CRN: It has been about a year since the Internet Corporation for Assigned Names and Numbers changed the way domain names are registered. To what degree did that shift affect [NSI's] move to merge with VeriSign?

Jim Rutt: I don't think it had any particular impact. I would say that getting the contracts resolved in November 1999,because the new structure was only ratified by all of us then,[was key]. Prior to that, we could not have done a strategic combination because our own status was somewhat cloudy. Once that was resolved, we started immediately thinking about combinations, some of which where we would be the leader and some of which where we would play a strong supporting role like this one. We concluded that this was the best combination possible.

Our government [contracts] run through at least 2003. We have essentially a perpetual agreement [to register .com,.org and .net names on the Internet], and we have a minimum of four years on the registry [that manages all domain names] through November 2003, with an option to extend that four more years if we separate the registry and the registrar functions.

CRN: About what percentage of domain-name registrations does NSI have today?

Rutt: In our fourth-quarter 1999 release, the most recent numbers we made available publicly, it was approximately 70 percent of the new registrations. We have something around 90 percent of the cumulative market share.

CRN: Would you expect that number to continue to drop?

Rutt: It's hard to say. You have to look at two separate numbers. One is the total growth in the [domain-name] market. One of the things we found was the gross overall market grew much faster than it has ever grown before. It was up 50 percent in the fourth quarter. Our registrar increased 25 percent quarter-over-quarter, which was a very good quarter for us. So the new guys did not take anything from us as far as we can tell. Rather, they found new markets and helped grow the total market.

Our registry gets $6 per name per year for everybody, including the competitors. Some of the new people pioneering new business models are doing it in spaces that are not yet economical,for instance, trying to sell domain names to consumers. It is probably going to be a good market in a couple of years, but right now it's tough, and they are probably losing money doing it. Nonetheless, we get $6 per name per year at the registry, and it is profitable for us there. As long as the growth rate of [NSI's registrar business] is 10 percent to 25 percent per quarter, we feel good.

CRN: What is your response to some of the analysts who have said this merger is overvalued at $21 billion?

Rutt: My own view,and Stratton [Sclavos, chief executive of VeriSign] said as well,is it is actually a quite good deal for VeriSign. We would not have been willing to do the deal for anything less.

We are at a wonderful cash and profitability position. [NSI] is the third most-profitable company on the Internet after America Online Inc. and Yahoo. We were very confident of our value proposition and would not be interested in turning loose our company for anything less than a good price.

CRN: How will NSI's own Internet technology services be supplemented by the palette of services VeriSign has today, or is there overlap?