Leading internet infrastructure services provider VeriSign, Inc. (VRSN) recently announced a hike in the registry domain name fee for .net top-level domain names, in agreement with the Internet Corporation for Assigned Names and Numbers (ICANN).
The price increase will be effective from July 1, 2013. As of July 1, 2013, the registry fee for .net will be $5.11, up from the earlier level of $5.62.
VeriSign is the registry of domain names within the .com, .net and .name generic top-level domains (gTLDs) under agreements with the ICANN and the U.S. Department of Commerce (DOC).
Earlier in January, the registry fee for .com domain names increased from $7.34 to $7.85, and the registry fee for .net domain names was increased from $4.65 to $5.11.
The news of the price increase came in just after the approval of the company’s agreement. Most recently, the U.S. Department of Commerce approved the renewal of VeriSign's agreement with the ICANN to serve as the authoritative registry operator for the .com registry. The term of this agreement, effective from December 1, 2012, would continue through November 30, 2018.
However, the agreement includes certain new terms and conditions. VeriSign's current pricing of $7.85 per domain name registration will continue for the six-year term of the agreement. It also mentions that VeriSign will not be entitled to four price escalations of up to 7% during the six-year period.
Nevertheless, the price increase will positively impact the top line. In 2011, VeriSign completed its four-year restructuring plans, which included divesting or winding down non-core businesses, the sale of Authentication Services business, and relocation of its headquarters.
This restructuring has resulted in a more efficient and more focused VeriSign with opportunities ahead. Management can focus on the standalone business of Naming Services, leading to better execution.
Meanwhile, competition continues to be stiff for VeriSign from the likes of Tucows Inc. (TCX) and others.
As of now, we prefer to be on the sidelines and hence maintain our Neutral recommendation as we believe that most of the positives are already discounted at current levels.
Our Neutral recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.
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