By Elinor Mills Abreu
MOUNTAIN VIEW, Calif. (Reuters) - They direct you to every Web address you type in your browser. They secure nearly every item you buy online. Soon they'll be routing your telephone calls as well. And you probably don't even know who "they" are.
VeriSign Inc. VRSN.O -- the provider of Internet address and security services -- is hoping to step out from behind the curtain in 2002 with an advertising campaign modeled after the "Intel Inside" marketing of the early 1990s.
Like Intel Corp. INTC.O, VeriSign's branding suffers from its lack of a clear consumer product. Unlike the chip giant, VeriSign has confused the marketplace by acquiring companies that do different things, including provide obscure services.
"We had a Robert Bly-esque time in the woods, beating on drums, trying to come up with a message of who we are," a VeriSign spokesman said recently, referring to the American poet who argued that modern men suffer from being disconnected to their mythic roots.
The company came up with a mantra -- digital trust services. -- but now has its work cut out to make their message carry. One spokesman admits, for example, that his own mother has confused the company he works for with Verizon Communications VZ.N. Verisign will commit substantial amounts to its identity-boosting campaign -- one published report put its ad budget at $80 million -- using network television and major print publications to get the word out.
MARKET LEADER IN SECURE TRANSACTIONS, DOMAINS
It has the resources to do it, with $1 billion in cash at its disposal. An 800-pound gorilla in its own right, it's valued at nearly $10 billion.
The company pioneered public-key infrastructure (PKI) services in 1995. PKI, even if hard to understand, is vital to e-commerce. It enables companies to identify parties in an online communication using digital certificates and to encrypt, or scramble, messages so they are read only by the intended recipients.
The company then acquired Signio Corp. and now offers online payment services. Its acquisition of Network Solutions Inc. (NSI) last year, however, wasn't as obvious a choice.
Since 1993, NSI has had what many in the industry argue is a monopoly on the domain name registry market, thanks to a cooperative agreement with the U.S. government.
As registry for all .com, .net and .org domain names and operator of the domain name system, NSI gets $6 a year for every Web address purchased. VeriSign is expected to retain the .com contract after it expires in 2007 and to bid for the .net contract in 2005.
VeriSign also makes money as one of the many registrars, reselling domain names to customers. It also has 46 affiliates in other countries that pay royalties.
The company offers one-stop shopping, from buying a domain name to creating a Web site and enabling e-commerce.
UTILITY FOR MERGED DATA, VOICE WORLDS
Even as he was in talks with NSI, VeriSign Chief Executive Stratton Sclavos had his sights set on a bigger market -- telephony.
Last week, the company completed its $1.2 billion acquisition of Illuminet Holdings Inc. ILUM.O, whose independent carrier-to-carrier switching network routes land-line and wireless calls and enables carriers to offer caller ID, roaming and other services.
Sclavos' plan is to create a global directory based on the domain name database, which looks up about 5 billion Web addresses a day, to find phone numbers and Web addresses, as well as offer location-based services for people, regardless of whether they are on their telephone, handheld or PC. The closest analogy would be a utility.
"Our ultimate goal is to be so ubiquitous in the services we deliver that we get taken for granted," Sclavos told Reuters in an interview at his office in Mountain View, California.
"I say that somewhat tongue-in-cheek, but we want to provide the services basically every communication and every commerce transaction uses more or less 24 hours a day, seven days a week," he said.
NEAR-TERM CHALLENGES
The company's stock is one of the few that's managed to avoid the Internet collapse, still trading at nearly $40 -- but it's well below it's year's high of almost $100 and its fallen 20 percent since its third-quarter earnings report. Analysts pointed to slowdowns in both domain name renewals and deferred revenue growth as concerns.
While the domain name database did shrink, that was mostly due to the last gasps of the speculative dot-com bubble and a purge of free, promotional domain names, said Chief Financial Officer Dana Evan. That leaves reliable, paying customers who have proven that they will buy more services, she said.
Meanwhile, the events of Sept. 11 and delays in the launch of the new .biz and .info domains also slowed deferred revenue growth, but recurring revenues, which represent about 80 percent of the total, compensate for that, said Evan.
While many companies have taken financial hits because of cuts in corporate spending, VeriSign's subscription-based business model has enabled it to expand operating margins and predict up to 40 percent revenue growth next year. It's sales this year are approaching $1 billion already.
In general, analysts foresee bright long-term prospects, even a "juggernaut," if VeriSign can execute on its plan, said Stephen Sigmond of RBC Capital Markets.
"The big challenge is correcting this perception some people have that they're just a domain name company, and clarifying the message," he added.
Sclavos is confidently aiming high, with the goal of being one of the top five technology companies in the world within the next 10 years.
"We want to be known in the same breath as Oracle (Corp.) ORCL.O, Cisco (Systems Inc.) CSCO.O, Microsoft (Corp.) MSFT.O and Intel," he said.
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