From American Technology Research analyst Dave Edward's September 20th note to clients:
Yesterday, VeriSign announced Jamster! Guardian, a new product in the U.K. which will allow parents to block content from being downloaded to their children's cell phone by simply entering the phone number on the Jamster! web site. VeriSign expects to launch the product in the U.K. this week and plans to roll it out in "other countries" before the end of the year.
As we have discussed before, we believe that Jamster!'s customer satisfaction and regulatory issues in Europe are a significant risk. We think this product is a good move for VeriSign as it addresses some of the carrier, customer and regulatory complaints about its services. In fact, a spokesman for the Independent Committee for the Supervision of Standards of Telephone Information Services, the primary U.K. regulatory body, was quoted in the press as saying that he welcomed the move but that there "was not enough detail to comment further". Of course, the company may continue to be accused of misleading advertising practices and may need to make changes to its marketing programs in the future.
Even though Jamster! Guardian may alleviate some of the regulatory risk, it may increase revenue risk as parents are allowed to block their children from purchasing Jamster! content. Note that according to a recent study of U.S. cell phone users, children between the ages of 12 and 17 download ringtones at twice the rate of the average cell phone user and three times the rate of the 34-54 age bracket that would include their parents. It is difficult to determine how much revenue is at risk once 12-17 year olds are not allowed to spend as freely, but at the margin, we think this increases the risk to Q4 guidance and results. We reiterate our Hold rating.
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