TheStreet.com is reporting that Wells Fargo analyst Gray Powell downgraded Verisign (VRSN) today writing:
VeriSign’s domain name growth appears to be falling a bit lower than the midpoint of second quarter expectations and competition from new gTLDs could be influencing overall growth to some degree.
“The company is tracking toward about 400K domain name additions in the upcoming quarter, which is lower than the 550K guidance midpoint, said the analyst, citing ICANN zone files.”
“The analyst also noted that other domain names that will possibly be more popular haven’t yet been launched.”
“He downgraded the stock to Market Perform from Outperform and lowered his price target range on the shares to $51-$55 from $56-$60.”
TheStreet.com reports that the same analyst said while Google’s (GOOG) recently announced domain program could be a good thing for VeriSign, as small businesses buy more .com and .net web domains, if Google sells higher profile domains at larger discounts or gives them away for free, it could result in more competition to VeriSign’s .com and .net domains starting late next year.
Shares of Verisign are trading down $1.65 a share just over 3% today on the news although it has bounced off the lows of the session which was $48.64
An inforgraphic was also published which appears above.
Unlike almost study I have read, I cannot find in any of the material how many SMB participated in the study, how the study was conducted and what time frame the study was conducted.
According to this survey of small- and medium-sized (SMB) business owners already conducting business online:
4 out of 5 SMB website owners prefer a .com web address over a new gTLD web address.
81% of website owners believe new gTLDs will be confusing to their customers.
77% of SMB website owners prefer a .com web address over a new gTLDs that describes their business.
79% of Internet users would rather visit a .com will confuse customers.
66% of SMB website owners prefer a descriptive, longer .com web address to a shorter new gTLD address.
An overwhelming majority (94%) feel safe visiting a .com while only 33% feel comfortable visiting a new gTLD.
Since 1964, SCORE has helped more than 10 million aspiring entrepreneurs. Each year, SCORE provides small business mentoring, workshops and education to more than 375,000 new and growing small businesses. More than 11,000 business experts volunteer as mentors in over 320 chapters serving local communities with entrepreneur education.
VeriSign, Inc. (NASDAQ: VRSN), today reported financial results for the first quarter of 2014, reporting revenue of $249 million for the first quarter of 2014, up 5% from the same quarter in 2013.
Verisign reported net income of $94 million and diluted earnings per share (EPS) of $0.64 for the first quarter of 2014, compared to net income of $85 million and diluted EPS of $0.52 in the same quarter in 2013.
The operating margin was 56.1 percent for the first quarter of 2014 compared to 56.4 percent for the same quarter in 2013.
Verisign reported, on a non-GAAP basis, net income of $95 million and diluted EPS of $0.64 for the first quarter of 2014, compared to net income of $94 million and diluted EPS of $0.58 for the same quarter in 2013.
Shares are up $.80 after hours to back over $50 a share.
Verisign expects to complete in Q2 the intended repatriation of approximately $700M-$800M of cash held by foreign subsidiaries
Verisign ended the first quarter with cash, cash equivalents and marketable securities of $1.7 billion, flat as compared with year-end 2013.
Cash flow from operations was $142 million for the first quarter compared with $151 million for the same quarter in 2013.
Deferred revenues on March 31, 2014, totaled $886 million, an increase of $30 million from year-end 2013.
Capital expenditures were $11 million in the first quarter of 2014.
During the first quarter, Verisign repurchased 2.4 million shares of its common stock for $132 million. At March 31, 2014, $868 million remained available and authorized under the current share repurchase program.
Verisign Registry Services added 1.28 million net new names during the first quarter, ending with 128.5 million active domain names in the zone for .com and .net, which represents a 4% increase over the zone at the end of the first quarter in 2013.
In the first quarter, Verisign processed 8.6 million new domain name registrations for .com and .net as compared to 8.8 million for the same period in 2013.
The final .com and .net renewal rate for the fourth quarter of 2013 was 72.2% compared with 72.9 % for the same quarter in 2012.
Renewal rates are not fully measurable until 45 days after the end of the quarter.
Verisign ended the quarter with $1.7 Billion in cash and equivalents
According to Verisign.com, the operator of the .Com registry the number of .Com domain names just broke the 113 Million mark for the first time.
The official number at the last Verisign update was 113,002,815.
According to ntldstats.com/tld the number of new gTLD registrations are over 332,000…
Stock Analysis firm Trefis had some interesting comments on Verisign in a note entitled “Drop In Verisign Shares Highlights Risks Associated With Domain Business”
The note went on to say that the biggest risk to the Verisign business is growth in ccTLD domain names.
