New Contract Triggers Large Decline in Verisign
Verisign (NASDAQ: VRSN), which is the largest manager of the Internet-address database, saw its shares fall precipitously on Friday. A new contract allows the company to continue to control Web sites ending in .com with limited price increases. Shares were more than 13 percent to trade just above $34.00.
Bloomberg reported that the U.S. Department of Commerce approved a contract renewal through November 30, 2018 that lets Verisign maintain its current pricing of $7.85 per domain name registration. In the previous contract, the company had the right to four price increases of as much as seven percent. Those terms have been removed in the new contract.
“A major growth driver has been removed,” Shaul Eyal, an analyst at Oppenheimer & Co., said in a research note today. “With $1.4 billion in cash, VeriSign could be considering its capital utilization plan which currently focuses on buybacks.” On a conference call with investors, Chief Executive Officer Jim Bidzos said that “We're extremely well positioned even without the pricing terms in the previous agreement. We're still a growth company.”
The company's service translates the words in an IP address into numbers that a computer server understands. Other companies that sell .com addresses also pay a fee to Verisign for the service that links words in IP addresses to the correct Internet site.
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