VeriSign, Inc. (VRSN) reported revenues of $264 million from continuing operations in the first quarter of 2010, up 4% year over year and up 1% sequentially.

Core businesses (Naming Services and Authentication services) generated revenues of $263 million while the non-core Content Portal Services (CPS) business reported revenues of $1 million as part of continuing operations during the first quarter of 2010.

Naming Services generated revenues of $162 million, up 9% year over year and up 2% sequentially. Authentication Services generated revenues of $102 million, down 2% year over year and down 1% sequentially. The sequential decline of Authentication Services was related to user authentication as well as VeriSign Japan.

Both naming and authentication services continue to see improvements driven by the rebounding economy. Increases in advertising and e-commerce spending should positively impact the company’s business. The Naming business saw record new registrations as well as an improving renewal rate.

The base of registered names in .com and .net totaled 99.3 million names at the end of March, up 7% year over year. The company added 2.5 million net names in the quarter and processed a record 8.1 million new registrations. Renewal rate was strong at 71.2%, up from approximately 70.5% in the third quarter of 2009.

New registration and renewal growth in the quarter was driven by increasing confidence in the economy, continued strong international growth, and registrar marketing programs. Bookings continue to be strong in the authentication business as well.

During the quarter, VeriSign launched Project Apollo, which is a 10-year initiative to strengthen and scale the .com and .net infrastructure, intended to grow the current infrastructure capacity 1,000 times from the current level. This in turn should enable the processing of 4 quadrillion queries per day by 2020 from the current level of 4 trillion queries.

Operating margin came in at 39.8% compared to 36.8% in the year-ago quarter. Net income was $51 million or 28 cents per share compared to a net income of $65 million or 34 cents in the year-ago quarter. Excluding special items but including stock-based compensation expense, net income came in at 31 cents, in line with the Zacks Consensus Estimate.

VeriSign generated $101 million of cash from operations and used $20 million in capital expenditures. The company also repurchased 2.1 million shares for $50 million. The company ended the quarter with $1.0 billion, down from $1.5 billion at the end of the previous quarter.

At the end of the quarter, deferred revenue was $924 million, up 4% sequentially and up 6% year over year, driven by growth in new domain names and Naming Services.

Guidance

Going forward, management stated that it will no longer provide quarterly guidance. However, it provided an update on its previous targets. Core revenue growth for 2010 is now expected in the range of 5% to 7%, up from 4% to 7%.

The company targets an operating margin of 39.5% – 40% in the fourth quarter of 2010, up from the earlier guidance of 39% to 39.5%.

The results did not have much of an impact on the stock price. The stock dipped 0.37% to close at $26.78 in after-hours trading. Earlier, the stock dipped 0.85% to close at $26.88 in regular trading.
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