Earnings Preview: VeriSign

VeriSign (VRSN) is expected to report Q2 earnings after the market close on Thursday, August 6, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 32 for EPS and $255.16M for revenue, according to First Call.

Analyst Views

Deutsche Bank expects revenue of $256M, up 9.2% year-over-year, and EPS of 31c, generally in-line with consensus expectations. The firms DNS tracker suggests net adds will be in-line with Deutshe's 1.1M net adds forecast, which is near the low end of the 1M-1.5M guidance when adjusted for the ICANN domain name changes. The net adds equate to a base of 93.5M names. Within the SSL business, Deutsche expects SSL certificates to grow +9% year-over-year to 1.15M, while ASPs are expected to decline 7% year-over-year to $239k per certification. The firm expects deferred revenue of $885M, up 13% year-over-year, and cash flow of $110M. Deutsche believes the ongoing litigation is likely to remain an overhang on the company in the near term. That said the stock has underperformed the market declining 16% vs. a gain of 7% for the S&P, which limits potential downside. Deutsche expects the stock to outperform once the litigation overhang is removed. Additionally, they expect .com/.net comps to improve materially going into the 2H09. Deutsche forecasts net adds to increase to 1.5M in Q3 and to 1.8M in Q4 from their 1.1M estimate in Q2. Finally, Deutsche believes there exists significant margin expansion potential as cost rationalization efforts from the divestitures are realized.