is gearing up to jump into the public domain, setting its IPO price range this week to generate upwards of $36.8 million.
This registrar of domain names filed a pricing range of $14 to $16 a share, and plans to roll out 2.3 million shares, according to a recent filing with the Securities and Exchange Commission. The company will have a market value of upwards of $236.8 million.
The company faces a challenge with its offering. Its main source of revenue, a contract with the National Science Foundation to register domain names for the Internet, is set to expire in March.
And while the NSF may extend the agreement through September 1998, the company has stated NSF "will not be reawarded the contract to the company" or any other entity.
Robert Korzeniewski, company CFO, said in a previous interview that he is fairly confident that Network Solutions
will continue as a key player in the domain registration system.
"We will still have a role after March 31. I don't think [the
be transitioned quickly, and we have certain competitive advantages that
will help keep us going. We think we have the technical and management
know-how to allow us to be a strong competitor in a very fast growing
market," he said.
Revenue for the quarter ending June 30 was $10.1 million, up from $4.5 million recorded in the same period a year earlier. Net income reached $740,000, or 6 cents a share, compared to a net loss of $356,000, or 3 cents a share, for the corresponding period in 1996.
Network Solutions, which is the sole provider of Internet domain name registration service for second-level domain names within the ".com," ".org," ".net," ".edu," and ".gov" top-level domains, said revenue from this service accounted for 81 percent of the company's net revenue for the six months
ended June 30.
But the potential loss of its major revenue source is just one of a host of problems the company is facing.
Network Solutions recently became the target of an antitrust investigation by the Justice Department, relating to Internet registration products and service.
The company was also the object of an audit earlier this year, and the company's billing and collection practices are still being audited by the NSF's office of the inspector general.
The company is a wholly owned subsidiary of Science Applications
International Corporation (SAIC). Upon completion of the IPO, SAIC will hold about 98 percent of the combined voting power of the company's
outstanding common stock.
The company's underwriters include Hambrecht & Quist, J.P. Morgan, and PaineWebber.
The company said Net registrations within the top-level domains maintained by the company increased by 206 percent to 1.04 million at June 30, 1997, up from
340,000 domain names registered at June 30, a year earlier.
With over 10 million businesses and over 750,000 active trademarks and service marks in the United States alone, the company believes that the potential for continued growth of domain-name registrations by commercial
entities and services related to those registrations is substantial.
The company also provides intranet consulting and network design and implementation services, which accounted for 19 percent of the company's net revenue for the six months ending June 30.
However, the company said in its filing that it expects a significant increase in its operating expenses as it funds greater levels of product and services development, increases its sales and marketing operations, upgrades systems and infrastructure, opens new offices, develops new
distribution channels, and broadens its customer support capabilities.
The company has applied to be listed on the Nasdaq index under the symbol "NSOL."