Verisign shreds estimates

April 26, 2001: 5:30 p.m. ET

Security software, domain-name registrar soars past targets

NEW YORK (CNNfn) - VeriSign on Thursday logged a first-quarter operating profit that soared past the Street's expectations, citing continued strong demand for its products and services.

And executives at the Mountain View, Calif.-based firm said they are comfortable with Wall Street's existing consensus revenue estimates for the current quarter and remainder of the year.

Excluding acquisition-related and other extraordinary charges, VeriSign said it earned $48.6 million, or 23 cents per share, during the period ended March 31. That's a dime better than the 13 cents per share analysts polled by First Call had expected, and compares with a profit of 2 cents during the same period last year.

At $213.4 million, VeriSign's first-quarter revenue rose 526 percent from the $34.1 million it reported during the same quarter a year ago and was slightly more than the $212.7 million analysts had expected, according to the First Call survey. The revenue results include sales derived from several companies VeriSign acquired during the course of the year.

Shares of VeriSign (VRSN: Research, Estimates) slipped 38 cents to $46.22 on Nasdaq ahead of the earnings announcement. They soared $2.29 to $48.51 in extended-hours trade.

VeriSign is a leading supplier of software and services designed to enhance security on the Internet. Its products include encrypted software IDs, also called digital certificates, and managed security services to safeguard data and transaction sent over the Internet and corporate networks.

Last June, VeriSign bought Network Solutions, the No. 1 supplier of Internet domain-name registration services. Each time a user requests a Web page using the familiar dot.com, dot.net and dot.org suffixes, that request is channeled through systems maintained by Network Solutions and other domain-name registrars. Those systems then route the user to a numeric address which is used to identify the Web server on the Internet.

Web site operators pay an annual fee for that service, and the company is by far the dominant domain-name service provider.

The company said its enterprise and service provider division, which sells its security software and services through a direct sales force, saw particularly strong results. In particular, it said it gained traction with its managed public key infrastructure, or PKI, services, adding more than 200 new customers in the quarter, including Ernst & Young, Comerica, the Nuclear Regulatory Commission, and the Depository Trust Co.

With those new customers, VeriSign said there are now roughly 2,000 businesses, government agencies, and health-care organizations using its managed PKI services to secure online business processes.

VeriSign said its registry services group, through which it sells Internet domain-name services, added 3.1 million new names during the quarter, finishing it with 30.6 million active domain names in its database. That's up 120 percent from 13.9 million in the same quarter last year.

The registry services group also processed the renewal, extension or transfer of an additional 2.7 million domain names during the quarter, bringing the total number of paid domain name transactions to 5.8 million, VeriSign said.

In early March, VeriSign reached a preliminary agreement with U.S. federal regulators which would allow it to retain control of the domain-name registry database intact at least through 2007.

Looking ahead, Dana Evan, VeriSign's chief financial officer, told analysts on a teleconference that the company is "comfortable" with the current consensus revenue estimate of about $230 million in revenue for the current quarter.

For all of 2001, Evan said the company is aiming for total revenue ranging between $975 million and $1 billion. "We would anticipate seeing our revenue growth rate accelerating in the second half of the year," she said.

She did not provide specific earnings-per-share forecasts for the current quarter or the full-year. Analysts are generally expecting a profit of 14 cents per share during the second quarter, and 59 cents per share for the year, according to First Call's survey.