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Investment Overview for VeriSign (NASDAQ:VRSN)
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Below are key drivers of Verisign's value that present opportunities for upside or downside to the current Trefis price estimate for Verisign:
.com & .net domain names
- .com and .net's market share of all internet domains: .com and .net market share has declined from 52.5% in 2007 to 48.8% in September 2012, and we expect it to continue to decline to around 44% by the end of Trefis forecast period. However, Verisign's licence renewal rate has increased over the last few quarters. There could be an upside of around 7% to ${trefisprice} if its market share remains constant. On the other hand, the increase in domain name prices could further reduce the demand for .com and .net domain names. There could be a downside of around 7% to ${trefisprice} if its market share further declines to around 40% by the end of Trefis forecast period.
For additional details, select a driver above or select a division from the interactive Trefis split for Verisign at the top of the page.
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VeriSign had two main businesses, before Verisign sold its SSL and Authentication Services business to Symantec in May 2010 for $1.28 billion. Verisign retained its Domain Names business:
Domain Names:
Within this business, VeriSign controls the rights to the exclusive registry of .com and .net Internet domain names. VeriSign collects a fixed fee each time individuals or businesses register a new .com or .net domain name, or renew the registration of an existing domain name.
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The source of value for the Domain Name division comes from the following:
Large Market of for .com and .net Domain Names
We believe VeriSign will see a total of around 128 million .com and .net domain names in 2013. VeriSign charges $7.85 for .com and $5.11 for .net currently. We expect the average price per domain name to be around $7.5 by the end 2013.
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Growth of the Internet
By September 2012, there were more than 246 million domain name registrations across all top level domains, a 12% jump year-over-year. In 2013, the Internet could be nearly four times larger than it was in 2009.
Trefis Forecast Rationale for .com & .net Domain Name Business Gross Margin
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Gross Margin represents Gross Profit as a percentage of Revenue. Gross Profit is determined as Revenue minus the Cost of Goods and Services Sold.
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- ${forecast} increased from 72% in 2007 to about 80% in 2012.
- The increase in margins was driven by the companies efforts to cut down its expenses during the period through restructuring. As part of these initiatives it spun off its securities certificate business and cut down its staff size.
- ${forecast} is expected to decline steadily as the company's ability to hike prices for .com domains has been restricted. .com domains constitute ~88% of the domains it governs and with the cost structure most likely to stay same, we expect the margins to decline.
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Trefis considered the following factors for its forecast:
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- VeriSign expected to leverage existing increases in spending in the Domain Names business over future operations.
- The company could use all the permitted hikes in .net fee payable to it according to the agreements for the same with ICANN.
- VeriSign expected to reduce costs and streamline IT equipment and facility costs over its now-reduced top-line.
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- VeriSign fee to ICANN for each .com domain is now variable and goes upto $0.25 per domain name. As a result, fees paid to ICANN will increase by around $750,000 per month.from the fixed lumpsum payment of $4.5 million every quarter.
- The renewed agreement restricts price hikes for the .com domain names. However with the costs expected to remain at current levels with multiple redundancies built into the system, the margins are expected to decline.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF MethodologyView All Help Topics