This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Neustar Could Fall

By: Herb Greenberg | 10/03/13 - 12:47 PM EDT

Stocks in this article: NSRLMT

NEW YORK ( TheStreet) -- Its name may not ring a bell, but in the deep-in-the-weeds backwaters of the deeply-arcane, acronym-riddled world of telecommunications, Neustar (NSR) has been a standout.

It's best known for running the database that makes it possible for you take your phone number with you if you move or change carriers.

The database is a big business for Neustar, generating about 48% of its revenue. It's also profitable -- so profitable that with gross margins exceeding 65%, Neustar routinely produces impressive positive free cash flow.

Not surprisingly, its stock has doubled over the past two years.

Contract Up for Grabs

But there's a hitch: For the first time since Neustar started managing the database in 1997, the portability contract, as it's called, is up for grabs.

It's unlikely Neustar will lose it, at least entirely, but it's also possible the contract could be split with others, or the price Neustar is paid could be sharply reduced.

Therein lies our story.

Spun out of Lockheed-Martin (LMT) in 1999, Neustar has been all about databases that surround telephone numbers.

In recent years, to lessen the blow of being so heavily tied to one thing, it has been diversifying into such things as marketing analytics and security analytics. It's even the keeper of the dot-biz Internet domain.

But the heart of the company, even though its percent of sales has been declining, is the portability database.

As CEO Lisa Hook described it at a recent investment conference:

"It is an information exchange, or a registry service, that is used by every telecommunications service provider in the United States to create and complete telephone calls. So, it's a data service that injects information into every network that tells where every telephone number is, what its attributes are, and the physical location of the phone number. That's been extant in the industry for the past 18 years. It's a single contract with the entire industry, or a body that represents the entire industry. Private contract, paid for by all of the carriers. We've renewed it now four times."

  1 2 3

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security.

To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Herb's Tweets

Brokerage Partners

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
Real Money Pro

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Trifecta Stocks

Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.

Product Features:
  • Model portfolio
  • Trade alerts
  • Recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
Stocks Under $10

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Dividend Stock Advisor

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Breakout Stocks

Bryan Ashenberg, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.

Product Features:
  • Model portfolio
  • Small-cap and mid-cap focus
  • Intraday trade alerts
  • Weekly roundups
Options Profits

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
Top Rated Stocks Top Rated Funds Top Rated ETFs