H&Q Conference: VeriSign Dares to Post a Profit

After 12 quarters of losses, the Internet company heads for the black. Also, SportsLine contemplates the future of online sports.
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SNOWBIRD, Utah --

VeriSign

(VRSN) - Get Report

is taking the plunge into black ink that so few Internet companies dare to try.

The company provides digital certificates to help companies and Web sites identify users and conduct secure transactions online. VeriSign, which has posted losses for 12 quarters running, expects to post a profit later this year. Analysts polled by

First Call

look for a profit of 3 cents a share in the quarter ending Sept. 30.

Operating income should reach 16% to 20% of revenue by the first half of 2000, said VeriSign CEO Stratton Sclavos at the

Hambrecht & Quist planet.wall.street

conference Tuesday. For the fourth quarter ended December 1998, operating losses were $3.3 million, or 25% of revenue.

Here's another reason why VeriSign stands out in the Internet landscape: Sclavos is probably the only person wearing a tie at this laid-back conference in the mountains. After pointing out that he was "taking some heat for wearing a tie," he joked, "but it's 100% Gore-Tex, and I'll be skiing in it later."

--

Suzanne Galante

SportsLine's Line

How big is the market for online sports, and when will it arrive? Those were the questions

SportsLine USA

(SPLN)

CEO Michael Levy faced here Tuesday.

SportLine is faring well in the arena of online sports content. Although its

CBS SportsLine

site is second in audience reach behind

Disney's

(DIS) - Get Report

ESPN.com

, Levy indicated that the momentum was with him, pulling out fresh

Media Metrix

numbers showing that the number of unique visitors to the site grew 27% from October to January, compared to 15% for ESPN.com over the same period.

Levy said he was comfortable with analysts' estimates of a little more than $10 million in revenue for the first quarter, the biggest share of which comes from advertising. The

CBS Sports

operation of minority shareholder

CBS

(CBS) - Get Report

sells about $800 million in advertising annually. Levy thinks CBS SportsLine over time can add 10% to that number.

As part of that strategy, some ad sales for the site are being sold in a package with other CBS properties; CBS SportsLine, he said, is getting 4% of a multimillion-dollar deal with golfing manufacturer

Taylor Made

. Last year, there was $4.5 billion dollars' worth of sports advertising on TV, 20% of all TV advertising, he said. He expects that there will be $2 billion worth of Internet sports advertising by 2004 or 2005.

Nancy Casey, general partner with

Valhalla Capital

, said she thought the big opportunity for SportsLine was in e-commerce, not advertising.

Casey, whose firm doesn't have holding in SportsLine, said she also noticed how Levy had pointed out more than once during the presentation that the average sports fan is not on the Internet. That, she said, was hard to reconcile with the fact that that same demographic -- young, high-income males -- were theoretically the earliest adopters of the Internet. "Maybe there are not that many information junkies," she said.

Levy's response? "If you walk into a football stadium, you'll see a lot of people who are not computer users," he said, adding that he thought the Internet had 50% penetration into that population. Separately, he estimates that 5 to 7 million sports fans are in fantasy leagues; CBS SportsLine has 70,000 such players, he said.

SportsLine USA's stock rose 7/8 to 50 1/2 Tuesday, a day when

BT Alex. Brown

analyst Lawrence Marcus upgraded the stock to strong buy from buy.

-- George Mannes