VeriSign's Slowing Growth Underlies Our $41 Valuation - Seeking Alpha: " . . . Verisign (VRSN) is primarily known as the authoritative registry for dot-com and dot-net generic top-level domains. It also operates a diverse array of network infrastructure, including two of the Internet's 13 root name servers and the back-end systems for the dot-gov, dot-jobs, and dot-edu top-level domains. The company's share price has risen almost 15% since Jan. 24, after the company reported steady revenue growth in 2012 and gross margins improved to almost 80%. We believe that the market is being overly optimistic about Verisign's prospects. Its primary revenue growth driver for the past few years, the annual increase in the dot-com domain registration fee was fixed by the renewed agreement with ICANN (Internet Corporation for Assigned Names and Numbers). As a result, the company is now dependent upon the growth in the dot-com and dot-net domain name registrations and the annual hikes in dot-net domain names. . . . The dot-com domains constitute close to ~90% of the dot-com/dot-net domain name mix, currently governed by VeriSign. The restriction on dot-com domain fee hikes under the new agreement will result in the dot-com domain price staying steady at $7.85 until November 2018. At the same time, the agreement for dot-net domain registry permits price hikes of up to 10% per year. The growth of dot-net domain name registrations (~9%) has been slightly outpacing that of dot-com domain names (~6%), and we estimate the growth of the combined fee to slow down to 2% annually and reach about $8.50 by 2019. . . ." (read more at link above)
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