VeriSign’s average daily Domain Name System (DNS) query load was 77 billion, up 16.0% sequentially and 21.5% from the year-ago quarter.

VeriSign announced that .com continued to maintain its #1 slot as the largest TLD, followed by .de (Germany) and .net. The biggest improvement was for .cn (China), which moved up two places in the rankings to end the quarter at #7, while .info moved one step down to #8.

In its latest Industry Brief, VeriSign highlighted the opportunities and challenges of the growing “Big Data”. VeriSign cited a study conducted by International Business Machines (IBM - Analyst Report), which estimates that more than 2.5 quintillion bytes of data are generated every day. IBM’s study also noted that 90% of current worldwide data have been generated over the last two years.

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 growth 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) and Verizon (VZ - Analyst Report) in the network intelligence and availability (“NIA”) segment remains a major concern.

Currently, VeriSign has a Zacks Rank #3 (Hold).

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