威瑞信 (VRSN) 2001 Q2 法說會逐字稿

VERISIGN INCORPORATED CONFERENCE CALL

Good day and welcome to VeriSign Incorporated second quarter earnings release conference call. Today's call is being recorded. At this time for opening remarks, I would like to turn the call over the Ms. Dana Evan, please go ahead.

Thank you. Good afternoon everyone and welcome to VeriSign's second quarter 2001 conference call. I am Dana Evan, Chief Financial Officer for VeriSign and I am here with Stratton Sclavos, President and CEO, and Kathleen Ochsner our Director of Investor Relations. On behalf of the company, we would like to thank you for joining us today. Before I review the format of the call, we would like you to know that our financial results are released to the newswire this afternoon after the markets closed. The press release can be found on our website at www.VeriSign.com. This call is also being webcast live, both on our website as well as at www.streetfusion.com. As it relates to the format of the call today, I will begin with review of VeriSign's financial results for the second quarter of 2001, and then turn the call over to Stratton. He will review the quarterly highlights and other important business milestones as well as give you a high level view into our business opportunities, strategy, and the overall outlook going forward. Stratton will then turn it back to me for some financial guidance for Q3 and the rest of the current year as well as some final comments. We will then open the call for your questions. We will stop the call promptly at 3 o'clock. Before I begin, I would like to remind you that the financial matters that we will be discussing today other then the historical financial data may be forward-looking statements. As such, they are subject to the risks and uncertainties as described in our 10-K for the year ended December 31, 2000, as well as other reports filed with the SEC. Our actual results may vary materially from any such statements. Now, turning to the financial review, as you will see in a moment, our second quarter results indicate another strong quarter for VeriSign in what was obviously a challenging macroeconomic environment. The positive trends we saw in the quarter in both the growth of our customer bases as well as our revenue per customer were driven primarily by high ASPs in our core services, increased [________________] rates, and better than expected renewal rates. This translated into solid sequential growth in our topline revenue, healthy operating cash flows, greatly expanded operating margins that came in well ahead of plan, and better than expected earnings results. In addition, we exited the quarter with a very strong balance sheet containing over a billion dollars of cash, no debt, and a growing deferred revenue balance. Now, turning towards the actual results for the quarter, on a consolidated basis VeriSign reported $231.2 million of revenue for the quarter compared to $213.4 million in Q1 of '01. To segment that further into our business division, the Mass Market division delivered approximately 63% of total revenue for the quarter while the Enterprise and Service Provider division made up the remaining 37% of revenue. Over the course of the quarter, the continued demand for our core services, in addition to our expansion into new and enhanced service offerings drove even further diversification in our revenue base. Customer concentration therefore remains virtually nonexistent with no single customer accounting for even 5% of total revenues. More importantly, due to the broad range of the services that we offer and the span of markets in which we offer them, we are not necessarily reliant on any one area of the business to demonstrate strong financial growth. The percentage of revenues driven from our international affiliates and subsidiaries were 13% in Q2, up from 10% last quarter. Consolidated cost of revenue for the quarter was 78.6 million compared to 72.6 million in Q1. This translates into a 66% consolidated gross margin for this quarter consistent with last quarter and our internal expectations. Now moving on the operating expense related items, we ended the quarter with a consolidated employee headcount of approximately 2355 people as compared to 2310 last quarter. Total consolidated operating expenses for Q2 were 118.8 million compared to a 113.5 million in Q1. While we continue to see increased deficiencies in our marketing spending during the quarter due to the general market dynamics, we also continued to invest in the corporate infrastructure and R&D areas. This reported operating expense level translates into consolidated operating income of $33.8 million or a 14.6% operating margin. This represents a significant expansion over the 12.8% operating margin we reported last quarter and demonstrates the continued operating leverage we expect to see in our business model. In addition, the company took the opportunity in the quarter to enhance our cost control measures and look for more synergies across all lines of business while continuing to manage our expense growth more efficiently. Other income for Q2 was 19.2 million compared to 21.5 million in Q1, and consists primarily of interest income as well as realized gains from the sale of marketable security. The continued rate decreases by the Federal Reserve drove lower yield on our cash balances during the quarter. As you might expect to the extent the Fed continues to lower rates, this could further reduce quarterly interest income. In addition, VeriSign reported a one-time noncash charge in the quarter of 9.9 billion. This charge relates to a portion of the goodwill booked for several acquisitions made with stock over the past two years including Network Solutions, Signio, and THAWTE among others. It is important to note that these acquisitions have performed at or above expectations. However, the decline in overall market conditions and related multiple dues to estimate their values coupled with the company's conservative approach to accounting practices indicated that this charge would be reasonable under the FASB guidelines for such matters. VeriSign reported pro forma consolidated net income for the second quarter of $52.6 million versus net income last quarter at 48.6 million. This translates into a pro forma consolidated EPS in Q2 of 25 cents compared to a EPS of 23 cents in Q1 of '01. As you know, VeriSign is not currently in a tax paying position; it does not expect to be for the foreseeable future. However, on a fully taxed basis using a 40% rate, EPS this quarter was 15 cents or 1 cent ahead of the first call consensus of 14 cents, which had also been tax affected. Now moving on the balance sheet as it relates to the cash balances, VeriSign continues to post an extremely strong balance sheet with cash equivalents and investments of approximately 1.3 billion at the end of Q2. As we have shown in the past quarters, we continue to generate healthy positive cash flows from operations. On a normalized basis, operating cash flow excluding certain one-time charges was approaching $60 million, which was relatively consistent with cash flow over the past few quarters. On the DSO front, net DSO's in Q2 came in at 66 days as compared to 59 days in the last quarter. To drill down a bit further, the increased revenue contribution from our international customer base as well as the higher absolute number of renewals in the quarter were primarily responsible for the increase in the DSO number. As I have said many times before, internally, we manage our accounts receivable balances to a goal of maintaining approximately 80% of our account receivable at an aging of current to 60 days and we continue to achieve that goal on a quarterly basis. Total deferred revenue increased to 570 million in Q2, up from 542 million last quarter. This represents a 5% sequential increase and was consistent with our internal target and the guidance that we gave last quarter. We would conservatively expect deferred revenue to grow at a rate of approximately 3% to 5% per quarter for the second half of the year with some potential for upside. Capital expenditures for the quarter were slightly in excess of $30 million as compared to approximately $20 million last quarter. As a reminder, the company's capital budget for 2001 is approximately a $100 million. With that, I will conclude my review of the financial results and turn the call over to Stratton.

