By JORDAN ROBERTSON | Associated Press
Published May 19, 2010
SAN FRANCISCO (AP)
Symantec Corp.'s decision to pay $1.28 billion to buy a division of VeriSign Inc. that sells security technology to websites highlights how quickly the companies are moving in opposite directions.
Symantec, best known for its antivirus software for personal computers, wants to secure more things.
With the VeriSign deal, announced Wednesday, Symantec will have spent nearly $3 billion in two years acquiring technologies that make it a bigger player in other parts of the security market, such as protecting data on mobile phones and delivering software over the Internet.
Meanwhile, VeriSign, whose brand is ubiquitous on the Web for protecting online transactions, wants to secure fewer things.
It wants to focus instead on a lesser-known but more robust part of its business: managing traffic to websites with addresses ending in ".com" and ".net," and collecting fees for registering those domain names.
VeriSign has been purging divisions for the past three years, after realizing it was spread too thin following a buying binge designed to insulate it from the kinds of problems it had after the dot-com collapse a decade ago.
Prior to Wednesday's deal with Symantec, VeriSign had sold more than a dozen businesses since 2007 for a total of nearly $1 billion. Some were curious choices for VeriSign to have in the first place, such as a division that did billing services for telecommunications companies and another that sold ring tones and insurance for mobile phones.
What Symantec gets out of the VeriSign deal is one of the Web's best-known brand names for security.
VeriSign's logo - a check mark and the tag "VeriSign Secured" - is ubiquitous on websites that have bought its security technology. The VeriSign division that Symantec is buying sells "certificates" to websites that want protection for their customers' data. The Secure Sockets Layer, or SSL, certificates allow data to be encrypted between a user's browser and a website's servers. A padlock icon appears on a user's browser when that technology is being used.
The certificate business has long been a cornerstone for VeriSign, but has come under pressure in recent years.
In part, that's because cheap SSL certificates sold by other companies are easy to come by. The competition has forced VeriSign to sell more of its cheaper SSL certificates, too, even though their security measures are weaker.
Revenue in that division rose just 3 percent last year to $410 million, while revenue in VeriSign's domain-name division jumped 12 percent to $616 million.
Still, at the end of last year, more than 1 million sites were using VeriSign's SSL certificates, making the business an attractive target for a company such as Symantec looking to extend its brand.
The deal is expected to close in the September quarter. Symantec said it expects the transaction to reduce its adjusted earnings by 9 cents per share for the current fiscal year. It won't add to adjusted profit until the September quarter of next year.
The business VeriSign is left with is a lucrative one, but whose weakness following the dot-com collapse was a key reason VeriSign went on a tear with its acquisitions.
VeriSign is critical in steering Internet traffic to ".com" and ".net" Web sites. Its directories help Internet computers locate websites and know where to send e-mail.
The company makes its money by collecting a fee every time someone registers or renews a domain name ending in ".com" or ".net." Although Web site owners buy names through third parties, VeriSign gets fees as operator of the ".com" and ".net" registries.
Those fees generally go up each year, and as of July 1 will be $7.34 per ".com" name and $4.65 per ".net" name. Those fees add up with some 85 million ".com" names and 13 million ".net" names registered - and they account for the bulk of revenue in the domain-name division.
Symantec shares were up 2 cents in extended trading. They had fallen 32 cents, or 2 percent, to close the regular trading session at $15.63. VeriSign shares rose 83 cents, or 3 percent, to $28.82 in extended trading, after falling 24 cents to close at $27.99.
Both companies are based in Mountain View, Calif.
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