Verisign Earnings Looks To Dial Up Growth Thursday

Verisign (NASDAQ:VRSN) is scheduled to announce its Q1 2012 earnings on April 26. We currently have a $40 Trefis price estimate for Verisign, which stands slightly below the current market price. Verisign is a domain name registrar which has the exclusive registry rights for .com and .net domains from ICANN. Its .com and .net domain registration business accounts for nearly 90% of Verisign’s value. Verisign competes primarily with other domain name registrars like NeuStar, Employ Media, and Afilias to win new and maintain existing registry rights.

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Focus on .com and .net domain registrations

Since almost all its revenues are generated from domain registrations, the growth in .com and .net domain registrations is the major driver for Verisign’s revenues. Verisign had reported nearly 113.8 million active .com and .net domains at the end of 2011. We expect the number of net active .com and .net domains to reach approximately 120 million by the end of 2012.

The number of total domains has been increasing rapidly, but we expect .com and .net domains as a percentage of all domains to decline as other top level domains become popular.

Verisign rolled a few minor services in 2011 like Hashlink Domains and Domain Countdown to drive domain registrations, but we don’t expect them to impact sales much. It also stated that it was looking to generate additional revenue from new gTLDs (custom domains like .google and .apple) by acting as the registry backend provider for applicants, but the revenue from its custom gTLD registrar business isn’t expected to impact its earnings significantly, at least not until 2013. We will be looking for any announcements related to this during the earnings call.

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