Thanks Dana. Well given what was admittedly at a very challenging environment for tech companies in Q2, we are obviously very pleased that we could exceed our financial goals for the quarter especially with respect to operating margin where we are clearly seeing the benefit and leverage of our infrastructure as a service model. As you will see in a minute, we are able to match the quarters strong financial performance with significant accomplishments in both product and strategic relationship development as well as surprisingly strong improvement in our customer matrix in both the Enterprise and Service Provider division and the Mass Markets division, and while we did see some softness in areas such as security consulting and wireless deployment, the diversity of our portfolio of services and continued market share gains more then made up the difference. In fact, our results were strong enough that revenue per customer increased in every line of business during the quarter. Now as we said before, we think our business strategy of operating in Internet infrastructure utility that our customers can plug into for critical services makes us more resistant to economic downturn and this definitely benefited us in Q2, vis-à-vis other technology companies. In addition, the increase in operating leverage that we are seeing is allowing us to continue to fund significant new products and service development. We believe this is important for fueling incremental revenue growth in 2002, and beyond. All things considered, we feel very fortunate to be in the position we find ourselves in. Over the next few minutes, I would like to cover the associated Q2 business matrix for each of our division and some of the key corporate accomplishments during the quarter. Then I'll spend a few minutes talking about our outlet for the rest of the year including some near term catalysts and then we'll turn it back over to Dana for a summary of the financial guidance going forward. As we jump into the divisional matrix, you'll see that both our number of unique customers and the associated annualized revenue per customer went up across the board from Q1. As many of you will recall from our annual stay in February, we consider the revenue per unique customer matrix to be the best indicator of the quality of our business. Alright let's start with the Enterprise and Service Provider division. This division includes our Enterprise PKI services, our global affiliate business, B2B payments, corporate domain name services, and of course the global registry. Revenues for this unit in 1Q2 totaled $85 million representing 37% of our total revenue. Let us now get down into each area for some more qualitative perspective. First, we'll talk about our managed PKI business. Contrary to general market perceptions, we continue to see good performance in terms of new orders, contract renewals, sale pipeline growth and closure rate, and while we did see some orders slip out of the quarter, we still saw sequential growth in this business in terms of revenue and customer deployment trends. We signed over 200 new customers in Q2, including AIM Advisors, Qwest communications, QUALCOMM, and SCI systems. Deployment volumes are also continuing to climb with tens of thousands of seats being turned on weekly. As we discussed earlier in the quarter, these deployment rates are 5 to 10 times what they were a year ago. We attribute this phenomenon to the fact that our Enterprise customers are looking to use extranet to reduce the operating cost associated with customer and supplier communication. Subsequently, they are deploying our certificate to both internal and external users in order to provide the required access control and privacy that these applications demand. We expect this trend to continue for the foreseeable future. Moving to our international affiliate business, we added one new affiliate in Europe during Q2, while we saw continued buildup and ramp up from our existing base. In fact, over 50 additional Enterprise customers were signed on by the affiliates in the quarter. In addition, our Dutch and Singapore affiliates also added our payment services to their offerings during the quarter. And we would expect to add 1 to 2 new affiliates in Q3 and have another 1 to 2 of our existing affiliates at the payment platform. In B2B payments, we continue to see significant interest from large manufacturers, with both retail and wholesale distribution chains. We'd expect to make some new customer announcements very shortly. The agreement we announced in April with E1 Global and First Data will lead to new product introductions this quarter as well including some of our first XML-based services. Our corporate domain name services group continued to see strong demand for their services in Q2. As you know, this group helps large corporations manage and protect their domain name portfolios on a global basis. What we are finding is that this opportunity is not just about domain name registration, but also about online brand protection and promotion. In fact, we have just renamed the group VeriSign Online Brand Protection Services and we'll be rolling out in a handset of offerings in Q3. Although our contracts prevent us from disclosing the names of individual customers, we are seeing accelerated uptake throughout the Fortune 500 and beyond. The soft areas for the ESP divisions in Q2 were security consulting and wireless. General market conditions and widely reported delays in global wireless deployments played a very significant factor here. We also believe, however, that we could have executed better and we've recently made some management changes to provide better focus and leadership in these areas. We expect these changes to show results as early as this quarter. The last piece of the ESP division is the global registry. We saw a good performance in this unit in Q2 in both its core business as the registry for Dot Com and Dot Net, but also in its further expansion into new service offerings that leverage our installed infrastructure. First we'll cover the domain name statistics. We've registered approximately 2.8 million new names for the quarter, which was slightly below our goal of 3 million, but still impressive given the overall market conditions. We also renewed over 2.3 million names and managed to transfer over 730,000 names, this brought our total of paid domain transactions to 5.8 million for the quarter. Now, as many of you know, there has been a high degree of investor and industry focused on renewal rates given last years dramatic rise in registrations. We've been forecasting a very conservative 50% renewal rate for the year. In Q2, we saw overall renewal rates of 60%. While this number is down from the 65% rate we saw in Q1, it is still well above our 50% guidance number. All in all, we are pleased with Q2's renewal rate and we're still maintaining the 50% guidance number going forward for the year as a whole, but now believe there is upside to this forecast. In addition to this relatively strong performance in domain names, we also signed our first customers for the managed DNS offering. We're finding a high degree of interest from traditional enterprises as well as small ISPs and domain name providers. Look for enhanced product offerings and initial customer announcements this quarter. Last, but very importantly, we're also able to continue our R&D spending in some critical areas such as XML, internationalized domain-names, converge network services, messaging, and secure DNS. All of these projects will lead to new