Internet infrastructure services provider VeriSign, Inc. (VRSN) recently announced that the Internet Corporation for Assigned Names and Numbers (ICANN) has renewed the former’s contract to serve as the authoritative registry operator for the .net registry for another six years till 2017.
Management stated that as the demands on the Domain Name System increased dramatically, VeriSign will continue to build and invest in the infrastructure that supports .net to ensure its continued secure and stable operation.
We view this renewal as a positive for the company as this should boost business for VeriSign in the coming years.
Earlier, in May, VeriSign resolved its five-year long lawsuit with Coalition for ICANN Transparency Inc. (CFIT) by entering into a Settlement Agreement and Mutual Release.
Under the agreement, both the parties dropped their claims against each other. The lawsuit alleged that VeriSign had obtained the contract from Internet Corporation for Assigned Names and Numbers (ICANN) without any competitive bidding, a claim denied by VeriSign.
Based on the recent developments in the case, CFIT agreed to dismiss its claims voluntarily. CFIT filed its fourth amended complaint on February 22, 2011.
In 2010, the District Court granted CFIT’s third amended complaint, which contained new allegations regarding the .net Registry Agreement. However, Verisign's motion to dismiss CFIT's third amended complaint was granted by the District Court.
At the beginning, CFIT filed both its first and second amended complaints against the company in fiscal 2006, and both were dismissed. Later, CFIT appealed to the U.S. Court of Appeals for the Ninth Circuit. The U.S. Court of Appeals reinstated the lawsuit against VeriSign and remanded the case to the U.S. District Court.
We view both the developments as positive and maintain a Neutral recommendation on the stock. However, the stock currently carries a Zacks #4 Rank which translates into a short-term rating of Sell.
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