VeriSign Could Sell Telecom Business, Other Units

VeriSign (VRSN) could be planning to divest some of its business lines, including its legacy core telecom business, which accounted for a quarter of 2006 revenues, Pacific Crest’s Rob D. Owens asserted in a research note yesterday.

Owens notes that in a recent conference call with analysts, new CEO William Roper discussed his plan to focus on a few key areas: mobile messaging, content delivery and identity services. “In our view, this creates potential scenarios where less-strategic units could be divested to streamline the business,” he writes.

Owens says four of Verisign’s business lines could be put up for sale:

The legacy telecom business, which includes “the company’s SS7 business, billing and payment, intelligent database services, wireless roaming and Communications Assistance for Law Enforcement Act services.” While 25.6% of the business last year, Owens notes that it contracted 1.8% last year and is likely to be down another 6.3% this year.

Managed security services.

RFID/ePedigree services.

Real-time Web services.

Sale of these businesses could bring the company more than $1 billion in cash, Owens says. He notes, though, that VeriSign is not likely to divest the units in the near-term, while Roper becomes more comfortable in his new role as successor to recently departed Stratton Sclavos.

Meanwhile, Owens raised his EPS estimate for 2008 to $1.40 from $1.30, citing price increases on .com and .net domain registration fees and ongoing restructuring moves.

Owens says his sum-of-the-parts analysis of the company yields a valuation of $39.56, which is significantly above the current share price. He raised his price target on the stock Wednesday to $35 from $33.