services starting later this year, and throughout 2002. I am personally very excited about these new areas and am pleased that our increased leverage is giving us the opportunity to continue to fund this work on schedule. Let me finish by summarizing the overall customer matrix in the ESP division for Q1. The number of Enterprise customers grew to 3330 during the quarter, up 7% from 3120 at the end of Q1 and the average annualized revenue per Enterprise customer grew to $45,000 per year, up 5% from 43,000 in Q1. The number of international affiliates grew to 38 from 37 last quarters, and as I mentioned earlier, we also had 2 of the existing affiliates add our payment services platform to their offering. This combination of events led to an average revenue per affiliate of $2.2 million, up from $1.9 million last quarter. In the global registry business the number of active registrars grew to 84 from 82 last quarters. Average revenue per registrar increased to 1.3 million from 1.2 million. Obviously we think it significant that each of the customer matrixes in the ESP division increased during the quarter. Now turning to the Mass Market division, as you know this is a division that includes retail, domain name registration, our small business E-mail and website hosting services, our website certificate services and our B2C payment area. Revenue for the division was 146 million in Q1 or 63% of total revenues. Let's talk about basic domain names first. As we've said before, our strategy in the retail domain name market is to acquire and retain high quality customers who are more likely to renew the domain names year after year and to purchase additional services from us as their Internet businesses grow. We believe we continued our good progress from Q1. We registered 1 million NET new and transferred names in the quarter at an average of 1.5 years per paid name. We also renewed close to 1.4 million names during the quarter. The average subscription term for the renewed name was slightly over 2 years per name, versus last quarters 1.9. We also added an additional 750,000 names to our active base during Q2 from our previously announced acquisition of registrars.com. In the value added services area, we brought on an additional 23,000 new customers for our image café service, bringing us to a total of 56,000-hosted websites. We also added 70,000 new E-mail boxes, bringing us to a total of 715,000 posted E-mail accounts. We expect to continue to see growth in the value added service area in Q3, especially in the messaging area where we have now built out our own high performance infrastructure and our migrating our customer bases as we speak. Turning to web certificates, we issued a record 95,000 web search during the quarter and upsell rates climbed to a record 40% from 35% last quarter fuelled by continuing demand for our premium certificate and improved sales conversion rates. Retention rate remained constant at 87% for the quarter. In B2C payments, we added 6000 new customers and saw our active base grow to over 26,000 merchants organically, up 30% quarter-over-quarter. While this growth may seem surprising given the online retailing environment, it appears that we're benefiting from a continued move by traditional physical world retailers, large and small, to use our payment services that bring up their online storefronts. We also saw a significant increase in the dollars transacted through our gateway in Q2 up to $720 million from $570 million in Q1. Now all the numbers I've just mentioned constitute organic growth in the payment business from Q1. We've also added some 25,000 to 26,000 cyber cash merchants to our base with their corresponding transaction volumes. As we report Q3 matrix, we should easily have over 50,000 merchants processing well over $1 billion a quarter through our gateways. Summing up, Mass Markets, we are pleased with the quality of the domain name customer base and with the renewal rates in subscription terms. As we head into Q3, we have just completed and rolled out our new retail storefront. This massive redesign attempts to take a page from the Dell and Amazon handbooks to provide easier navigation, product selection, and customer support. Although the site has only been active for a few days, we believe we have a winner. Right now the new site can be found at www.netfall.com, but although within a few weeks we'll be transitioning all of our URLs in traffic to the new storefront. The customer matrix for the Mass Market division is as follows; we now manage 16 million domain names up from 15.5 in Q1. These names represent 6.5 million unique customers. Average annualized revenue per domain customer rose to $77 up 4% from $74 in Q1. The web certificate customer base grew to 102,000 unique customers from 95,000 in Q1 and average revenue per certificate customer increased to $670 per year from 660. And lastly the B2C payment services customer base grew to over 50,000 active merchants with annual revenue per customer of 350 per year up from $336 in Q1. Let me finish by covering a few corporate highlights from Q2 and then giving you a sense our outlook for the rest of the year. The two most notable highlights at the corporate level were recently announced alliance with Microsoft for Dot Net strategy and the ratification of our new agreements with the department of commerce and ICANN. On the Microsoft front, we are excited about the opportunity to provide our authentication, payment, and domain name services in support of the Dot Net initiative. We believe XML based web services are going to be a key market driver over the next 5 years and we think Dot Net will win a significant following. We would expect to begin offering the first of these services by year-end. In addition we have committed to using certain Windows 2000 and Dot Net technologies within our infrastructure and we would expect to collaborate further with Microsoft as Dot Net comes to life. We are also closely tracking the other web services initiatives in the market and expect to be able to provide our services across each of the more promising platforms. And of course, the news on the ICANN front is that the contracts with the Department of Commerce and ICANN are now approved and signed. We are thrilled that we are able to come into agreement with both parties on a new arrangement that balances need to be Internet community with the clarity that we need to run out our business. So as we head into Q3, we remain committed to our strategy of becoming a key enabler for second generation of the Internet. We believe our job is to observe the complexity and inherent in network navigation, security, and payments and to provide our customers with scalable and reliable access to these services. Looking into the second half of the year, we remain reasonably confident about our business outlook even with the backdrop of what looks like a prolonged depression in technology spending. Reasons for our optimism include our view that many of our services are non-discretionary for business with large and small. Additionally our service model makes them easier to deploy, with the lower initial outlay in terms of both capital and human resources and of course, we have some unique catalyst that should appear in the second half including the introduction of the new domain name extension and our own internally developed services across many of our lines of business. So with that as always, I will thank you for your attention and I will turn it back over to Dana who will give you the financial guidance for the Q3. Dana.

