VeriSign Inc. (VRSN) reported revenues of $263 million from continuing operations in the fourth quarter of 2009, up 5.6% from a year ago. Core businesses of Naming Services and Authentication Services generated revenues of $262 million, up 2% from the prior quarter and up 5% from the year-ago quarter.
Naming Services generated revenues of $159 million, up 9% year-over-year. Naming Services ended the quarter with approximately 96.7 million active domain names in the adjusted zone for .com and .net, representing a 7% increase year-over-year. During the fourth quarter, VeriSign processed 7.3 million new names, up 4% from the prior quarter.
Authentication Services revenue generated revenues of $103 million, up 1% year over year and ended the quarter with 1.22 million Secure Socket Layer (SSL) certificates in the installed base, an increase of 9% over the same quarter last year.
Operating margin improved to 36.8% from 33.7% in the year-ago quarter but was down from 38.6% in the prior quarter. The company recorded a $4 million depreciation adjustment in the quarter. Excluding this charge, the operating margin would have come at 38.3%, in line with management’s expectations.
Net income came in at $59 million or 31 cents per share beating the Zacks Consensus Estimate of 29 cents. This compared to a net income of $54 million or 28 cents in the year-ago quarter.
During the quarter, VeriSign generated $173 million of cash from operations and used $51 million in capital expenditures. The company also repurchased 9 million shares for $208 million. As of December 31, 2009, the company still had $700 million left for additional share repurchases.
VeriSign ended the quarter with cash and equivalents of $1.5 billion, up $45 million from the prior quarter. The divestiture of fourteen of its non-core businesses generated approximately $185 million of cash in the fourth quarter. The company ended the quarter with approximately 2,300 employees, down approximately 350 from last quarter as a result of the divestitures.
VeriSign decided to wind down its Content Portal Services (CPS) business in the fourth quarter. Management earlier indicated that it would focus on core competencies to provide highly scalable, reliable and secure Internet infrastructure services to customers around the world. Hence, the company has divested a number of non-core businesses in its portfolio, such as communications, billing and commerce, content delivery, messaging and enterprise security services.
Going forward, management expects core revenues to grow by 4% – 7% year over year. The company saw strong bookings in the fourth quarter as enterprises began to show confidence in a market recovery. Operating margin is anticipated to improve to 39% – 39.5% by the end of 2010.
For 2009, VeriSign reported revenues of $1.031 billion, up 6.8% from a year ago. Core revenues grew 8% year over year to $1.026 billion. Operating margin came in at 37.7% from 33.5% in 2008.
Net income came in at $247 million or $1.28 compared to a net income of $201 million or $1.00 in 2008. The divestiture of fourteen of its non-core businesses generated cash in excess of $765 million in 2009.
It remains to be seen how the streamlined company climbs up the growth trajectory. As the Internet spreads to mobile devices, we see VeriSign tapping this growth market with an array of value-added services.
Headquartered in Mountain View, CA, VeriSign provides essential Internet infrastructure services to companies, service providers and website owners.
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