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VeriSign to draw on cash hoard

The issuer of digital certificates wants to broaden the scope of its online-security offerings.

With $160 million in cash in the bank, digital certificate issuer VeriSign is looking to expand into new markets, even though it hasn't earned a penny yet.

VeriSign CEO Stratton Sclavos today said the company is exploring areas such as hosting directories of digital certificates for trading partners, issuing certificates with stronger encryption to identify Web sites, and acting as a "trust gateway" to expand its role in e-commerce transactions.

"The follow-on offering gives us the flexibility to look at new areas and make a 'make or buy' decision," Sclavos said at the Nationsbanc Montgomery Securities conference in San Francisco today.

VeriSign issues Web server certificates with 40-bit encryption overseas, but Sclavos said it has approval from the Commerce Department to issue 56-bit certificates for financial institutions outside North America. He hinted that broader approval for stronger certificates, perhaps with as much as 128-bit encryption in some cases, for non-financial firms may be coming soon.

In a secondary offering of its stock last week, VeriSign raised $128 million before fees. In addition, Security Dynamics, which was involved in founding VeriSign, sold 1 million shares, as reported last week. The founders of Secure IT, a firm VeriSign bought last July, sold about 20 percent of their holdings, Sclavos said.

VeriSign issues digital IDs, which vouch for the identity of individuals and Web servers online, in three segments. It charges $300 a year for digital certificates for Web servers, but the price could go up if the company gets export approval for stronger encryption. Its OnSite service lets corporations issue certificates to employees, customers, and suppliers while VeriSign handles the back-end of managing those certificates.

Sclavos sees room for significant growth internationally, where it now has overseas operations or joint ventures in eight countries. He's high on the potential for its affiliate services, which he said has signed up 200 ISPs in the last week.

"Affiliate services is a huge opportunity that will show up in 1999 and 2000," Sclavos said.