VeriSign details .com contract renewal and its current status.
Last week VeriSign made the surprising announcement that The Department of Commerce was evaluating the pricing in its .com registry contract renewal. Its shares plunged from $46 to around $36.
Shares have jumped up about $4 in the past 15 minutes or so (around 2 pm EDT), shortly after the company just put out a statement about the renewal, reiterating that its role as the .com registry provider is not in jeopardy.
It also tried to justify the price increases in the renewal contract. They’re the same as last time: the right to increase prices 7% in four of the six years.
Here’s some of its justification:
The level of security and stability offered by Verisign is only possible with investments in overcapacity and redundancy, network security, intellectual property (IP) and in human capital: The engineers and employees at Verisign who operate the .com registry and ensure its security and stability. The pricing terms of the .com Registry Agreement enable Verisign to make these investments, develop the necessary IP, know-how and purpose-built systems, respond to new threats to stability as they emerge, and recruit and retain the specialized talent necessary to maintain our network, including dozens of globally distributed constellation sites and data centers in the U.S. and elsewhere.
Verisign also believes that under the terms of Amendment 30 the public interest is served by the provision of .com registry services offered at reasonable prices, terms and conditions. Verisign believes that $7.85 per year for a .com domain name and the increases contemplated by the current pricing terms are reasonable prices for unlimited access to .com resolution services, given the security and stability offered by the .com registry, and particularly in light of accelerating query loads and increasing cyber threats. The current pricing terms are also reasonable because, unlike other registry service providers, Verisign offers performance and reliability under the most stringent contract-mandated SLAs, may not monetize any user registration data, and has the most restrictive price caps on its service of any gTLD. The current price of a .com domain name was anticipated in 2006 when the current .com Registry Agreement was approved by the Commerce Department as in the public interest. Any review of the pricing terms of the .com Registry Agreement by the Commerce and Justice Departments is bounded by the provisions of Amendment 30.
That’s all well and good, but its fat margins call everything into question.
There’s not a whole lot new in its statement, other than the pricing justification, so I’m not sure why the stock jumped.