VeriSign Sheds Businesses in Bid to Refocus

Embattled Internet infrastructure and security giant VeriSign will
undertake a massive divestiture of most of its existing businesses to better
concentrate on its “core” domain name and authentication areas.

Speaking today at the company’s annual analyst meeting in New York,
VeriSign executives said the company would rid itself of a long list of
units, including a number of its communications and payments businesses.

“We have been going after doing too many things not well enough in too
many places,” said John Donovan, VeriSign’s executive vice president for
products and sales and marketing. “We’re going to go out and execute
against fewer geographies and fewer products.”

Those businesses will either be closed entirely or sold off in deals
throughout 2008, Bert Clement, VeriSign senior vice president and CFO, told analysts. Transitioning the businesses to new owners will
likely require an additional several months, extending the process into
2009, he added.

After the bloodletting, VeriSign, which operates the .com, .net and .tv
Internet suffixes, will consist chiefly of its Domain Name Services (DNS)
and Secure Socket Layer (SSL) units. Those areas generate the most revenue
and have the most growth potential, execs said.

Those businesses are also among the least vulnerable to competitors,
thanks to the heavy infrastructure investments they require.

“Infrastructure is really at the core of our DNA,” said Ken Silva, vice
president and chief security officer, during the presentation. “It’s really
one of our huge competitive advantages. It is a barrier to entry into this
space, because in order to run this type of operation, you’ve got to build
an operation that is global, always available and, by the way, is
battle-hardened.”

Making both businesses even more worthwhile to maintain is the fact that
they both leverage many of the same technology assets, Silva said.

The sweeping changes come as a result of what spokespeople described as a
five-to-six-month review of the company’s businesses. Executives said
paring down its lines of business would help VeriSign focus on the markets
in which the 12-year-old company has been operating since its inception.

“Our DNA really is basically Internet infrastructure at the core,
surrounded by scalability and trust,” Silva later told
InternetNews.com. “If you really look at the two absolute core
services we have, they’re SSL and DNS. We’ve been a player since those
markets started or since those protocols started … They’re at the heart of
what we do.”

Another business that survived the restructuring is the VeriSign Identity
Protection business. Executives said the unit, which offers a suite of
identity protection and authentication services for consumers, represents a
significant growth opportunity. As a result, VeriSign brass said it plans
to continue investing in that area, though it’s less developed than the
company’s DNS and SSL businesses.

Executives also said VeriSign is looking into whether to continue three
additional businesses, its Managed Security Services, Mobile Messaging, and
Content Delivery Network units. Those areas face a combination of
entrenched competition, require sizable investment, or are in markets that
are still maturing, they said.

The news comes following a tumultuous year for the Internet
infrastructure and transaction player, which has suffered accounting
questions and management shakeups.

Last November, the company restated millions in earnings from previous
years, due to accounting errors. CFO Dana Evans left in July.

The company’s longtime CEO Stratton Sclavos resigned abruptly in May amid concerns about the company’s sprawling strategy.
Sclavos, who has since been replaced by former board member Bill Roper, had
overseen a slew of acquisitions in recent years that continued the company’s
dramatic expansion into new areas.

During today’s analyst meeting, Clement said the company plans to
continue making acquisitions, but would slow its pace.

“The perception on the Street was … we were an acquirer,” Clement said.
“That’s definitely not the case on a going-forward basis.”

“We’re going to invest in companies and do the same process that we’ve
done for our strategic business review when we look at M&A,” he added.
“We’re going to make sure [an acquisition] fits our DNA, that we can
leverage our infrastructure, leverage our core, and have an ability to win
there.”

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