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4/28/2005
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Beyond The Dot-Com Domain

VeriSign wants to be the trusted third party for transactions of all types over the Internet and other networks

Each day, VeriSign Inc. helps millions of Internet users reach the proper Web site and send E-mails to the right person. As the keeper of the database of dot-com and dot-net Internet addresses, VeriSign provides the technology infrastructure that translates Web-site and E-mail addresses into the numerical code used by routers and switches to move traffic over the global network to its proper destination. And it does that more than 14 billion times a day.

In recent years, VeriSign--which is celebrating its 10th anniversary--has expanded the services it offers and transformed itself into a more diversified company. It also has made acquisitions to enter new markets (see story, Spending Spree: VeriSign Buys Into New Markets). Today the bulk of VeriSign's revenue comes from security, billing, payment, and a variety of other services that it offers to telecommunications service providers and online retailers.

VeriSign can become 'one of the most influential technology companies of the 21st century,' says chairman and chief executive Stratton Sclavos

VeriSign can become "one of the most influential technology companies of the 21st century," says chairman and chief executive Stratton Sclavos.


Photo by Robert Houser
VeriSign has built what chairman and chief executive Stratton Sclavos calls an "intelligent infrastructure" that provides security services to more than 3,000 businesses and 400,000 Web sites, and also processes more than 30% of all E-commerce transactions, totaling more than $100 million in daily sales. It's also playing a role in the wireless industry, where it processes 90% of all bills paid over cell phones, transmits 30% of picture messaging, and delivers 7 billion text messages per month. And it's moving into hot new technology markets such as radio-frequency identification and voice over IP.

"The first 10 years have been about building the intelligent infrastructure and plugging it into the various communications, commerce, and content networks that need our services," Sclavos says. "The next 10 years are about delivering on the promise of providing the transformational services that let our customers and the world at large benefit from the move to a digital economy and society."

VeriSign offers telecommunications carriers a central point, or hub, for traffic routing, translations, and wireless IDs, similar to what it does for the Internet, Sclavos says. And the growth of wireless and VoIP services provides an opportunity. "We need to bridge data and voice, see that VoIP is secure, provide services between data and voice, and finally integrate the two," he says.

VeriSign can become "one of the most influential technology companies of the 21st century" if the company executes on its plan, Sclavos says. Whether Sclavos can accomplish that remains to be seen. What's clear is that VeriSign already has become much more than a company that merely handles Internet addresses.

"VeriSign sells services. And the services are more coherent than VeriSign is given credit for," Forrester Research analyst Laura Koetzle says. VeriSign offers a range of security, authentication, fraud-protection, and billing services to companies that do business on the Internet or across other networks. "VeriSign takes a chunk of the transaction from someone else's commerce," she says. "Sometimes it pays to be the middleman."

Nearly 60% of the company's revenue comes from its Communications Services unit, which provides, among other things, a signaling network used by phone companies and wireless service providers to help route calls and messages over multiple networks to the right destination. This network and its associated applications also are used to provide the services and information needed to complete and bill for calls made by, say, a Verizon cellular customer who travels (or roams) to another part of the country and uses the Cingular cellular network to make or receive a call. VeriSign says it handles more than half of all such cellular roaming calls in the United States.

VeriSign's network infrastructure also is being used to deliver content, such as new ring tones or video news clips, from a variety of suppliers to mobile phones and other wireless devices, and to bill for that content. More than 1,000 companies use the VeriSign Hub and its database to route traffic and manage the transactions, the company says. By using VeriSign's infrastructure instead of adding to their own facilities, service providers can respond to changing market conditions and roll out new services more quickly.

"VeriSign provides us with huge efficiency," says Scott Bergs, senior VP and chief operating officer at wireless service provider Midwest Wireless Holdings LLC, which uses VeriSign for billing and is turning to it for help in delivering financial, sports, and news information. "Our customers want lots of content over the phone, and VeriSign moves that content over our network securely." Instead of working with multiple suppliers, VeriSign "delivers shared services from one source," he says. "As data becomes more of our overall revenue, [VeriSign] will deliver high volumes of rich content."

The dot-com bust, which caused telecom service providers to slash expenses, investment, and employees, has helped VeriSign grow because many of those companies now need help to roll out new services. But VeriSign does more than provide services to carriers; it also provides content itself and shares in the revenue stream. Among the company's recent acquisitions are Jamster, which provides ring tones, games, and other content for mobile phones, and LightSurf Technologies Inc., which offers multimedia messaging services for mobile phones, including PictureMail and VideoMail.

That means VeriSign, in some cases, is competing with its customers, especially wireless carriers that sell ring tones, games, and other content directly to subscribers. Those carriers "want to own the channel, the distribution network to customers," says Seamus McAteer, an analyst at telecom research firm M:Metrics Inc.

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