Thanks Stratton. In summary, before we turn the call over to you for the Q&A session, let me just briefly give you some high level guidance. As you can see by VeriSign's quarterly financial results as well as Stratton's and my comments today, we continue to experience strength in our major lines of business and look forward to new opportunities in the future. Taking this in to account, we have established what we believe to be reasonable goals for the company. In general, we would expect to see continued growth in topline revenue consistent with these business trends, although we would also expect periodic fluctuations among our growth rate. Turning to the revenue estimates for Q3, we remain comfortable with the current street estimates in the range of $250 to $260 million and the consensus of approximately $255 million for the quarter. Looking-forward for the remainder of the year, we are maintaining our fiscal 2001 revenue guidance in the range of $975 million to $1 billion. We would expect our revenue growth rate to accelerate in the second half of the year when we anticipate seeing the impact of the several new catalysts on our revenue strength Stratton just spoke about. These catalysts could include incremental revenue streams from the new domain name extension, registry hosting services, and corporate brand management services among others. In addition, growth, operating, and net margin should also continue to improve. However, we would expect periodic fluctuations among our growth rate here as well. As it relates to gross margins for the year, we continue to expect gross margin in the range of 66% to 67%. In addition, we would expect our operating margins to continue to expand such that we exit with the year with margins obviously within or more likely above the previously guided target range of 14% to 16%. As it relates to the EPS guidance, we are raising our guidance for Q3 to 16 cents up from the current street consensus of 15 cents. We are also increasing our fiscal 2001, EPS guidance to a range of 60 cents to 63 cents up from 56 cents to 60 cents previously given. Again on a fully taxed basis at a 40% rate. With respect to the VeriSign target operating models for future years, we are looking for operating margins for 2002, to exit the year in the range of 22% to 26%. To the extent that we continue to experience similar margin expansion is to what we saw in Q2, it would be the possible for the 2002 target to increase slightly beyond that range. In addition, looking 3 to 5 year out our long-term target-operating model would suggest delivering operating margins in the 30% to 34% range. We anticipate giving detailed guidance for 2002 on the Q3 earnings call in October. I would also like to remind you that last quarter the VeriSign board of directors authorized to share repurchase program provide the company from time to time will repurchase that $315 million of its common stock in the open market. While we did not buyback any shares in the second quarter due to the relative strength of the stock during the open trading window. We will look to buyback VeriSign shares from time to time at appropriate prices to fuel employee option grants and for other general purposes and with that being said, I would like now open the call for your questions. Operator, can we have the first question please?

