Platter: there seems to be little interest in this stock, which is losing a ton of money, by the way
The reason VRSN is losing "a ton of money" is their focus on building their infrastructure system. The attached are selected passages from VRSN's latest 10-K, dated 8/14/98:
…The Company has experienced substantial net losses in each fiscal period since its inception and, as of June 30, 1998, had an accumulated deficit of $41.5 million. Such net losses and accumulated deficit resulted from the Company's lack of substantial revenues and the significant costs incurred in the development and sale of the Company's products and services and in the establishment and deployment of the Company's operations, infrastructure and practices. The Company intends to increase its expenditures in all areas in order to execute its business plan. As a result, the Company expects to incur additional losses for the foreseeable future…
…Revenues increased significantly from the prior year due to increased sales of VeriSign's products and services, particularly its Web-site IDs and OnSite products. As a result of the continued acceptance of Digital IDs, the number of digital certificates issued continued to grow on a quarterly basis. The Company has seen year-to-year increases in the number of customers that are buying Consumer and Web-site Digital IDs and the number of organizations and government agencies beginning to deploy PKI and digital certificate solutions and believes that such increases are attributable to the continued acceptance of digital certificates as a mechanism for authentication, access control and secure messaging. In addition, during the three and six months ended June 30,1998, the Company completed certain work required under various contracts for its enterprise and electronic commerce solutions and, therefore, recognized the related portion of revenues…
…The increase in cost of revenues from 1997 to 1998 was due primarily to hiring personnel to support the additional volume of issuances of Digital IDs…
…The Company anticipates that cost of revenues will vary for the remainder of 1998 depending on the product mix sold during that period, as cost of service revenues is typically higher than cost of product revenues due to the relatively high personnel costs associated with providing services...
One can incur from DD that VRSN's business model is sound. Revenues are increasing due to product demand and expenses are rising as well become of said demand (hiring more people is a good thing). Over time, VRSN will be in the black.
Why VRSN is flat while the AMZN's of the world skyrocket is a question I cannot answer (Note: What do these two have in common that's in the color Red). Looking at the big picture, taking a choice of the two, I choose VRSN (No giggles or <g>'s either).
Speaking of the big picture, I hope you read today's WSJ. In the Marketplace section, an article focused on several money-center banks (foreign and domestic) creating a joint venture on certifying identities on IP networks (VRSN reference as well).
Regards,
Pat
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