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VeriSign Shares Sink on Results

Internet: Stock plunges 46% to 52-week low a day after the firm posts a net loss and lowers forecasts. 'Technology downturn definitely caught up with us,' chief executive says.

April 27, 2002|MATTHEW FORDAHL | ASSOCIATED PRESS

SAN JOSE — Shares of VeriSign Inc. fell more than 46% on Friday after the Internet name registrar and provider of online trust services reported deteriorating business conditions.

The Mountain View, Calif.-based company said after markets closed Thursday that domain name registrations fell far short of forecasts in the first quarter. Other divisions also were flat.

"The sustained technology downturn definitely caught up with us," Chief Executive Stratton Sclavos said.

The company said it would lay off 10% of its work force, or 350 employees, to restructure and cut costs.

VeriSign shares sank to a 52-week low Friday, closing down $8.35 at $9.89 on Nasdaq.

The division that handles the registrations ended the first quarter with 12 million active domain names under management but reported a renewal rate of only 40%.

First-quarter sales for the group were $113 million, compared with $137 million a year earlier.

Domain names typically are renewed every two years. In 2000, businesses and individuals were snapping up addresses as they prepared to reap the rewards of the "new economy."

The results are in line with a report by research firm SnapNames that showed more than 372,000 domain names ending in ".com," ".net" and ".org" vanished in March as sites shut down and speculation cooled.

At least a dozen analysts downgraded their rating of VeriSign stock Friday.

"It's a total debacle now," said C. Eugene Munster, a research analyst at U.S. Bancorp Piper Jaffray.

He said the first-quarter results confirmed some investors' fears and popped the bubble of "true believers" who had supported the firm's business model and stock.

VeriSign reported a first-quarter net loss of $20.9 million, or 9 cents a share, compared with a loss of $1.4billion, or $6.90, a year earlier.

Excluding acquisition-related charges, the company earned $68million, or 28 cents a share, compared with $49 million, or 23cents, a year earlier.

Analysts had predicted earnings of 20 cents a share, according to a survey by Thomson Financial/First Call. VeriSign's results matched expectations when adjusted for taxes anticipated by analysts but not paid by the company.

First-quarter sales were $328million, up from $213 million in the same period last year. Analysts had expected revenue of $342million in the first quarter of 2002.

Sclavos said second-quarter sales would range from $320 million to $330 million. Analysts had expected $360 million.

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