Competition -- see our 1/2/98 rating prior to the public offering...
gaskinsco.com
Summary: 1-2-98
VeriSign, Inc.
BUSINESS: Privacy Software
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This is a development stage company. As such, it is difficult to analyze and draw conclusions about future potential business.
Rating Summary (1 to 5, with 5 high)
Management -- based on losses and no clear profit model [1]
Market growth -- Internet privacy solutions [5]
Market domination -- emerging market that eventually, most likely, will be dominated by Netscape and Microsoft [1]
Proprietary -- competition getting ready to pounce [1].
Background
For Internet privacy, VeriSign (1) sells add-on server and client (identification) software (2) provides outsourced certificate (identification) management services.
It's a $43 million-funded company that develops technology for the emerging Internet privacy market. VeriSign solutions provide add-ons to RSA cryptography
software (www.rsa.com), and are based on an open, industry standard.
RSA Data Security is the world's brand name for cryptography, with more than 100 million copies of RSA encryption and authentication technologies installed and in
use worldwide.
Competition
It appears that VeriSign's strategic partners and shareholders could be getting ready to pounce.
For example...
(1) Security Dynamics has a competing product. See the December 8, 1997 press release at www.securitydynamics.com/pressbox/PR/pr1997-12-08.html
Through RSA, Security Dynamics is the largest pre-offering shareholder (28%).
On the other hand, "Security Dynamics will incorporate custom digital certificate technology developed by VeriSign into Security Dynamics' ESS architecture ... and agreed to be a reseller of the Company's VeriSign OnSite product."
To further confuse the issue, James Bidzos, VeriSign's chairman and member of the compensation committee, is also President of RSA and Executive Vice President and a Director of Security Dynamics.
(2) Also, "Netscape has introduced software products that enable the issuance and management of digital certificates, and the Company believes that other companies
could introduce such products."
(3) Such as Microsoft?
(4) RSA itself can compete directly in April, 2000.
(5) In private label deals VeriSign loses its brand name, making it vulnerable to longer-term competition. For example...
(a) "In April 1996, the Company entered into a Private Label Agreement with VISA under which the Company developed and operates a digital certificate system for VISA's member banks."
(b) According to a December 10, 1997 press release, "VeriSign's services ... will permit AT&T to act as a certificate authority. AT&T will issue digital certificates as part
of its Internet services under the AT&T brand beginning in 1998."
Summary
With a fundable early stage Internet concept, it appears that, on a go-forward basis, VeriSign will have difficulty defending itself against competitors, which may include strategic partners, shareholders, and customers. While we think the stock will
bounce up on the offering, the longer term prospects appear quite challenging.
Rating: on a scale of 1 to 5 -with 5 being high...
Proven Management:: 1
Market Growth: 5
Market Domination: 1
Proprietary: 1 |
