VeriSign Is Betting on Its Tech Edge

That infrastructure, called ATLAS for Advanced Transaction Look-Up and Signaling, currently handles 10 billion domain-name queries a day and is capable of handling an average of 100 billion a day and 200 billion a day at peak capacity.

"I believe we have as much as a decade lead ahead of other companies in terms of large-scale directory technology," Sclavos said. Combined with other pieces of VeriSign's business, the technology has numerous applications, the company argues. Among them:

RFID: VeriSign believes it can tap the technology to run the directory that would handle the billions of lookups of RFID tags, which Wal-Mart (WMT Quote) has mandated its suppliers to use by 2005.

Security: In the shorter term, VeriSign is analyzing patterns in the billions of DNS queries it receives to warn its security customers of breaches before they cause problems. When the Sobig virus hit this summer, VeriSign's DNS servers "went crazy" and the company was able to warn security customers early, Sclavos said.

Internet Search: VeriSign recently launched a search service called "Site Finder" that provides search results including listings paid by advertisers whenever an Internet user typed in an incorrect domain name ending with .com and .net. However, the company suspended the service, which generated $500,000 in its two weeks of service, after Internet regulators expressed concern it was resulting in instability on the Internet and rivals sued saying it represented unfair use of VeriSign's registry monopoly.

Meanwhile, VeriSign has its hands in the Internet in a couple of other ways. Its security business is working on a pilot program for members of the military to vote online in the 2004 primaries. And the company's Internet Services Group handles online payments for close to 100,000 retailers online by acting as a payment clearinghouse to a couple of dozen banks and credit card processors.

In some ways, however, stretching into so many areas has hurt VeriSign because few investors have the time to learn about and track the progress of the company's different business lines. Its story has been complicated further by acquisitions and exits, making year-over-year comparisons difficult. And some investors probably have not forgotten management's big miss last year, which stemmed in part from a decline in the Network Solutions retail domain name business and prompted layoffs.

"Over time this company has really thrown a lot of products out in the market to see what will stick, and I wouldn't say we have a real clear leader," said Michael Sansoterra, a software equity analyst for Principal Global Investors in Des Moines, Iowa, which holds VeriSign shares. "It's still very much a show-me story."

U.S. Bancorp Piper Jaffrey analyst Gene Munster agrees, noting that buying shares comes down to an investor's time horizon. "We believe that in order for the stock to get to the next level, they need to do more than grow these little businesses," said Munster, who has a market perform rating on the stock. (His firm hasn't done any banking with VeriSign.)

That said, VeriSign's decision to shed its shrinking Network Solutions retail domain-name business is a step in the right direction, Munster added. "I think that's a sign of getting slightly more focused," he said.