To: Patriarch who wrote (261 ) 10/23/1998 9:32:00 AM From: Platter Read Replies (1) | Respond to
Negative report on VRSN...."VERISIGN (VRSN) 30 +1 3/8 Maker of digital certificate technology used in e-commerce reports earnings of a loss of $(0.18) per share versus expectations of a loss of (0.20), on revenues of $10.5 million, a 174% rise year-over-year, and 23% sequentially. However, including the acquisition charges for SecureIT, VRSN lost $(0.34) a share. Nevertheless, the strong revenue growth is what everyone will focus on, as it shows wider acceptance of the company's core technology. The news apparently leaked out early today, as VRSN rose almost 5% today, against the Russell 2000's overall rise of 1.6%. While Verisign's technology is widely used, and viewed by many as an essential ongoing component of secure transactions, the company is not expected to make a profit anytime soon, at least not until well into 2000. Nevertheless, the company carries a market cap of $700 million, quite high for a company with only $23 million in TTM revenue. With such high valuations, the company simply cannot make any mistakes, as the market would probably punish it immediately with a 50% or more correction. That isn't the case today, however, but long investors should be cautious here. On the other hand, if the vision is fulfilled, and Verisign's technology becomes as wide spread as some think it will, it could be a much larger company. One thing that puzzles us though, and which merits further research, is why VRSN spends so much on Cost of Revenues (49% of revenues, high for what is essentially a software company), and Sales and Marketing (58% of revenue). We'd be happier if R&D were at these levels, but they are only at 24%. For now, however, the focus will be on the strong revenue growth, the only real criteria (at least for now) for Internet stocks anyways, which is why revenue growth got the first paragraph in the press release." from briefing.com