Today's question and answer session will be conducted electronically. If you would like to ask a question please signal by pressing the '*' key followed by the digit '1' on your Touch-Tone telephone. Again that's '*' '1' to signal for a question. We will first go to Stephen H. Sigmond with Dain Rauscher Wessels.

Hi, guys very nice quarter. Stratton and Dana, I would just like to drill down a little bit more into the operating margin expansion that you saw during the quarter. Can you talk about where you are seeing the most traction in terms of upsell and just give us a sense to some of the operating leverage that you get when you convert an Enterprise customer to the next year?

Sure Steve, thanks. Well couple of things, as you heard us say over the course of last couple of quarters, is we really didn't believe we were doing a great job of up selling our customers pretty much anywhere across the corporation and we had put a very significant management focus on that. So where we are seeing the up sale is pretty much across the board whether its on the domain name side, the value added stuff, the image café, E-mail boxes, obviously on the certificate side jumping 5 percentage points and up sale rate quarter over quarter, I think shocks even us. We are seeing that because of increasing international penetration and just a demand from customer for this bundle of products. On the enterprise side, we are seeing up sales in terms of more certificates being ordered by existing customers and as I said last quarter some of the new orders are coming in at higher than traditional user count. So I mean that's all good news from the selling side. On the leverage side, well I think the reality is we have spent hundreds of millions of dollars over the last few years to build out infrastructure that we believe is around 10% of its capacity. So in essence, there are no step function increase in capital needed to be able to support these increases in services that we are seeing both in volumes and kind of rate of deployment and therefore the leverage is showing through to the operating line.

Gross margin looked pretty flat, has been flat over the last few quarters. Should we expect to see increasing leverage there or is it more from [______________] perspective?

Right Steve. So I think we are looking for the gross margins to sustain that 66% and 67% range throughout the quarter. We will look for the margin expansion to come from the other operating areas from marketing and sales, R&D, and G&A.

Okay great. Then the last question this just on Dot Net and I know you haven't given any real specific details on pricing or timing, but just curious as to what we have to expect that to do in terms of whether it's a number of certificates or number of developers, if you could give us any guidance on either magnitude or timing of the impact to the business. Thanks.

