<http://online.wsj.com/article_print/SB119500841715092326.html> The Wall Street Journal VeriSign to Slim Down, Sharpen Its Focus Ten of 15 Business Units May Go in Big Overhaul; Perils of Diversification By BOBBY WHITE November 14, 2007; Page A12 VeriSign Inc., a Silicon Valley company that plays a central role in Internet transactions, has been criticized on Wall Street for branching off into new ventures with little payoff. Now, the company is planning to prune. The Mountain View, Calif., company is set to announce during an analyst meeting today that it plans to divest itself of as many as 10 of its 15 business units as part of a corporate overhaul. Depending on its final decisions, VeriSign may emerge with only three major businesses, including its core Internet name registry and e-commerce security units. The businesses are part of its Internet-services group, which in the third quarter accounted for around 60% of its $373.6 million in revenue. In addition, the company is making a bet that online-identity protection will be an expanding business and plans to keep it. The majority of the business units it plans to shed will come from VeriSign's underperforming communications-services group, which accounted for about a third of its third-quarter revenue. Businesses it will look to divest itself of include billing services for wireless carriers, communications consulting and other services. The company also is weighing whether to keep its telecommunication-messaging and content-delivery units, which also are part of the communications-services group. Both businesses operate in growing markets, but executives are worried about costs to remain competitive. The company plans to evaluate over the next six months whether to keep the businesses. "We are, in effect, starting all over again," said Todd Johnson, VeriSign's vice president of broadband-content services, who is part of a team overseeing the process. "We want to signal to the market we are taking a different approach to how we grow the business." Company executives declined to estimate the financial impact of the restructuring. VeriSign executives said the company is in talks with private-equity firms and wireless-phone companies that could buy some of the units. The company said it expects to shut down some of the businesses if buyers aren't found. The divestitures are expected to be completed by the first half of 2009. VeriSign's moves are the latest example of a Silicon Valley company that stumbled in trying to integrate businesses purchased in an effort to expand, like Symantec Corp.'s 2004 acquisition of Veritas Software Corp. and several other deals. The company, founded in 1995, was formed largely around the idea of selling what are called digital certificates to help Internet users prove their identities. It also operates a central directory of Internet domain names, including all those ending with the suffixes .com, .net, .cc and .tv. Stratton Sclavos, VeriSign's longtime chief executive, launched an acquisition spree, paying about $1.5 billion for 15 tech-related businesses between 2004 and 2006, estimates First Analysis Securities Corp., an investment-banking firm in Chicago. In the second quarter of 2005, after the company reported a drop in quarterly earnings that reflected a shortfall in its mobile-ring-tone business, the company's stock fell 16% in a single trading session. Analysts saw little synergy between some of the units, as well as problems integrating the companies. "It was really unclear as to just what was this company's direction," said Shaul Eyal, an analyst with CIBC World Markets. This May, Mr. Sclavos resigned amid concerns over the company's strategy, without comment. He was succeeded by VeriSign board member William A. Roper Jr. In August, founder D. James Bidzos, its first president and CEO and a former chairman, was given the role of chairman again. Mr. Roper signaled that the company would conduct a review of operations. The potential changes contributed to a boost in VeriSign's share price, which is up 38% since the start of 2007. In the third quarter, the company reported that profit rose 24% to $19 million, or eight cents a share, but revenue declined 5.8%. Mr. Roper said that with so many divergent businesses and teams fighting for resources, the company had lacked a coherent focus. "I think it was Clint Eastwood that said it best: 'A man has got to know his limitations.' I don't think we did," said Mr. Roper. "After all of this, I think we are headed in the right direction." -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'