VeriSign Buys Mobile Content Firm

Updated from 1:00 p.m. EST

Taking another step to bolster its mobile content business, VeriSign (VRSN Quote - Cramer on VRSN - Stock Picks) will acquire m-Qube, which helps companies develop, distribute and bill for mobile content, the companies announced Monday.

VeriSign is paying $250 million for the privately held m-Qube. The transaction is expected to close in the second quarter of 2006. VeriSign said the deal will not affect earnings for the year, and it says it will update its guidance after the deal is complete.

"M-Qube strikes us as the one with the best prospects and the highest chance of success," said Albert Lin, an analyst with American Technology Research, referring to VeriSign's buying spree in the mobile content business. "It fills a hole in the mobile content offering that VeriSign has had to live with in the past, which is the ability to do single-sale billing."

Just last week, VeriSign said it would buy Kontiki, which developed a platform for delivering content over broadband networks. The company also recently completed its purchase of 3united Mobile Solutions, a wireless applications service provider. VeriSign said these companies will help it provide "anytime, anywhere" delivery of mobile and broadband services.

Before the latest purchases, several analysts including Lin downgraded the stock, citing the poor performance of VeriSign's ring-tone division, which is called Jamba/Jamster.

"I don't think it's going to do much to help the Jamba/Jamster music business," Lin said, "but as far as mobile content goes, what m-Qube does is a far better business model and service offering than what Jamba/Jamster offers."

Strategically, m-Qube is a better fit, as it is more of a business-to-business model, which fits with VeriSign's more "behind-the-scenes business," Lin said. In contrast, Jamba/Jamster is a direct-to-consumer offering.

Lin has a sell rating on the stock. His company does not have an investment banking relationship with VeriSign, nor do they own any shares in the company.

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