Sure Steve, thank you. We said when we announced this with Microsoft was they intended with the rollout of the Windows XP in the October timeframe to begin to promote some of these services and so we are on track from a development perspective to rollout some of those services at that time, although I think what you really see is probably second quarter next year as more of the XML frame work gets out there as more of the passport stronger authentication services we are building to get out, that's when we will start to see an impact on the business, although frankly even right now we are beginning to certify XP developers with our [________________] certificates.

Thanks a lot. It takes a lot to raise guidance in this environment. Nice job.

Thanks Steve.

We'll take our next question from Mary Meeker with Morgan Stanley.

Hi, this is Dave Joseph for Mary. Congratulations guys.

Now what Mary.

That's a little deeper voice. I just have one question for you guys. Is there any more visibility or clear visibility on when your registries will be up for Dot-Biz and Dot-Info, and how are you modeling that in at this moment.

Yeah, Dave. We seem to be on a nonmoving start date of kind of mid-to-late September in both of these, both the Dot-Info and the Dot-Biz, which obviously we believe, are going the be the biggest of the new ones. And we are geared up in taking name request right now. We're also taking trademark applications. So, the good news is there are no more day-per-day or week-per-week slips. They seemed to be locked into this end of September date, and we are pretty much locked and loaded ourselves to be there on day one.

Great, thanks guys. Congratulations again.

Thank you.

Thanks Dave.

We'll go next to Todd Raker with Credit Suisse First Boston.

Yeah it's a great quarter. Just a follow up on the Dot-Info, Dot-Biz question, and my understanding is that the auctions will occur in September, but they won't go active till October. Do you expect any impact on your differed revenue line this quarter, Q3?

Well, yeah its obviously, it's a lot of retard in the way that we're going to run it. Meaning that they are going to round off in request for names, and we have a significant number of those. So in the lottery, which begins in September, when those names get taken, my understanding is that is the anniversary date of the contract, and therefore, the anniversary date of the payment. So that will begin the clock ticking on the deferred revenue, and given that it's the end of September, we'll obviously take almost zero of it in Q3 revenue, and we'll go in the deferred.

And can you give us some insight to what happened to international care facets and any feelings in terms of trying to quantify. I mean, how many pre-registrations do you have. What kind of impact do we see here on Dot-Biz and Info?

Well, I think, just like we saw with international, you're going to have a tremendously interesting spike, right, in the market, on the first few days of this, the first few weeks, may be even the first few months. I do think that these are more generally desirable than the international care facets, which obviously, targets specific regions of the world. So, it's likely they're going to have a bigger spike and a slower decay. Our estimates are relatively conservative here in 1 to 2 million names, over the first couple of quarters. The estimates from the operators of those registries are much higher. So, we'll see who is right, in any way, shape or form, that shouldn't be much more significant than the multilingual stuff.

And just kind of last question on this issue. If you look at the registry, it grew 6% sequentially in terms of the overall universe. Where do you think your organic growth of domain names we are going to settle out?

Well, every time I predict it I'm wrong. So, I will confess it at upfront. I think that the problem in estimating a growth rate for it, it that it seems to us that every few quarters, there are going to be new products to be sold in this phase. So I think, organic growth rate of an existing product; lets take Dot Com or Dot Net probably is going to be a net 5 to 10% sequential area. But when you throw on new products, whether it is a biz or an info name extension or a different type of multilingual or for example a web num, when it is wireless numbering domain names that we're going to put forward. All of those things create new total available markets for names. And so you know, we used to talk about 160 million into 200 million names in what we thought the available market for com and net would be. That was wrong, right. But I think a 160 to 200 million is probably low when you think about all naming products that we're currently now thinking about. So, 5% to 10% sequential when it comes to just organic of existing products, but I can tell you about a half dozen new naming products that will hit in the next two to three quarters, that will spike that demand.

Great, thanks guys.

Once again, please press '*' '1' if you would like to ask a question. If your question has been asked and answered, you may remove yourself from the question roster by pressing the '#' key. We'll go next to Mark Fernandes of Merrill Lynch.

Thanks. Congratulations Stratton and Dana. Thanks for making this a worthwhile earnings season year. First question regarding the up sale of value added services, trend. Can you talk about Image Café and E-mail accounts, I mean what are your expectations there, and are you pretty pleased with the uptake there.

