Based in Mountain View, California, VeriSign will maintain its
role as registry operator. It handles the DNS database management
and resolution services for approximately 30 million digital
identities, including the authoritative directory for all .com,
.net, .cc, and .tv domain names.
Many had criticised VeriSign's ability to take fees from
registrars for each .com or .net domain name registration – and
then to compete with these registrars through its Network Solutions
business in selling the names to end users. This competition will
end with the sale – albeit registrars will still have to pay
VeriSign a fee of $6 per year for each .com and .net domain name
they represent on the VeriSign registry.
The more likely reason for the disposal is that Network
Solutions operates on 9% margins, compared to the healthier 17%
operating margin enjoyed by VeriSign's core business, according to
analysts cited by Wired News. It also points to the drop in its
share of the domain name registration business: down from 41% in
late-2001 to 25% in early-2003.
The domain name registrar business is being bought by Pivotal
Private Equity of Arizona, although VeriSign will retain a 15%
equity stake in Network Solutions. "The acquisition of Network
Solutions fits well into our strategy of investing in companies
that shape the future of the communications industry," said Jahm
Najafi, CEO of Pivotal Private Equity.
Network Solutions is the world's biggest domain name registrar.
It was acquired by VeriSign in 2000 for nearly $21 billion in stock
and the brand was lost until VeriSign resurrected it in January of
this year.
"We believe that this transaction will strategically position
VeriSign to focus exclusively on our core mission of providing
critical infrastructure services for the internet and
telecommunication networks, while allowing Network Solutions to
pursue its own independent strategy in the web presence market,"
said Stratton Sclavos, Chairman and CEO of VeriSign.
"Network Solutions has a strong base of over four million
satisfied customers," added Pivotal's CEO. "We will continue to
provide stellar service, launch innovative products, and build new
channels of distribution to accelerate the rate of market growth.
This broader set of products will make Network Solutions the one
stop shop for web presence services."
According to the companies, the transaction is subject to
certain closing conditions and is expected to complete in the
fourth quarter.
