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VeriSign empire's new territory: Net IDs

Quietly building a digital information and infrastructure empire, VeriSign looks to the hotly contested territory of Internet identification technology.

As giants of technology raise their bets in the battle over Internet identification technology, VeriSign may already hold the winning cards.

In recent weeks, Microsoft and Sun Microsystems have boosted their efforts to become the leading provider of online identification services. Known as e-wallets, such services allow consumers to store their personal data in one place, eliminating the need to re-enter credit card numbers, shipping address and other information as they travel from one Web site to another.

While it's unclear who the victor will be--or even what the spoils are--VeriSign stands to gain from the battle itself.

VeriSign, which already supplies a large chunk of the security software used on the Internet, is quietly building a digital information and infrastructure empire. In the process, its Internet services are rapidly becoming the necessary underpinnings for other companies' lofty ambitions.

Like a utility company, VeriSign's emerging empire may be one that few consumers see but everyone depends on. The company has significant positions in Net authentication and security services, Web domain and registry services, and call exchange and communications billing services.

"Pretty soon we're going to wake up and realize they're the dominant infrastructure provider," said Israel Hernandez, an analyst with Lehman Brothers, which has a "strong buy" rating on the company.

Just as VeriSign struck a deal with Microsoft in July to join the software giant's .Net and Passport Internet software initiatives, so did the company announce, on Wednesday, its intentions to join in Sun's similar Liberty Alliance efforts.

However the dust settles, VeriSign is likely to play a large role, experts said.

VeriSign is already a key player in assigning Web domain names and registry information, securing Web sites, and linking telephone callers in a sort of all-encompassing information exchange and services melange. And the company continues to build its security-software arsenal. This week, it dipped into its coffers in a $1.2 billion deal for Illuminet Holdings to extend itself into the telecommunications market.

Without VeriSign's security and encryption technology, for example, few Web surfers might feel comfortable handing over information like credit card numbers to Web sites such as Amazon.com or to an online ID service such as Microsoft's Passport. Ever notice the padlock that appears on the corner of your Web browser ensuring a secure transfer of data? That's VeriSign.

VeriSign "is focused on convergence" of telecommunications and computer infrastructure, said David Fraley, an analyst with industry consultants Gartner Dataquest. "Now they're taking that and asking, 'Where's the future of the Internet?'"

Passport, in existence for more than two years, is a key part of Microsoft's evolving Web services plan. Last week, Microsoft said it would open up its proprietary Passport authentication system by supporting Kerberos, an existing security standard, and encouraged other companies to join it in building what it terms a "federation" to link authentication systems.

Sun on Wednesday announced a competing effort, called the Liberty Alliance, which includes Sun and 32 partners and aims to provide a competing method for verifying online IDs.

Meanwhile, AOL Time Warner invested $100 million in e-tailer Amazon.com in July partly as a way to improve its own online-identification technology.

As part of its .Net initiative, Microsoft will support VeriSign's server digital certificates to help verify and manage relationships with developers of applications that use services that are part of .Net My Services. .Net My Services is a consumer-focused initiative formerly known as HailStorm. VeriSign's Personal Trust Agent technology will also sit behind Microsoft's Passport authentication, single sign-in and secure-messaging capabilities.

Few details of the Liberty Alliance have been announced, but with its commanding lead in authentication systems already cemented, it's clear VeriSign will play a large role, said analysts.

"VeriSign's involvement in both the Microsoft and Sun alliances are part of VeriSign's strategy to make the foundation for e-commerce transactions and communications even stronger," a company representative said. "We'll work with all industry leaders to build that foundation."

In other words, VeriSign might be expected to make deals with other technology giants, such as IBM.

Net services Switzerland?
Why is a market as esoteric as digital identification so attractive to blue-chip technology companies? Behind the ether of ones and zeroes zooming across the Net, there are muscles to be flexed and money to be made if a company can control the methods used to cull computer user information.

While the ultimate ambition behind Sun's efforts are not clear, Microsoft hopes to corral Net users to new Web services offered by it and its partners. Microsoft claims no nefarious intent in regard to the huge database of usernames and information it will acquire via its Passport initiative and Windows XP, despite great concern by consumer groups. But a database of 165 million Passport accounts could give it the ultimate mailing list for targeted marketing of new services, for example.

Whatever the outcome of the online ID struggle, VeriSign is likely to thrive because it essentially serves as an information and services "Switzerland," largely impervious to the strategic whims of behemoths such as Microsoft.

Indeed, amid a sharp decline in the fortunes of technology companies, VeriSign has upped estimates for future quarters.

The company is looking to expand its presence in the still-young convergence between the Internet and traditional telephone networks.

It has committed considerable resources to a long-term industry project called ENUM, which is designed in part to link ordinary telephone numbers to Internet addresses. While its ultimate applications are still foggy, boosters say the project will allow individuals to create a kind of universal digital "business card" online, which networks will be able to use to track down a person by way of the telephone, e-mail, an instant-messaging system or whatever else the user specifies.

However it comes to be used, it's clear that the ENUM system--or any other that tries to link the huge number of telephone numbers to the Web world--will require massive, expensive database and security efforts, and VeriSign is one of several companies that is trying to ensure it gets a piece of that business.

With telecommunications services added to VeriSign's previous strengths in Web registry and domain services and in Net security, the company is poised to dominate a larger swath of technology's netherworld of back-end systems and databases. In the company's mind, it wants to be the glue that keeps things together behind the scenes as people increasingly turn to various computing devices to communicate.

"We can act as the global utility," said Herb Hribar, senior vice president of VeriSign's global registry services.

News.com's John Borland contributed to this report.