CEO Departure Doesn’t Help VeriSign In The Short Term

Seems the market can’t decide what to do with the sudden departure of Internet infrastructure software vendor VeriSign’s (VRSN) long-time chief executive Straton Sclavos, announced Tuesday. At first the shares sold off on Tuesday, then they climbed and rose again on Wednesday, on hopes Sclavos’s removal would spur a restructuring at the company.

Thursday the shares are down a fraction at $29.37. American Technology Research’s Rob Sanderson, whom I quoted regarding Navteq (NVT), has also picked up coverage of VeriSign with a neutral rating and says that despite VeriSign’s being “an interesting turnaround story,” investors may be overly optimistic about improvements in the near term to the company’s profitability as a result of executive changes.

“We feel that expectations for operating margin improvement may be aggressive in the near-term as the majority of restructuring benefits appear to fall into 2H with little incremental improvement in Q2,” says Sanderson.

Also, he points out that chief financial officer Dana Evan had worked with Sclavos for 12 years at VeriSign and opines that she may not stay under new CEO William Roper, which he implies would be negative for the company, as she provided good governance for many years. At the same time, VeriSign, Sanderson reminds us, is under a Securities & Exchange Commission investigation over backdating of options and the company has been delinquent in its regulatory filings since the second quarter of last year, and has requested extra time from the Nasdaq to file its reports.

Bottom line, Sanderson says wait for the shares to pull back some, without specifying a price range.

VeriSign shares Thursday are down half a percent at $29.28.