Author Topic: VRSN - Verisign  (Read 14306 times)

rtvinvest

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Re: VRSN - Verisign
« Reply #30 on: February 16, 2017, 11:03:21 PM »

I've bought domains, Verisign provides zero value as a customer.  They sell overpriced SSL certs.  I can't imagine why I would ever purchase anything from them.

Bingo.

They actually sold the SSL cert business in 2010 iirc, to focus more on the even more profitable TLD business.

I went to their site.  They advertise two products, domain names and internet security.  I clicked domain names and created a made up name, they had it available.  I clicked to buy it and was presented with a page of partners I should finish the transaction with.  The page had maybe 16 names or so, with no indication who I should select.  It was weird, if this is their business they don't even sell the names.

Then I went to their internet security pages.  I had to click around for a while until I could find something with a "Request a Quote" button.  I'm not exactly sure what they sell, but buying from them is very hard.

They don't sell directly to consumers. This is done by registrars (e.g. GoDaddy). Verisign is a registry operator, and is forbidden by ICANN to own more than 15% of a registrar. Every .com domain you own and pay GoDaddy $10 per year for is $7.85 of revenue for VRSN. Great thing about this business is that they have very low S&M costs as all registrars compete with each other to sell consumers domain names at low/no margin in order to sell hosting/website building at high margin. So you have middlemen selling VRSN's product at very low margins/upfront losses while they could sell .pizza at much higher margins, but which doesn't bring customers to their site.


KCLarkin

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Re: VRSN - Verisign
« Reply #31 on: February 17, 2017, 07:31:42 AM »
IIRC They make like $7 per .com domain name sold by anyone.

I don't think it is anyone's interest to lower that price. The actual market value of most .com names is thousands of dollars. By pricing these domains so low, you are just encouraging squatting. If you charged $100 per domain, it would not be material to any legit domain owner. And it would release thousands of good .com names.

LC

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Re: VRSN - Verisign
« Reply #32 on: February 17, 2017, 07:44:24 AM »

I believe future organic growth will be far below historical levels due to saturation of good .com names. However, with internet penetration still very low in large parts of the world and .com as most recognized/trustworthy TLD I do expect continued demand for new .com domain names. Until now most new TLDs have not performed well, and VRSN has bought the right to be registry operator for one of the more promising ones (.web). However, an antitrust investigation has been initiated on this purchase.

I don't like the overstatement of reported figures (combined with insider sales) in '02 during which the current chairman was CEO. Obviously the one key thing to dislike about the business would be the dependence on one contract. I believe VRSN is very aware of their dependence on this agreement and that their core focus is to never break the service agreement.

Two big points here:

One is their negotiating leverage is going to continuously decrease over time.

Two is growth. I agree it will only come from developing countries. But will the .com domain really that important as these countries start up? I don't know. I wouldn't be surprised another domain became more popular.
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roark33

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Re: VRSN - Verisign
« Reply #33 on: February 17, 2017, 11:16:54 AM »

I've bought domains, Verisign provides zero value as a customer.  They sell overpriced SSL certs.  I can't imagine why I would ever purchase anything from them.

Bingo.

They actually sold the SSL cert business in 2010 iirc, to focus more on the even more profitable TLD business.

I went to their site.  They advertise two products, domain names and internet security.  I clicked domain names and created a made up name, they had it available.  I clicked to buy it and was presented with a page of partners I should finish the transaction with.  The page had maybe 16 names or so, with no indication who I should select.  It was weird, if this is their business they don't even sell the names.

Then I went to their internet security pages.  I had to click around for a while until I could find something with a "Request a Quote" button.  I'm not exactly sure what they sell, but buying from them is very hard.

Oddball--
I wrote this report with John.  I think you are misunderstanding what verisign does. (The certificate are something they did long ago and they have never "sold" domains directly.   Verisign serves as a backbone telephone book of the internet addresses.  I can explain more, but they could be replaced, but it would be a hassle and they have done it for 20+ years without missing a beat, so why do it?  The difference with Neustar is they had a few customers, the phone companies, so they had leverage and a reason to get them replaced at a lower the cost, but a domain right now is $8, what individual person is going to push to get them replaced because they want to pay $4 instead of $8.

Without pricing increases, VRSN is probably a bond, but it is a bond that sometimes sells at a discount to par, that will eventually trade up to par.  My two cents.   

rtvinvest

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Re: VRSN - Verisign
« Reply #34 on: February 18, 2017, 02:32:52 AM »

I believe future organic growth will be far below historical levels due to saturation of good .com names. However, with internet penetration still very low in large parts of the world and .com as most recognized/trustworthy TLD I do expect continued demand for new .com domain names. Until now most new TLDs have not performed well, and VRSN has bought the right to be registry operator for one of the more promising ones (.web). However, an antitrust investigation has been initiated on this purchase.

