3 “New” Risks to Verisign’s Business

Company includes additional risks in its most recent quarterly filing.

.Com registry Verisign released its earnings and filed its quarterly report with the SEC yesterday.

Using Intelligize, I compared Q2’s SEC report to Q1 to look for changes. I found three interesting risk factors added to the most recent report. Some of these aren’t new risk factors, but they weren’t disclosed in the Q1 report.

1. China – newly enforced regulations for business licenses for selling domains in China

For example, the government of the People’s Republic of China (“PRC”) has indicated that it will issue new regulations that will require registry operators to, among other things, obtain a government-issued license in order to provide Registry Services to registrars located in the PRC. The new regulations could impose additional costs on our provision of Registry Services in the PRC and could impact the growth or renewal rates of domain name registrations in the PRC. While we have submitted applications to the government of the PRC to obtain the licenses required by the new regulations, there can be no assurance that we will obtain the licenses or obtain the licenses in a timely manner. Our failure to obtain the licenses could result in restrictions, up to and including, a prohibition on the sale of our Registry Services to registrars located in the PRC.

In addition to registry operators, the new regulations will require registrars to obtain a government-issued license to sell domain names directly to registrants. Their failure to obtain the required licenses could also impact the growth of our business in PRC.

2. Growth of ccTLDs – Verisign added the growth of ccTLDs to its previous competitive threat statement.

Growth in the number of domain names under our management may be hindered by certain factors, including overall economic conditions, the growth of ccTLDs, the introduction of new gTLDs, and ongoing changes to search algorithms used by Google and other Internet search engines that negatively affect the profitability of certain types of websites, and as a result, reduce demand for new domain name registrations and renewals.

3. Data – This applies to every company, but Verisign warns of harm from data breaches at service providers.

We retain certain customer and employee information with third-party service providers, including those providing cloud-based service offerings. We invest significant time and effort in determining that these third-party service providers have sufficient data security processes and practices in place to maintain the security of this information.

Should the data that we provide to these service providers be compromised through a security breach or otherwise, we could face significant liability and adverse publicity.