Trefis didn’t mention the new gTLD’s at all.
It would be one thing to mention new gTLD’s and then conclude that the wouldn’t impact Verisign market share of the global domain market, but for the company not to even mention new gTLD’s makes it look like Trefis doesn’t even know they exist.
Regarding the contract to run the .net and .com registry, all Trefis had to say was that “Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line”
The post did not mention ICANN or the impact that the US possibility giving up oversight might effect the contract the next time it comes up for renewal.
Here is the post:
How Will Losing The .com/.net Contract Impact VeriSign?
VeriSign is the sole registrar for the .com/.net domain names, and had a market share of approximately 46.7% in global top level domain name registrations in 2013. At the end of Q3FY13, VeriSign had a total of 126 million .com and .net domain names registered in the adjusted zone out of a total 265 million domain names registered globally.
Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line. You can take a look at the impact a loss in contract to another registry service provider such as Neustar on VeriSign’s stock by changing its share of all domain registrations worldwide.
“Currently, we believe the only threat to VeriSign’s market share in the global domain name registrations market is from country code top level domain names (ccTLDs). ccTLD registrations reached 119.5 million at the end of Q3FY13 and have been increasing at almost three times the growth rate in .com/.net domain names. “
“This rapid increase in ccTLD registrations, combined with restrictions on domain name pricing, have strained top line growth for VeriSign, which fell to 10.5% in 2013 from 13% in 2012. ”
“We expect VeriSign’s market share to decline gradually until the end of our review period as ccTLD registrations continue to grab potential .com/.net registrants.”"…
VeriSign, Inc. VRSN today provided a statement on the National Telecommunications and Information Administration’s (NTIA) announcement of its intent to transition key Internet domain name functions.
Verisign shares are down over 5% in pre-market activity trading at just over $52 a share.
Here is Verisign’s announcement:
“”The announcement by NTIA on Friday, March 14, 2014, does not affect Verisign’s operation of the .com and .net registries. The announcement does not impact Verisign’s .com or .net domain name business nor impact its .com or .net revenue or those agreements, which have presumptive rights of renewal.
The NTIA announcement involves Internet functions that are entirely different functions from those Verisign performs under its .com and .net agreements. The functions performed by Verisign involved in the NTIA announcement have been performed as a community service spanning three decades without compensation at the request of the Department of Commerce under the Cooperative Agreement”…
Earlier today we told you that ICANN Published A Study On Mitigating Risks Of Name Collisions from new gTLD domain names.
Tonight Verisign published an answer to the study ICANN.
On its company blog Verisign, in a post entitled “Uncontrolled Interruption? Dozens of “Blocked” Domains in New gTLDs Actually Delegated”, Verisign in part says:
The report “centers on the technique of “controlled interruption,” initially described in a public preview shared by Jeff Schmidt last month.”
“With that technique, domain names that are currently on one of ICANN’s second-level domain (SLD) block lists can be registered and delegated for regular use, provided that they first go through a trial period where they’re mapped to a designated “test” address. ”
“The staged introduction of new SLDs is intended to provide operators of installed systems the opportunity to assess the potential impact of an impending name collision on their own, before any external operators have an opportunity to exploit it.”
“If this technique (or any other) were adopted, it would stand to reason the staged introduction would need to be monitored carefully. ”
” Someone would need to check that SLDs on the block lists actually did go through the trial period, and were not put into regular use without the appropriate opportunity for assessment by operators of installed systems.”
(Note that Verisign isn’t endorsing the technique; we are reviewing the just-published Mitigating the Risk of DNS Namespace Collisions report, and we’ve already expressed reservations about the statistical invalidity of SLD block lists as an indicator of name collision risk. That being said, the point still remains that if such a technique were adopted, it would need to be monitored to ensure correct implementation.)
“Given the anticipation of “controlled” interruption, it’s ironic that while ICANN specifically precludes the delegation of domain names on the SLD block lists, dozens of them were actually registered and delegated!”
“That fact was recently duly noted by one of Verisign’s researchers who has been analyzing the daily progress of new gTLDs. As it turns out, nearly all delegated SLDs that should have been blocked were cancelled over the past weekend after independent reports citing the existence of inappropriate delegations began to circulate.:
:That the delegations of SLDs on the block lists could have caused name collisions with installed systems is not our primary concern. (And, as noted above, we don’t consider the block lists – which are based solely on query frequency at specific points in time – to be the final word on which delegations might or might not cause name collisions.…