Tax law implications and two topics that weren’t discussed: Verisign results
Tax law will have big implications for Verisign.
Verisign (VRSN) noted fourth quarter and full year earnings following the bell yesterday.
Of note, the .com/.net base increased by 0.57 million domain names to 146.4 million. The firm forecasted growth of 0.4 to 0.9 million for the quarter. For Q1, it forecasts 1.5 million to 2 million growth in the base.
Verisign has perfected its art of hitting at least the minimum growth prediction. It’s fairly easy for it to manipulate this with marketing dollars and specials across .com and .net to push registrations.
Since of the recent U.S. tax law changes, the firm plans to repatriate $1.1 billion of cash that it has stashed in overseas subsidiaries. Despite having so much cash, the firm has regularly borrowed money to buy back shares while keeping the cash safely offshore, outside the hands of the U.S. government.
It will now have to pay tax on money earned by these overseas entities since of the tax law changes. This will increase Verisign’s annual tax expense. Its interest deduction from borrowing money will also be limited. So the firm is evaluating its entire capital structure.
It was the absence of discussion of a couple topics on yesterday’s conference call (and in recent quarters) that really struck me.
First, no one is asking regarding Verisign’s IDNs. It’s clear by now that those are a bust.
Second, all of that talk regarding monetizing intellectual property has disappeared. I suspect Verisign has decided to not ruffle feathers on IP and instead continue to work on ways to increase the price of .com domain names. Increasing prices slightly will have a bigger impact on its bottom line than a bit of IP wrangling.
Keep in mind that Verisign hired Phil Corwin last year. Corwin spent the last decade arguing against .com price increases on behalf of the Internet Commerce Association. Coincidence?
