Verisign – Spinning Out of Control – Looks Bad?

Implications: Roper is leaving.  The founder is coming back to take over from Roper. On the surface this looks bad.

Analysis: I have not been happy with Verisign in the last year.  On July 5, 2007, I wrote a posting strongly advising Roper not to sell off its SS7 backbone business without a real plan to replace that lost revenue.  See “Verisign - Don't Sell Off the Past for the Future”.

The backbone business for Verisign has been steadily declining over the lats few years due to the industry’s shift to Internet Protocol (IP) based services.  However, Verisign’s backbone business has been generating revenue and therefore cannot be discounted easily.

It is easy to say you can generate cash by selling off non-core assets but that corporate sale needs to be followed up with a plan to replace the lost revenue.  I for one never understood what Roper planned on doing specifically to grow the revenue.  Roper’s goal was to concentrate on its core business.  That is great but next questions are “what, how and when”?

In other words what specific actions are Verisign going to perform to grow the revenue after it sells off its non-core assets?   Roper’s departure does not ease my fears because he never finished what he started.  What does this mean?

Bringing in the cavalry in the form of Jim Bidzos is certainly getting my attention.  When you bring back a founder it usually means that the exiting CEO was told to leave and that the founder was brought back in order to present an image of stability and control until the board finds a permanent replacement.  In other words, Verisign may be spinning out of control.

The devil is in the details.  Investors pay attention to what is going on.