VeriSign is to shed its communication services operation in order to focus on its core businesses of running the .com and .net registries and securing online transactions. The firm also plans to expand its reach into identity protection.
The plan, announced Wednesday, which could cut the internet infrastructure giant's workforce by half to about 2,000, is designed to boost its profit margin and net growth after a difficult period for the firm.
Stratton Sclavos, boss of VeriSign for the last 12 years, unexpectedly quit the firm in May. In July, the digital certificates firm announced it would take a $160m hit to cover mishandled stock option grants in an announcement coinciding with the resignation of former CFO Dana Evan. Both Evan and Sclavos were the recipients of mishandled stock option grants, although there's no evidence of wrongdoing on their part or that of the board as a whole.
Most of the units VeriSign plans to divest come from its communication services group, which included a consulting business and billing service for mobile operators that together account for around a third of its revenue. Acquisitions such as mobile ringtone firm Jamba! in 2004 and managed security firm Guardent in 2003 pushed VeriSign into potentially profitable but highly competitive markets.
Without a clear leadership position in these businesses VeriSign was left with its finger in too many pies. VeriSign is in negotiations with unnamed mobile operators and venture capital firms about selling the excess unit, the Wall Street Journal reports. VeriSign plans to close the businesses if it is unable to find a buyer. The restructuring process is expected to last until the end of next year.
VeriSign shares initially dipped on the announcement before rebounding to close slightly up on the day, climbing 55 cents to reach $33.70. VeriSign's reorganisation makes business sense, but historical precedent suggests investors may be in for a bumpy ride.
Network Associates (as it was) went through a similar process after the dotcom boom when it shed many of its late 1990s acquisitions in fields such as network performance monitoring, encryption, and firewalls to focus on the business it started off in the first place, McAfee Anti-Virus, and intrusion prevention. ®