VeriSign Could Sell Telecom Business, Other Units

Jun. 07, 2007 10:54 AM ETVeriSign, Inc. (VRSN)
Eric Savitz profile picture
Eric Savitz
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VeriSign (NASDAQ: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.

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    Eric Savitz profile picture
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    Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Eric joined Barron's as a feature writer in New York in 1988, after four years at the Dow Jones news wires. In 1995, he moved to California as the magazine's first reporter in Silicon Valley, creating the Plugged In column. Eric left Barron's in 1998 to become executive editor of The Industry Standard. He rejoined Barron's in Palo Alto in late 2001. Eric also writes the monthly Tech File column for Smart Money magazine. Visit Tech Trader Daily (http://blogs.barrons.com/techtraderdaily/) and Barron's Online (http://online.barrons.com/).
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