I think, we're pretty pleased with it. I mean, one of the things is that you're selling less retail domain names, right, than we sold a year ago. You're having less chance to sell value added services. At the same time, we're now starting to effectively market to the renewal base some of these services, and frankly, we're beginning to see opportunities that go beyond just our customer base. We're actually being asked to bid E-mail services and Image Café services into other small business consumer bases on the net. So I think, we remain very highly confident that we're going to do a good job of getting both image café and E-mails stuff to a much higher level than they are today. I'll tell you Mark; the E-mail stuff is probably our most exciting area in this small business market. It just seems that it's a very good product, especially now that we've migrated to the infrastructure in-house. The notion of having your E-mail address to the same as your domain as opposed to at an AOL or at some other ISP, having to be able to transferred any where you go. That seems to be resonating well, and people like, believe it or not, getting it from VeriSign because the trusted infrastructure play is making more sense as some other providers of those services in the market are having some trouble.

Okay, and in terms of the term life on these names. Do you see stabilization here at these levels, Stratton?

I think, we're going to see it stabilized for a little while on the renewal site, probably posted its two years per name and on the new side, somewhat between 1.5, 1.8, not to be too specific. The interesting thing, Mark, that may change that to the upside is that its my understanding the current Dot-Biz and Dot-Info minimum terms are two years and five years, respectively. So to the extent we can capitalize on the new name momentum. In terms of term life, we will probably see an uptake in com and net because of that as well.

Okay. So that should be in a big spike and deferred one that happens, but one last question. Multilingual names, what's the kind of run rates trend in the registry?

You know Mark, I think, Q2 was about 40,000 names in the quarter, lower than our expectations, but as you saw, we only announced the Microsoft Internet browser resolution capability very late in the quarter. That's been something that the feedback from Asia and Europe has been telling us is very important, as it is what we call, multilingual dot multilingual, which will see us talk about here in Q3. So I think the product space of international domain names still has some features that the customers want to see, and we think by the end of the year, pretty much all that will be in place, and then we'll see, I think, what real demand is versus kind of this early demand, which has been more fueled by people wanting to make sure they reserve the name versus really wanting to use it so much right now.

Great, thanks guys.

Thanks Mark.

We will take a follow up questions with Todd Raker with Credit Suisse First Boston.

Hey guys, I wonder if you could just walk through kind of the up selling process. Have you seen a lot of success across the lot of different business line Stratton, in the very difficult macro environment? Can you give us some insight as to how you're achieving this in this environment, and where do you see the trend going in terms of ASPs per business unit.

Always better to be lucky than good Todd. You know how I'd like to put that. Now, I think that the reality is that certainly lets talk about the on the Mass Market side. We have this interactive website. It is a true statement to say that in web-based marketing, more still than anywhere else that I've ever seen, you can change your product offering daily, right, and that's what I would say, has led to more of the success here. It has been the [_______________] approach we've been taking on the Image Café and the E-mail boxes, hearing what customers are telling us, asking customers who don't buy, why they didn't buy, and what you find out is a lot of time, they're not buying, because they can't figure out how to make their way through your purchase flow much more so then they are not buying if they don't like the product. So I think the big storefront launch that we've just done, we think is a really good shot at seeing how good we can be at this and we'll track it pretty closely even though as you say Q1 and Q2 were not too shabby in that respect. On the enterprise side, that one's more just innate momentum, which is the customers all start really low, and therefore, they are just buying more capacity, more user accounts right, as they actually deploy the services, and so in that sense, we are being dragged by customer utilization, more so than by any change in our own strategy.

And another follow up question. If you look at web numbers, do you expect to see web number revenue in Q3, and if you look at auctioning off the numbers on the phone, would that be revenue upfront or would you defer that revenue. How do you anticipate that revenue stream there?

Well, let me answer the second part first, everything will be deferred there, and there will be yearly subscription deferred even if we were to create option for those and than in terms of Q3 revenue, we think we will start either in late Q3 or early Q4 to see that. We have been really more engaged on so far is handset manufacturers and carriers making this a really good experience, I think that is more important than taking some early reservations, although we are certainly out with a collection of folks that we would believe are obvious candidates for that in that active discussions right now.

Great thanks.

We will take our next question from Raimundo Archibold at JP Morgan.

Thank you, nice quarter guys. I had a couple of question. One, these are more probably housekeeping, can you give me a sense as to how many international affiliates are now operating above their minimums.

I think it was, what do we say about the last quarter about 4 or 5.

6 or 7 actually this quarter, I don't have that in front of me.

Actually we'll get back to you on that.

