VeriSign Earnings in Line - TheStreet

VeriSign Earnings in Line

It swings to a loss in the second quarter; shares slip more than 5% after hours.
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Updated from 5:11 p.m. EDT

Digital services company

VeriSign

(VRSN) - Get Report

swung to a loss on a revenue drop of 6% in the second quarter and issued weak guidance for the third quarter.

VeriSign on Thursday reported a net loss of $4.71 million, or 2 cents a share, for the second quarter of 2007, compared with a profit of $376.8 million in the same quarter of 2006.

A year ago, tax benefits of $327 million and a charge of more than $13 million in stock option expenses were included in the results.

Excluding items, earnings were in line with Street expectations at 25 cents a share, compared with 24 cents a share the year before.

Revenue of $368 million during the quarter was in line with consensus expectations but down from $391.85 million the year before. The results include $4 million of revenue related to the Jamba Services business that is for sale.

Shares of VeriSign were off 79 cents, or 2.6%, to $30 in after-hours trading.

VeriSign's Internet services group, which includes security services and information services, posted revenue of $225 million in the second quarter of 2007.

The information services business ended the quarter with approximately 73 million active domain names in .com and .net, representing a 5% increase over the first quarter of 2007 and a 27% increase year over year.

VeriSign processed 7 million net new registrations and 10 million renewals during the quarter. The company estimates renewal rate remained strong at 76% and consistent with prior periods.

The VeriSign Web site certificate business issued approximately 211,000 new and renewal certificates in the second quarter, up 4% from the first quarter of 2007.

VeriSign's digital infrastructure is now handling peak loads of 30 billion domain name server requests a day, up 60% from year-ago levels, the company said. Also, effective Oct. 15, VeriSign will hike its annual domain registration fees by 7% for .com domain names and 10% for .net domain names to $6.42 and $3.85, respectively.

The communications services group delivered revenue of $143 million in the second quarter of 2007 and the communications and commerce group generated revenue of $90 million.

The content group, which includes messaging services, generated revenue of $39 million during the quarter.

For the third quarter, VeriSign expects revenue of $370 million to $380 million, lower than Street expectations of $388.8 million.

Operating margin for the third quarter is likely to be 23%, up from 21.6% a year earlier, the company said.