Here're some comments from Stephen Sigmond, an analyst a Dain Rauscher Wessels Intl, from VRSN analyst meeting.
"Analyst Day Highlights: Business Robust, Transaction-Based Services On Tap Analyst Day Highlights: VeriSign management
reviewed current business trends an strategic initiatives at the company's first analyst day in Mountain View, California. The major
new news centered on VeriSign's plans to add transaction-based service offerings to its current portfolio of subscription-based
digital certificates. We believe these services have the
potential to generate strong incremental revenues and operating leverage beginning in late 1999. Business momentum remains
robust across each of the company's three target markets-Web sites, enterprises, and affiliate partners.
Web Site Market-Up-Sell Rate Now 15%: VeriSign's Web site certificates enable secure transactions over the Internet.
Management estimates the ultimate addressable market at 10 million Web site certificates; at the end of the March
quarter, approximately 125,000 Web site certificates had been issued. VeriSign' marketing programs are now generating 5,500
leads per week. A major recent catalyst in Web site business has been increasing adoption of 128-bit certificates and value-added
"bundles" such as insurance and Web site performance monitoring. These offerings carry price points of $595-$1,295 per server
per year, vs. $349 for a basic certificate. VeriSign is now seeing a 15% up-sell rate, vs. 10% at the end of the March quarter, and
management expects this percentage to continue to increase. We believe this bodes very well for revenue growth, deferred
revenues, and operating margin leverage. The company's recently introduced two-year certificates now have a 5% up-sell rate-a
positive early trend toward longer-term commitments by customers.
Enterprise Market-OnSite 4.5, Personal Trust Agent, Transaction Services Are Catalysts: VeriSign's enterprise customers use the
company's software and services to secure intranet and extranet applications. Thanks to the release of OnSite 4.0 and better
market awareness, average deal size has increased to $150,000. Sales cycles now average three to six months, vs. six to nine
months last year. VeriSign began the June quarter with more than 500 deals in the pipeline. Management discussed seven recent
large displacements of Entrust installations and estimates its current win ratio at 95%-plus. OnSite 4.5 is expected to ship by
quarter end. Enhancements include automated, high-volume management tools, better integration with enterprise software
applications (access control, ERP, messaging, and others), and the Personal Trust Agent (PTA), expected in July. The PTA, which
will be free, is designed to make certificates much easier for individuals to use. VeriSign is expected to launch two
transaction-based services this summer: digital notary services
(guaranteeing that documents were created and received by specific people at specific times), and a business-to-business directory
(allowing businesses to check the identity of online trading partners). These services will leverage VeriSign's existing facilities and
infrastructure. By the first half of 2000, VeriSign expects to expand into two other areas: digital audit and content escrow.
<snip>
Stock Opinion: VRSN shares have traded poorly of late, reflecting investor nervousness in the wake of recent and upcoming
announcements from other security vendors (notably CustomTracks and Entrust). We view these announcements as
noise rather than signal. We believe that VeriSign's market opportunity, competitive position, and execution are stronger than ever.
We reiterate our Strong Buy-Speculative rating and $200 price target. Our target is based on a discounted cash flow analysis of
projected 2003 earnings and a discount rate ofStory 20% that is in line with comparable companies. " |
