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VeriSign grabs Network Solutions for $21bn

Synergy from domains and certificates? Well, maybe...

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In a surprise move, VeriSign has acquired domain registrar Network Solutions for a massive £21 billion in shares. The deal is that VeriSign will issue 2.15 shares, which closed on Tuesday at $200, off 19 percent, for each Network Solutions share, which closed at $407.39, up 13 percent. At the time of the announcement, the premium was 48 percent for NSI shareholders at the previous day's close. NSI is bigger than VeriSign and its shareholders will have 60 percent of the combined company, as well as more employees and twice the revenue. A winner will be Science Applications International, an engineering and research firm that spun off NSI in 1997 but kept shares worth around $3.5 billion. Although VeriSign will be able to offer one-stop shopping for domain registration and e-commerce security products such as certificates, and has the NSI database of domain names, it seems most unlikely that such an acquisition cost could ever be justified on any rational grounds, even if there is considerable future leverage. One possibility being considered apparently is supplying data about buyers and suppliers for business-to-business commerce. Stratton Sclavos, the VeriSign CEO, will have overall control, but he is already familiar with NSI since he has been on the board since it floated in 1997. NSI will function as an independent subsidiary under Jim Rutt, the present CEO. NSI emerged unscathed from an antitrust investigation last month. Under its agreement with ICANN, which was reached after some friction, NSI has four more years to exploit its database, and may spin it off. Although there are now some 90 domain registrars, NSI is dominant. Following VeriSign's merger with Thwarte, it now controls nearly 100 percent of the signed digital server certificate business. But as digital certificates can be issued by anybody, there is always a possibility that some newbie will find a better way to give an assurance about security, and maybe succeed in obtaining a patent as well. Both companies have been criticised severely for their level of customer service: we shall have to see if things improve. ®

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