and the swine... Herb Greenberg, seems to have a tough time finding anything charitable about VRSN.
you know they have a bunch of shell companies that they do business with back and forth, the most likely
reason is that it creates more "revenue"
Can you think of another company that has recently in the news partly due to it's fiancial transactions with
related financial entities??
...Bueller... Bueller.... Anyone .... Anyone -vbg-
The Secret of VeriSign's Success
By Herb Greenberg
Senior Columnist
10/16/2001 11:02 AM EDT
You can't help but wonder how VeriSign (VRSN:Nasdaq - news - commentary - research - analysis) -- joined at the hip to the dot-com boom -- does it. Here's a company that serves as the registrar of the dot-com world, a world that on the fringes, at least, has imploded. Yet VeriSign manages to consistently report growing revenue and earnings and brags that it can barrel ahead at rates of 40% and 50% for years to come.
What's VeriSign's secret? Could it be the company is getting a little help from its friends -- a.k.a., related parties? According to the related-party footnote in the company's 10-K, VeriSign discloses that it "has invested in several companies" to which it "has also sold products and services." It adds that "revenue recorded from these investments individually do not comprise more than 1% of our revenue during 2000." The key word is "individually." If individually they don't account for more than 1%, then how much do they represent in total? And what does the company mean by "several"?
VeriSign doesn't say, but a little cross-checking on news retrieval services (a basic check, at that) dredges up the names of at least 12 customers and/or business partners (mostly small and dot-commish) in which VeriSign invests. Typical of the dealings is one with euro909.com (ENON:Nasdaq - news - commentary - research - analysis), a distributor of VeriSign products. Last June, euro909 sold its dot-com registrar business to VeriSign and sold 20% of itself to VeriSign and expanded the number of countries in which it sells VeriSign's products to seven from three. (VeriSign doesn't disclose any of this, but euro909, a public company, does.)
Such related-party dealings are fully legit (they are disclosed). But disclosure alone doesn't mean they shouldn't raise eyebrows. They were fully disclosed at many a telecom, tech and Internet company, too, and nobody cared until the customers started going out of business. That's why related-party sales are generally considered low-quality sales. They're especially low quality if the customers might not be buying from VeriSign if they didn't get money from VeriSign via an investment. That's something you simply don't know. And without a detailed breakout, it's hard to say how much related parties have helped VeriSign make or beat each quarter. (That's a critical question at a company that trades at 79 times this year's expected earnings and 48 next year's earnings -- at those multiples, every dollar counts!)
That's not the only issue with VeriSign. Last April, when this column first raised a few questions, VeriSign CEO Stratton Sclavos bragged about the strength of the company's deferred revenue. The more deferred revenue today, generated by long-term contracts signed with the owners of Web sites, the more actual revenue in the bank tomorrow. But take a closer look at the split between long-term and short-term deferred revenue (the difference being the amount deferred for more than or less than a year).
While long-term deferred revenue has been growing, short-term deferred revenue has been flat for three quarters. Why? Could it be that the company is offering bigger discounts for longer multiyear contracts, resulting in more deferred long-term revenue? And if so, as the revenue becomes due, is there simply less of it? VeriSign doesn't say, but this much is certain: "If deferred revenue isn't growing in the near term," says one hedge fund manager who is short VeriSign, "then revenue can't be growing all that quickly."
Finally, there's the issue of the amount of time it's taking for customers to pay their bills. Receivable days outstanding have been creeping higher for the past four quarters. Last quarter they were at 74 days, the highest they've been in more than a year. Does that reflect a slowdown in the owners of dormant Web sites in paying their bills?
Good question, and it's one of several I asked VeriSign in an email last Thursday to the company's PR spokesman, to its investor relations representative, to Sclavos, and to the CFO. (The spokesman and I had missed phone calls.) The only person to respond was the spokesman. On Thursday he said he couldn't get back to me until Monday. I wrote him back early Friday and said I really needed to hear something by Friday. He got back to me late Sunday and said I'd hear back from him early Monday. I emailed him back early Monday and said that would be great. Haven't heard a word since, though I'm sure I will now! |
