Like an engaged couple being showered with gifts and attention on the eve of
their wedding, security software vendor VeriSign and Internet
domain registrar Network Solutions
have been the top-performing stocks over the past month
in internet.com’s Internet Stock Index.
Though both were down slightly in early trading Thursday, NSOL and VRSN lead
the ISDEX with monthly gains through Wednesday’s trading of 48 percent and
47 percent, respectively.
In early March, VeriSign announced it would acquire Network Solutions in a
stock deal worth about $21 billion. Shareholders of both companies were
expected to vote on the merger at separate annual stockholder meetings on
Thursday.
The acquisition will enable VRSN to provide its customers of its digital
certificate software with additional e-commerce and Web development products
and services.
Though VeriSign carries a far higher market capitalization than Network
Solutions — $21.4 billion versus $14.4 billion NSOL actually generates
considerably more revenue and is profitable. In the first quarter, the
domain registrar logged revenues of $98.2 million and net income of $14.7
million, or 20 cents a share. VeriSign, meanwhile, turned in Q1 numbers of
$34.1 million against a net loss of $26.2 million, or 24 cents per share.
When the deal was announced three months ago, I
wrote
that while VeriSign appeared to be paying too much for NSOL, it was
“a merger of superbly positioned market leaders.” Though both are
experiencing increased competition VeriSign from Entrust Technologies and
GTE’s CyberTrust, Network Solutions from Register.com and a number of other
fledgling domain registrars they remain at the top of their respective
markets.
In making the deal, VeriSign gets first shot at selling digital certificates
and other e-commerce services to the thousands of businesses that will
register their corporate domains through Network Solutions. That alone will
help the company cut down on its cost per customer acquisition while
allowing it to sell multiple products and services to those same customers.
That’s how you build an Internet e-commerce services powerhouse, which was
the goal all along for VeriSign.
