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ICANN Renews VeriSign's Contract

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VeriSign, Inc. (VRSN - Free Report) recently announced that the Board of Directors of the Internet Corporation for Assigned Names and Numbers (ICANN) approved the renewal of Verisign's agreement to serve as the authoritative registry operator for the .com registry. The term period for the agreement will start from December 1, 2012 through November 30, 2018.

VeriSign’s Board of Directors approved the renewal of the .com registry agreement on June 16, 2012.

Meanwhile, The U.S. Department of Commerce will now undertake a review of the renewal of the .com registry agreement under the terms of the Cooperative Agreement between the Department and Verisign.

VeriSign met the challenging performance requirements in the operation of .com after having invested in the security and reliability enhancements such as   DNSSEC and IPv6 support.  The renewal of agreement bodes well for the top-line for VeriSign.

Earlier, VeriSign 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.

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

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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