Clock Ticking For VeriSign To Choose Legal Option

Date : 08/02/2010 @ 8:16PM
Source : Dow Jones News
Stock : Verisign, Inc. (MM) (VRSN)
Quote : 108.94  0.75 (0.69%) @ 6:00PM

Clock Ticking For VeriSign To Choose Legal Option

Verisign, Inc. (MM) (NASDAQ:VRSN)
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VeriSign Inc. (VRSN) said Monday that it has until October to decide whether to appeal a significant legal setback affecting its remaining core business to the U.S. Supreme Court, or return to a lower court for trial.

VeriSign issued a second-quarter earnings report after the market's close that included a slight gain in profit, as sales rose 9%. The company's naming-services unit, which will be its sole core business following the sale of its identity and authentication service to Symantec Corp. (SYMC), posted a 4% gain in revenue for the period.

VeriSign has divested dozens of businesses in recent years in an effort to slim down, leaving it reliant upon its naming services unit. That unit operates the registry for .com, .net and other domains, under a contract with the Internet Corporation for Assigned Names and Numbers, which is in turn overseen by the U.S. Commerce Department.

But a lawsuit originally filed in 2005 by a group calling itself the Coalition for ICANN Transparency alleges that VeriSign's deal with ICANN grants it an unfair market position and artificially inflates prices.

Last month, the U.S. Court of Appeals for the Ninth Circuit reversed VeriSign's motion to have the Coalition for ICANN Transparency's complaint dismissed, prolonging a legal headache for the company.

Chief Executive Mark McLaughlin said Monday that VeriSign has 90 days following the Ninth Circuit Court of Appeals' July 9 decision to decide whether it will "request further appellate review ... at the Supreme Court level," or have the case remanded for trial in district court.

Bret Fausett, an attorney representing the Coalition for ICANN Transparency, said he believes VeriSign has until Oct. 18 "to file a writ of certiorari with the U.S. Supreme Court," which he thinks the company is likely to opt for, rather than a trial.

"As far as I can tell, the strategy is to push off any trial on the merits for as long as possible," Fausett said. "The U.S. Supreme Court appeal--even if, as is likely, the Court declined to hear the appeal--would push off our inevitable return to the trial court by another year."

VeriSign's litigation over its naming service has been an area of concern for Wall Street analysts.

In a research note published shortly after the Ninth Circuit Court of Appeals' decision last month, Citigroup analyst Walter Pritchard wrote that while the result was anticipated, it also meant that "negative reaction in [VeriSign's] shares could be warranted."

Pritchard said that while the litigation may remain a "risk factor," he doesn't expect a resolution for at least a year and a half.

VeriSign's naming-services business ended the second quarter with a 9% increase in .com and .net active domain names, while adding 7.9 million new domain-name registrations, the company said.

VeriSign agreed in May to sell its identity and authentication service to security software giant Symantec for roughly $1.28 billion.

Shares of VeriSign rose more than 2% in after-hours trading, to $28.60.

-John Letzing, 415-439-6400;


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