Global Internet services company VeriSign Inc. plans to announce today that it will open a Herndon subsidiary to handle its domain name retailing business.
The subsidiary, Network Solutions Inc., has the same name as the company that VeriSign bought in June 2000 to become the world's largest seller of Internet addresses.
"Network Solutions needs to be a separate and independent entity because it is truly different than the rest of VeriSign," said W.G. Champion "Champ" Mitchell, who will be president of the wholly owned subsidiary. VeriSign, of Mountain View, Calif., is a major provider of Internet security and telephony products.
The domain name retailing unit, or "registrar," is the only VeriSign business that caters to a mass audience, including individuals and small businesses, Mitchell said.
VeriSign's main clients include tens of thousands of corporate customers, whereas Network Solutions "offers Web presence services to millions of customers," he said.
Mitchell would not speculate on the future of Network Solutions, but noted the recent creation of VeriSign's Herndon office as evidence of the subsidiary's commitment to running a successful operation. That office is to house about 650 Network Solutions employees and some of VeriSign's East Coast employees.
VeriSign stopped using the Network Solutions name for its addressing operation in the summer of 2001, Mitchell said. But in a 2002 survey of Internet address buyers, VeriSign found that 87 percent of them were familiar with the name "Network Solutions" and could identify it as a domain name seller, while few recognized the name "VeriSign," Mitchell said.
In addition to owning one of the world's largest Internet registrars, VeriSign controls the sole registry of names ending in .com and .net. As the registry operator, VeriSign collects $6 per name for each address registered in .com or .net, regardless of which registrar sells the address.
Network Solutions once encompassed the registry and registrar functions, but the registry is not be part of the new subsidiary. VeriSign's registry operation will remain in Dulles.
Domain name retailers as a whole -- and VeriSign in particular -- were hit hard in the aftermath of the dot-com shakeout. After growing unabated from the early 1990s, the universe of Internet addresses ending in .com, .net and .org shrank for the first time in November 2001 and continued hemorrhaging names until July 2002.
That trend has leveled off, but some observers have questioned the fundamentals of the registrar business model and of the business line that Network Solutions has taken over.
"It's a market that's marked by incredible competition, and it just so happens VeriSign is one of the most expensive" providers, said Chris Kwak, an analyst at Bear Stearns who follows VeriSign.
"The total number of names might be starting to grow again, but the total number of dollars isn't necessarily growing," Kwak said. "These guys [registrars] are going to beat each other up for a long time."
Kwak said he does not own VeriSign stock and he said Bear Stearns does not provide investment banking services for VeriSign.
Network Solutions also is to focus on using the domain name business to sell services like Web site design and hosting, Mitchell said.