I don't like the overstatement of reported figures (combined with insider sales) in '02 during which the current chairman was CEO. Obviously the one key thing to dislike about the business would be the dependence on one contract. I believe VRSN is very aware of their dependence on this agreement and that their core focus is to never break the service agreement.

Two big points here:

One is their negotiating leverage is going to continuously decrease over time.

Two is growth. I agree it will only come from developing countries. But will the .com domain really that important as these countries start up? I don't know. I wouldn't be surprised another domain became more popular.

1. Their negotiating leverage vs whom?

What's interesting is that if .com loses market share / becomes less dominant it becomes more likely that the DOJ unfreezes the .com pricing.

2. Agreed, growth is very difficult to predict. Currently Indian business owners prefer .com for their new websites, but this obviously may change. Right now there are various countries in which the local ccTLD (country code such as .de/.cn) is more popular than .com but on aggregate .com is by far the most popular TLD.


Oddball--
I wrote this report with John.  I think you are misunderstanding what verisign does. (The certificate are something they did long ago and they have never "sold" domains directly.   Verisign serves as a backbone telephone book of the internet addresses.  I can explain more, but they could be replaced, but it would be a hassle and they have done it for 20+ years without missing a beat, so why do it?  The difference with Neustar is they had a few customers, the phone companies, so they had leverage and a reason to get them replaced at a lower the cost, but a domain right now is $8, what individual person is going to push to get them replaced because they want to pay $4 instead of $8.

Without pricing increases, VRSN is probably a bond, but it is a bond that sometimes sells at a discount to par, that will eventually trade up to par.  My two cents.   

Have you considered buying the convertible?

siddharth18

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Re: VRSN - Verisign
« Reply #35 on: February 19, 2017, 05:36:58 PM »
I did some reading on VRSN yesterday and I think it's fairly simple to understand. So VRSN operates two root servers along with an authoritative registry of .com/.net gTLDs. The value of the company doesn't come from their operation of root servers, but from their contract making them the sole authoritative registry on .com & .net and allowing them to collect fee for each domain registration and renewal. So whenever a new .com is registered, the registrar (Godaddy for instance) will notify the actual server IPs that belong to the domain registrant of that specific .com domain.




Two big points here:

One is their negotiating leverage is going to continuously decrease over time.

Two is growth. I agree it will only come from developing countries. But will the .com domain really that important as these countries start up? I don't know. I wouldn't be surprised another domain became more popular.


Re: negotiating leverage - IMO it will only go up over time. Look at it from VRSN's point of view - 10 years from now, they can say "we have successfully maintained and managed the .com registry for ~30 years."  Who else can say that? Who else has that track record?

Look at risk/reward from ICANN's perspective. ICANN could save a few hundred million dollars (few hundred million dollars being quite insignificant in the context of total ecommerce transaction value) and risk a nightmare.


This may be a weird analogy but Verisign is kind of like a Carbon monoxide alarm manufacturer that has a government granted monopoly on making CO alarms, has been making them since they were invented, and has a 100% CO detection rate in all studies and not a single false alarm since inception. CO alarms cost only $10-$20 and are the cheapest gadget in a home, but without it, your home worth 6-figure home+ isn't safe to live in. Over time, the developing world will start building more homes and will demand CO alarms as well. Maybe the government or a non-profit CO alarm regulating authority will complain about your 60% operating margins and how the alarm itself cost only $2 to make and maybe the government has a point. But will the government want to risk deaths and bad publicity if a newer company sells them for $6 but, due to a rough transition, messed up the earlier batch of alarms that won't detect CO properly?
For any legit person/business (ie - non domainer/hoarders) - the cost of a .com/.net is negligible. However, that domain name is the single most important piece of their brand value and real estate on the web. Once you acquire a domain, it begins to have its own separate identity and equity in that all the time and effort invested in promoting/ranking your business will be associated with that domain. For instance, in SEO, each domain has its own pagerank (sort of a credit score/reputation) and the business can lose its competitive edge/traffic if it has to start fresh from a new domain.

The long term risk from outside is that if we enter a future where somehow your computer/phone/app can take you to a site or a page without needing a domain. But then that computer/phone/app would have to know the coordinates of that server and I don't see how that would work uniformly across all computers/phones/apps without an authoritative registry. If you say "Take me to North Pole" without punching in the coordinates the responsibility of figuring out the exact coordinates of north-pole would fall on that computer/phone/app. It'd have to know that the Northernmost tip of the Earth is located at Latitude: 90.0000 Longitude: 0.0000. And without a central record keeper like Verisign, there would be instances of the computer/phone/app guessing the coordinates wrong and taking you somewhere.

