VeriSign Swishes .Net Deal

The company will retain stewardship of the smaller but still popular suffix.
By Bill Snyder ,

VeriSign

(VRSN) - Get Report

rallied 6% Tuesday on news that the company is likely to retain stewardship of the popular ".net" suffix to Web addresses.

The Internet Corporation for Assigned Names and Numbers, or ICANN, recommended that Verisign's contract to run the domain be renewed for six years.

Nonprofit ICANN administers the system of Web addresses, while Verisign helps run the complex system of servers known as the registry, which routes traffic on the Web to the correct destination.

VeriSign has about two weeks to negotiate a new contract with ICANN staff, after which ICANN's board and the federal government must sign off on the renewal. ICANN will concurrently hold a public comment period.

Merrill Lynch analyst Ed Maguire said the ruling "removes a significant overhang on the stock, and provides a meaningful catalyst." There had been some concerns that an ongoing legal dispute with ICANN could push VeriSign out of the running. Merrill Lynch does not have a recent investment banking relationship with VeriSign.

If the contract is renewed, it will take effect July 1 and be worth about $10 million a year, down by about 40% from the current agreement, Maguire said. VeriSign also runs the larger ".com" domain, which generates about $200 million a year for it.

In recent trading, shares of VeriSign were up $1.52 to $27.59.

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