NSI’s Main Challenger Gains Ground

A couple of months ago I wrote about the initial public offering of Register.com (RCOM)
Register.com, one of a number of companies now challenging domain
registration market leader Network Solutions (NSOL)
Network Solutions.

Despite the daunting task of competing with NSI, which until last year was
the sole Internet domain registrar (with government blessing), eager
investors jumped all over Register.com’s IPO on March 3. Shares finished
their first day of trading at 57 <, or 139 percent above the $24 offer price.

After reaching as high as $116 per share on March 14, New York-based RCOM
got caught up in the severe spring correction. By April 17, shares fell as
low as $18.88.

But helped along by a quarterly report showing narrower-than-expected losses
and skyrocketing domain registrations, Register.com’s stock has returned to
its first-day trading levels, finishing Wednesday’s session at 59 9/64. It
is the top gainer among all Internet tickers for the week ended Wednesday
(up 115 percent).

While it’s far too early to declare Register.com the new domain registration
king, the company made substantial inroads into NSI’s market lead in Q1.
RCOM registered about 923,000 paid domain names in the first quarter, while
NSOL registered about 2 million.

That’s a big accomplishment, given that RCOM had only 467,000 domains
registered from last June through the end of the year. Further, the 923,000
registrations in Q1 equal the number of registrations for NSOL in last
year’s first quarter. RCOM is closing the gap at warp speed.

Register.com’s revenue growth is equally impressive. Q1’s $12.4 million
blows away the $9.6 million in revenue for all of last year. The company’s
valuation as a function of revenue has become more reasonable (or at least
less unreasonable), falling from about 200x trailing 12 months’ revenue
after its first day of trading in early March to about 85x TTM revenues now.

And though RCOM is not profitable, its net loss of $991,000, or 4 cents per
share, blows away Wall Street estimates of a 14 cents per share loss for Q1.

Bottom line: While it’s still not exactly a bargain, all trends point toward
strong growth and eventual profitability for Register.com, which already is
the No. 2 domain registrar and climbing.

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