Here’s the entire text of the prepared remarks from VeriSign’s (ticker: VRSN) Q3 2005 conference call. The Q&A is here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.
Welcome to this VeriSign Incorporated Conference Call. Today's conference is being recorded. At this time for opening remarks I would like to turn the conference over to Mr. Tom McCallum, Director of Investor Relations. Please go ahead.
[Tom McCallum, Director of Investor Relations]
Thank you, operator. Good afternoon everyone. Thank you for joining VeriSign's third quarter 2005 preliminary results call. I'm here today with Stratton Sclavos, Chairman and CEO of VeriSign, Dana Evan, our CFO and Steven Gatoff, our VP of Finance and Treasurer. In a moment Stratton will review Q3's preliminary results and we will open up the call for your question. We would like remind everyone that other than the historical financial data today’s discussion may include forward looking statements and its subject to the risk and uncertainties described in our annual report and other report filed with the SEC. Our preliminary results were released to the business wires after the market closed this afternoon and this call is being webcast live both on our website and at streetevents.com. Final financial results for Q3 2005 will be provided in our regular schedule earnings call on October 19th, call in information for the earnings call will be distributed next week and with that I’d like turn things over to Stratton.
[Stratton Sclavos Chairman, CEO and President]
Thanks Tom, and good afternoon everyone. As our preliminary result indicates we expect our performance in the third quarter to be mixed with strong demand across our Internet and core communication services offset by a substantial shortfall in revenues from our Jamba and Jamster mobile content business. The combination of factors including seasonality, a lack of hit content and new advertising guide lines and restrictions in several key European markets contributed to drive much higher subscriber return than we had anticipated in the mobile business during the quarter. Stratton said performance in the Internet and core communication businesses coupled with in quarter reductions in marketing and royalty expenses in the mobile content business should allow us to achieve our previous operating income and earnings per share guidance.
Specifically we expect total revenues for Q3 to be approximately $410 million versus our previous guidance of $435 to $440 million with Jamba enhanced revenues contributing approximately $115 million versus the previous expectation of $140 million. We also expect operating margins to rise to approximately 23% driving earnings per share of $0.27 consistent with our previous guidance. We are obliviously very disappointed in our inability to overcome the weakness we saw in the Jamba and Jamster European business in particular it appear the lack of new hit content in the seasonally slow period adversely affected our efforts to improve the churn will began to see at the end of Q2.
In addition the imposition of new marketing restrictions and guidelines in the UK in September reaccelerated the churn in that market. This led to significant friction in the customer acquisition process that outweighed any positive impact from our customer retention and market expansion initiatives during the quarter. The Q3 emphasizes the market from mobile content has been dramatic in unpredictable swings over the last 12-months, driven by a wider variety of factors. In the first part of the year we saw substantial subscriber growth driven by the popularity of certain content and ____ acquisition enable by our direct response model of fulfillment.
Conversely in the later part of the year we have seen accelerated subscriber return driven by of lack fresh content, summer seasonality, and new marketing restrictions and regulations in certain countries. For the short-term trends have been, and will continue to be hard to forecast, we still fully believe in the long-term opportunity in the mobile content enabled by the convergence of mobility and entertainment and in our ability to capitalize on our position as the leading global platform for these services.
We expect the market to reach some level of stability in the next 6-months, as normalization of the base in the UK and Germany stabilizes such that expansion into other geographies and new product areas begins to show through. Meanwhile we will continue to manage our marketing expenses carefully as we in parallel strive to build better retention and loyalty program. I should also point out that there were some highlights in the content business in Q3 as well, including the addition of over 400,000 subscribers from new geographies as well as the initial availability of our services to strength customers in United States.
Looking in Q4 for the content business and taking into account the September run rate for revenues and assuming continued pressure in the UK and Germany, we are forecasting approximately $90 to $95 million in revenues for Jamba and Jamster. While there could be some upside to this based on the continued ramp up strength additional subscriber growth in new countries and a full slate of premium content releases, slated for the December holiday season. We feel that it is better to assume that our challenges in the UK and Germany will continue to dictate our performance through the end of this year.
Given this outlook we would also expect to reduce our marketing expenditures again quarter-over-quarter and we will continue to operate the business profitably. It is also important to point out that based on Q3 booking trend our core Internet and communication services businesses are poised for a strong year-end finish. With these factors in mind our preliminary guidance for Q4 is for revenues of approximately $395 million to $400 million and earnings per share in the range of $0.26 to $0.27. Let me remind you that these guidance numbers are preliminary and we will update this outlook on October19th earnings call. With that let me thank you for your attention and now we will open up the call for your questions.
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