VeriSign Shares Sink On Gloomy Outlook

VeriSign

The Mountain View, Calif.-based company said domain name registrations fell far short of forecasts in the first quarter. Other divisions also were flat.

"The sustained technology downturn definitely caught up with us in Q1," said Stratton Sclavos, VeriSign's chief executive.

The company also said it will lay off 10 percent of its work force, or 350 people, to restructure and cut costs.

Shares of VeriSign sank to a 52-week low, down $8.35, to $9.89, in Friday trading on the Nasdaq Stock Market.

The VeriSign division that handles the registrations ended the first quarter with 12 million active domain names under management but reported a renewal rate of only 40 percent.

First-quarter sales for the group were $113 million, compared with $137 million a year ago.

"The magnitude was more than we anticipated," Sclavos said.

Domain names are typically renewed every two years. In 2000, businesses and individuals were snapping up addresses as they prepared to reap the rewards of the New Economy.

The results are in line with a report by the research firm SnapNames that showed more than 372,000 domain names ending in dot-com, dot-net and dot-org vanished in March as sites shut down and speculation cooled.

At the same time, VeriSign's online trust offerings have yet to take off as large customers such as telecommunications companies hold off on buying new technology until their industries recover.

At least a dozen analysts downgraded their rating of VeriSign stock Friday.

"It's a total debacle now," said C. Eugene Munster, a senior research analyst at US Bancorp Piper Jaffray.

He said the first-quarter results confirmed some investors' fears and popped the bubble of "true believers" who had supported the company's business model and stock.

"They basically have thrown in the towel today," he said. "The hopefest is over."

For the three months ended March 31, VeriSign reported a net loss of $20.9 million, or 9 cents per share, compared with a loss of $1.4 billion, or $6.90 per share, in the same period a year ago.

Excluding acquisition-related charges, the company earned $68 million, or 28 cents a share, compared with $49 million, or 23 cents per share a year ago.

Analysts were predicting earnings of 20 cents per share, according to a survey by Thomson Financial/First Call. VeriSign's results matched expectations when adjusted for taxes anticipated by analysts but not paid by the company.

First-quarter sales were $328 million, up from the $213 million reported in the same period last year. Analysts, however, were expecting revenues of $342 million in the first quarter of 2002.

Sclavos said second-quarter sales would range from $320 million to $330 million. Analysts were expecting about $360 million.

Copyright © 2002 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.