Not a monopoly its
market share?
VRSN believe they are not a monopoly as companies can buy
other domain names. That’s what you say when you have a dominant
business/monopoly! How often have you typed in a domain name other than .com?
Surprisingly there is still decent growth in domain names
driven by internet adoption, e-commerce and online advertising.
A license to own.com?
Under agreement with the Internet Corporation for assigned names and numbers (ICANN) VRSN has the presumptive right of renewal as operator for the .com registry, the agreement has no rebid provisions. If performance requirements such as uptime are met the agreement is renewed. As a bit of background, ICANN is the global coordinator for domain name systems and IP address so that every address is unique. ICANN is currently a public private partnership between the US Department of Commerce and the global community. Renewal of the agreement was approved in June through to 2018. VRSN has the right to increase pricing 7% in 4 out of the next 6 years. Current domain name prices are $7.85 (put through January 2012) a tiny cost given how important domain names are for companies.
Under agreement with the Internet Corporation for assigned names and numbers (ICANN) VRSN has the presumptive right of renewal as operator for the .com registry, the agreement has no rebid provisions. If performance requirements such as uptime are met the agreement is renewed. As a bit of background, ICANN is the global coordinator for domain name systems and IP address so that every address is unique. ICANN is currently a public private partnership between the US Department of Commerce and the global community. Renewal of the agreement was approved in June through to 2018. VRSN has the right to increase pricing 7% in 4 out of the next 6 years. Current domain name prices are $7.85 (put through January 2012) a tiny cost given how important domain names are for companies.
www.verisign.com/opportunity?
VRSN has three main growth opportunities.
1.
Introduction of new top level domain names ie
.book
ICANN is allowing
companies to operate their own top level domain name extension similar to .com for
example Amazon is applying for .book. There are currently 22 such top level
domain names like.com and .net. On first look it seems VRSN would be negatively
impacted as domains other than .com take market share but the majority of applicants
do not have the capability or scale to properly operate the top level domain. It
is likely a lot of this work will be outsourced, according to VRSN around 220
companies (mainly brands) have signed up for VRSN to be their back end registry
services provider.
2.
Internationalising .com domain names ie .com in
Arab
VRSN has applied for 9 international translations of .com,
increasing the field of available .com names.
3.
Network availability services basically security
Surprisingly VRSN is only beginning to tap into the network security
field. It is a differentiated sale when you can prove you have 15 years uninterrupted
uptime for .com and responsibility for .gov back end systems. The Network
Infrastructure Division is not yet material to disclose but the company has
hinted that expenses and the structure have been put in place for growth.
Conclusion
VRSN is a beneficiary of many trends, e-commerce, online
advertising, network availability and security. VRSN has access to steady cash flows through
its .com registry business and given their operational track record seemingly
good prospects in network availability. With a 15 year uptime track record for .com and responsiblity to run the back end systems of .gov I think I'd sign up for their network services.
Don’t worry Kim Dotcom is not included in the .com registry
business!
(Based in NZ, the founder of Megaupload shut down by the US
government earlier this year.)
Jason
www.decisiveassetmanagement.com
Disclosure:
Decisive is long VRSN
The material in
this article is for informational purposes only and in no way constitutes a
solicitation of business or investment advice. The material has been prepared
without regard to any client's or other person's investment objectives. Before
making an investment decision you should consider the assistance of a financial
adviser and whether any investment or service is appropriate in light of your
particular investment needs
