Internet infrastructure services provider VeriSign Inc. (VRSN) recently announced that the global base of internet domain names grew by nearly 3.8 million in the third quarter of 2010.
VeriSign’s registry, security and communications services are essential for the smooth functioning of the online world. Moreover, the Internet keeps expanding. The use of the internet continues to increase phenomenally in Asia, much more than the combined markets of Europe and North America.
Registrations increased 7% year over year to $13.3 million. VeriSign stated that the combined base of .com and .net domain names crossed 103 million. New .com and .net registrations totaled 7.5 million during the third quarter, an increase of 7% from a year ago. The .com/.net renewal rate for the third quarter was 72.8%, down from 73.2% for the second quarter.
The base of Country Code Top Level Domains (ccTLDs) was 79.2 million domain names, up 2.4% year from a year ago.
VeriSign’s average daily Domain Name System (DNS) query load during third quarter 2010 was 66 billion per day, with a peak of 78 billion.
In the last two years, VeriSign divested a number of non-core businesses in its portfolio, such as communications, billing and commerce, content delivery, messaging and enterprise security services. Most recently, the company sold off its Authentication services business. With this sale, continuing operations primarily consist of Naming Services (comprising Registry Services and Network Intelligence and Availability (NIA) Services). VeriSign can focus on the standalone business of Naming Services, leading to better execution.
The disposal of non-core business units should boost margins. The recent buy-back program announced by management should help the bottom line, but the top-line growth continues to be a challenge.
We continue to maintain a Neutral recommendation on VeriSign, supported by a Zacks #3 Rank. Tucows Inc. (TCX), another internet services provider, competes with VeriSign.
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