A Second Look: VeriSign

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NEW YORK — Shares of VeriSign Inc. on Friday gave back some of Thursday's gains as investors considered how dramatically a key contract renewal will boost earnings.

VeriSign's stock rose 7.5 percent Thursday _ at one point hitting a new 52-week high _ after the Department of Commerce approved the company's contract to manage the registry of .com domain names for the Internet Corporation for Assigned Names and Numbers.

Mountain View, Calif.-based VeriSign has operated the registry since 1999, and the renewal allows the company to oversee the registry through 2012. Also, the contract enables VeriSign to raise the $6 annual registration fee by 7 percent for four out of the six years remaining in the contract.

Analysts Friday differed over the effect the contract will have on earnings. Jefferies analyst Katherine Egbert boosted her earnings estimate for 2007 by 4 cents per share, and said it should add 15 cents per share to 2008 earnings.

But Susquehanna Financial Group analyst Gregg Moskowitz said Wall Street overrates the effect the price increases will have. VeriSign has to give six months notice before raising prices, and the company's business model recognizes revenue in a way that indicates earnings won't rise by as much as people think.

Moskowitz said the contract renewal boosts 2007 earnings by a penny per share, and 2008 earnings by 7 cents per share.

Moskowitz downgraded VeriSign to "Neutral" from "Positive," saying investors have priced the stock to expect this good news and the shares trade at a fair value.

Shares of VeriSign sank 92 cents, or 3.5 percent, to $25.17 in afternoon trading on the Nasdaq. The shares have traded in a range of $15.95 and $26.77 in the past year.