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Network Solutions still sitting pretty

Despite government-backed plans to increase competition in the ".com" registration business, NSI proved to be untouchable today with "rock solid" earnings, analysts say.

Despite government-backed plans to increase competition in the ".com" registration business, Network Solutions' "rock solid" earnings, reported today, prove it to be untouchable.

NSI reported record net revenues of $31.3 million for the fourth quarter--a 117 percent rise over year-ago results. The boom came from a surge in the registrations of domain names, helping the firm to beat Wall Street expectations.

For more than six years, NSI has had an exclusive contract with the National Science Foundation to run the allocation of top-level Net domains ".com," ".net," ".org," and ".edu." Next year that contract will expire. In the meantime, a nonprofit corporation anointed by the government will set up a new structure for overseeing the Net's technical underpinnings. Starting in April, five registrars will test NSI's shared registry, allowing the new players to directly register ".com" names and manage their customers' accounts.

This transition has been fraught with debate, but analysts say when the dust settles, Network Solutions still will be on top.

"If there is competition tomorrow, Network Solutions has already won the war," said James Pettit, senior analyst with Hambrecht & Quist's Internet group. "What wins is scale, brand names, service, and partnerships--they've got that. They've locked up the real estate."

Growth in international registrations, coupled with NSI's continuous rollout of new enterprise services, will help it stay ahead of the pact, added Pettit, who rates the company a "strong buy."

Moreover, analysts say competition is still far off for NSI.

"This is a company whose product is in such incredible demand, by a worldwide constituency, that it will not stop," said Paul Merenbloom, senior technology analyst for Prudential Securities, who rates NSI a "strong buy."

"The competitive threat is on the horizon, but it's only the horizon--the horizon always seems to be a lot closer than it really is," he said.

NSI reported today that it earned 22 cents per share, beating a consensus of analysts that had expected the company to earn 20 cents per share, according to First Call.

Shares of NSI closed at 148 yesterday, and have traded as high as 260.38 and low as 17.5 during the past 52 weeks. In afternoon trading today, the stock retreated somewhat, shedding 6 points or just over 4 percent to 142, reflecting an overall downturn in the Internet sector.'s Sandeep Junnarkar contributed to this report.