I see little risk fromother TLDs (like .attorney or .lawyer) simply because the .com has had a first mover advantage, and, over the last 2 decades has acquired significant mind-share. I can't imagine a single company or business wanting to abandon their .com in favor of .attorney or .lawyer simply to save $10. Also, people are now used to websites ending in .com. If you're opening a review site - Austin Plumber Reviews and had a choice - .com or .biz or .info - which would you choose? Of course you'd go with .com because your customer are used to the notion that websites usually end in ".com" and they'd only have to remember one phrase "AustinPlumberReviews" rather than "AustinPlumberReviews" and ".biz" separately. There's also a risk that if you only open AustinPlumberReviews.biz then a domain squatter will snap up AustinPlumberReviews.com, clone your site and gain from all those that forgot that your site ended in .biz instead of .com

If snapchat/instagram were to start today with a domain http://www.snapch.at or http://instagr.am they would still make every effort to acquire snapchat.com and instagram.com simply because it's only $10/year and the value of the traffic they would capture from people typing in "instagram.com" in their address bar would be in far excess of $10/year.

Regarding growth -

So about 40% of the world's population is online, and 60% isn't. The 40% that is already online, has collectively chased, treasured and valued .com over all other TLDs for the last 2 decades and .coms have a significant mindshare of this 40% of the population. If you assume that the remaining 60% of world that will eventually come online will follow/adopt/imitate the products/services/brands/best practices of the developed world (Google, Facebook, etc) then they too will treasure .com over other TLDs.


Also things like having browser shortcuts favoring .com (Pressing CTRL + ENTER after entering a word in address bar will automatically attach .com) and that mobile keyboards have a separate button allocated to .com but not other TLDs only proves that .com is more valuable than other TLDs.

glorysk87

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Re: VRSN - Verisign
« Reply #36 on: February 19, 2017, 08:26:30 PM »
I went to their site.  They advertise two products, domain names and internet security.  I clicked domain names and created a made up name, they had it available.  I clicked to buy it and was presented with a page of partners I should finish the transaction with.  The page had maybe 16 names or so, with no indication who I should select.  It was weird, if this is their business they don't even sell the names.

Then I went to their internet security pages.  I had to click around for a while until I could find something with a "Request a Quote" button.  I'm not exactly sure what they sell, but buying from them is very hard.

interesting - this here displays the common and deep misunderstanding of what VRSN actually does.

DooDiligence

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Re: VRSN - Verisign
« Reply #37 on: February 20, 2017, 05:49:26 AM »
Didn't they sell their SSL & PKI biz to Symantec a while back?

I'd think that any moat would be built around their DDoS & other cybersecurity offerings.

I haven't read their financials but would bet that cybersecurity services generates the lions share of revenues.

Running the 13 TLD servers would give them a huge advantage in services like DDoS protection, managed DNS, DNS firewall, etc., & as long as they do a good job on that end, they'd continue to service TLD.

IOW, TLD is important mainly because it allows them an edge on cybersecurity.

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oddballstocks

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Re: VRSN - Verisign
« Reply #38 on: February 20, 2017, 08:23:14 AM »
I went to their site.  They advertise two products, domain names and internet security.  I clicked domain names and created a made up name, they had it available.  I clicked to buy it and was presented with a page of partners I should finish the transaction with.  The page had maybe 16 names or so, with no indication who I should select.  It was weird, if this is their business they don't even sell the names.

Then I went to their internet security pages.  I had to click around for a while until I could find something with a "Request a Quote" button.  I'm not exactly sure what they sell, but buying from them is very hard.

interesting - this here displays the common and deep misunderstanding of what VRSN actually does.

It's easy to be mislead.  Go to their homepage, in giant letters it says they're a "Global Leader in Domain Names and Internet Security"

I understand how they manage domains, but it seems strange that this is how they present themselves.

Their internet security division is similar to CloudFlare.  They manage DNS and DDoS protection by putting a layer between your infrastructure and the internet.  They sell an actual product to handle this.  I would presume they have employees and servers to support this product.  I went through the quote process and it's quoted by Verisign.

I'm oddly familiar with this because back in 2005 at a startup we built a similar product and applied for a patent with the technology.  The nice thing is to see that the product idea is validated, stinks our company couldn't market/sell to capitalize on it.
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gjangal

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Re: VRSN - Verisign
« Reply #39 on: February 21, 2017, 10:05:23 AM »
Does anyone have any insight into why the short interest is high on this one? 15% of shares short with a 100 day avg volume of 860k. Short interest of 17 . The contract for the registry is extended till 2024 and they have about 600mn in FCF and EV is equal to Marketcap. To me it looks like the short interest is high given that the earning power of this company should remain stable till 2024.

The risk for other TLDs taking away market share is low and doesn't warrant such a high short interest