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VeriSign boosts 1Q, 2001 expectations

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VeriSign (Nasdaq: VRSN) hurdled fourth quarter expectations and increased targets for the first quarter and full year.

After market close Wednesday, the domain name registrar and provider of Internet security services reported fourth quarter net income of $45.5 million, or 21 cents per share, excluding goodwill writedowns and acquisition-related charges.

First Call's survey of 22 analysts predicted a profit of 11 cents per share for the quarter ended Dec. 31. However, that analyst estimate looks at earnings on fully-taxed basis, while VeriSign's reported figure does not. On a fully-taxed basis, VeriSign earned 13 cents per share in the fourth quarter, or 2 cents more than analyst consensus.

In a conference call with analysts, VeriSign CFO Dana Evan predicted a first quarter profit of 13 cents to 14 cents per share, slightly higher than First Call's consensus forecast of 12 cents per share. Evan did not raise revenue goals beyond analysts' current consensus projection of $210 million.

But Evan did boost full year expectations. VeriSign now looks for 2001 earnings per share of 56 to 60 cents, on revenue of $975 million to $1 billion. The company previously predicted 2001 revenue of $960 million to $985 million.

First Call was calling for a 2001 profit of 54 cents per share on revenue of $979 million.

"VeriSign obviously has a lot of visibility in their business going forward, which is one of the things that is admired about the company," said Robert Fagin, analyst with Bear, Stearns & Co.

Shares of VeriSign traded at $76.21 in afterhours activity on the Island ECN, immediately following the release of quarterly results. VeriSign stock shot up $7 to $81.50 in Wednesday's regular trading ahead of the earnings report.

Including amortization and other charges, VeriSign lost 1.3 billion, or $6.64 per share.

Fourth quarter revenue increased 613 percent year-over-year to $197.4 million, easily besting First Call's consensus forecast of $189.4 million. "We continue to experience strong momentum in all of our lines of business," Evan told analysts.

VeriSign executives were especially pleased with the company's public key infrastructure business, which manages network security for large organizations. VeriSign added more than 200 corporate customers. The company now has more than 800 public key infrastructure clients.

"If there were a business that managed to exceed our lofty expectations ... it would certainly be the PKI business," said Stratton Sclavos, president and CEO. "Contrary to the general concerns about economic spending, or specific concners about PKI deployment, we are seeing increased momentum in this space."

Many observers on Wall Street expected VeriSign to easily surpass the published consensus estimate in the fourth quarter. "Overall, the financials looked pretty good," Fagin said.

VeriSign in the fourth quarter sold more than 85,000 Web site certificates, up 135 percent year-over-year and up 13 percent sequentially. The company added 5,600 customers for its payment services. VeriSign's NSI Registrar unit registered about 1.9 million domain names, and renewed or extended another 650,000.

For the full 2000, VeriSign earned $129.1 million, or 72 cents per share, before goodwill costs. Annual revenue rose 460 percent to $474.8 million.

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