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VeriSign shreds estimates
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October 25, 2000: 6:52 p.m. ET
Internet security, domain name services provider logs strong 3Q sales, profit
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - VeriSign Inc. on Wednesday reported a third-quarter operating profit that was three times what Wall Street had expected.
During the period ended Sept. 30, VeriSign said it earned $38.4 million, or 18 cents per share, excluding one-time items. That compares with net income of $1.6 million, or 1 cent per share, during the same period last year, and is three times the 6-cents-per-share profit analysts polled by earnings tracker First Call had expected the company to report.
VeriSign, which provides data-authentication, secure-payment and domain-name registration services for Web sites, said its revenue for the quarter was $173.1 million. That's up 660 percent from the year-ago period but includes revenue from Network Solutions, which VeriSign acquired on June 8.
Analysts had generally expected VeriSign's top line to come in at about $163 million.
"With Network Solutions now neatly in the fold, we believe we exited Q3 as the leading infrastructure services company on the Internet by a wide margin," Stratton Sclavos, VeriSign's president and chief executive, said in a teleconference after the earnings announcement Wednesday evening.
Accounting for the amortization of goodwill and other intangibles, Verisign posted a net loss for the quarter of $1.3 billion, or $6.78 per share. That's compared with net income of $1.6 million, or 2 cents per share during the same period last year.
 VeriSign (VRSN: Research, Estimates) shares fell $20.88 to $147.44 in Nasdaq trade ahead of the earnings news, which was released after the close of trading. They rose $9.56 to $157 in after-hours activity.
Looking ahead, VeriSign Chief Financial Officer Dana Evans said the company is on track to post revenue of between $185 million and $190 million in the fourth quarter. For all of 2001, the company's total revenue should amount to between $960 million and $985 million, Evans said.
Although the most recent quarter's results handily beat the Street's expectations, the reported profit did include roughly $29 million in pre-tax gains on investments. Accounting for that, the company's operating earnings actually came in at about 11 cents per share, said UBS Warburg analyst Jordan Klein.
Even so, Klein said VeriSign's latest results were very strong and its prospects for growth make it a standout among computer software and services companies.
"This is one of the most visible revenue models of any company you'll find out there," Klein said.
But considering the volatility in the technology sector and VeriSign's relatively high valuation, he said he expects the stock to trade in a range anywhere between $135 and $180 until the broader market stabilizes.
Behind the numbers
During the quarter, VeriSign said its core authentication services business, which includes digital certificate and managed public key infrastructure services, saw particular strength. The company sold more than 75,500 certificates in the third quarter, representing a 140 percent increase from the third quarter last year.
As for its online payment-services business, VeriSign said it added more than 3,200 new customers in the quarter and now services over 10,600 online merchants.
VeriSign said its domain-name registration business, which it acquired with its purchase of Network Solutions in June, added 5.1 million new domain names and over 650,000 renewed or extended domain names during the quarter.
Last March, VeriSign, which is headquartered in Mountain View, Calif., agreed to buy Network Solutions for $21 billion in stock. It was one of the first in a string of acquisitions aimed at creating an online powerhouse that can shepherd companies onto the Internet and help them establish and maintain their online and e-commerce identities.
In July, VeriSign acquired ezDomainAuction.com, which markets and sells Internet domain-name registrations in the secondary market.
Separately, VeriSign said Wednesday it would acquire GreatDomains.com, which also sells secondary-market Internet domain-name registration services. Financial terms of that deal were not disclosed. 
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