Okay, the second thing is, you picked up a couple on the registrars side, you picked up a couple of names from some sales registrars, and say weaker ones in most cases, are you still seeing a lot of people knocking on your door with the idea that you are sort of the buyer of last resort for some of these guys and should we look at this is being kind of recurring nonrecurring action within the registrar business, which could allow you to continue to maintain reasonable market share.

I think it is hard to predict. Certainly, we continue to receive incoming calls from folks who either have a distressed assets or looking to see if we would be willing to take on their customer bases. I expect that will continue at the kind of the current levels through Q3 and Q4 when the reality is that you and I have talked about, we went from one provider to 80 providers overnight, highly unlikely that 80 are needed to make a dynamically competitive market and so my expectation is, overtime it will settle out to a number probably lower than we have today through consolidation both with ourselves and I sure other registrars will do that, but we do want to make sure that the names have a home.

I think the other thing Ray, to understand there is that one of the decision factors I am looking at this type of activities is what kind of a customer base does that registrar have and if it is base of customers that predominantly nonspeculative retail type customers so that we can acquire those at a cost as much that is less than our current customer acquisition rate, that's a good deal for us, so that's kind what we look for.

Okay, and then on the PKI side, I just curious, can you give us a flavor for how those sales are going between to your direct efforts first as the channels and which channels seem to be generating the most momentum for you at this point.

In channels in PKI, I make sure I understand what you are.

In terms of resellers are partners that you may have, that you are working with.

I mean the reality is that almost all of the new business comes from our direct sales force, and we continue to have a pretty high hit rate in Q2.

Okay and in last question also on the PKI, if over 2200 customers, governments etc, and 200 that you picked up this quarter, can you give us a sense are there any specific vertical markets or geographies that are gaining momentum at this point in terms of deployments of PKI or what kind of color can you give us in terms of the type of customers that are actually accelerating their deployments.

Yeah, let me break the answer into 2 parts, one is the kind of domestic market. We absolutely see accelerated deployment of certificates in the domestic market, which I am sure is surprising to folks given other news items in the space, but we get to watch the odometer every day, quick over, as I have said many times, and it is tens of thousands per week right now going up the door not being sold licenses, but in fact termed on fees at corporate desktops and devices. So I think we are seeing just a general adoption of this technology as companies look to reduce costs to extranet, that is 80% of our volume right now and it is not limited to a particular industry I mean you can name an industry and I can name a customer for you that signed on in the last couple of quarters, I think it relates to international, I can't really tell you whether the increased uptake let's say in the UK or in the Netherlands or in Japan is because the market is ready or because our affiliate has finally gotten tractions, and I am sure it is a little of both, but the UK, Japan, Australia for that matter, Brazil is actually going very well, Canada seems to be doing well, all of those of kind of kicked in the last few quarters. I would say probably half and half because the market there is kind of picking up and because the affiliate knows what they are doing.

Excellent, thank you, talk to you later.

Thanks.

We will take our next question from Robert Fagin with Bear Stearns.

Hi guys, couple of questions here. Could you talk to the number of transfers in and out, just so that we get a sense of what is going inside there and just general pricing on PKI, and than I just wanted clarify, even if you register a Dot-Biz or Dot-Info in the quarter you won't start recognizing the revenues until they actually go live, did I get that right?

Well, let me answer the first one, on the transfers in and out, total transfers in the quarter were about 730 thousand at the registry level, about I would say 2/3rd of those were transferred out and 1/3rd transferred in, and now in addition to that of course the registrars Dot Com name base because we have acquired the asset, I do not know if that is officially a transfer or not, that's really just a customer acquisition for us, we have bought that asset. So Dot Net, if you included that we would have gotten more in than we sent out, as you know when we transfer out that goes against the nonrenewal number and so that's what also taken down renewal rates. I apologize, let me come back on the second part was on Biz and Info registrations. To answer that Robert, what is going on there is what ever the Biz and Info registries determine are their policies around anniversary date is when we will start the clock. My current understanding is that when the name actually gets put in the database not when it gets put into the resolution infrastructure, so that would suggest it is that data lottery actually starts.

Okay, and then in terms of PKI pricing.

No appreciable down tick or up in the quarter, seemed to be flat from Q1 if you would recall there is a little bit down from Q4, but Q2 over Q1 was flat.

Okay, great thanks a lot.

We will take our next question from Todd Weller with Legg Mason.

Thanks and congratulations again, just a couple of question, Stratton. Could you just talk about the renewal rates in the registrar you are seeing there and kind of talk what you expect the impact on the promotional activity that happened in the third quarter of 2000.

Sure, you are not to get into a long speech I gave last quarter about the percentage of renewal plus or minus that depending on the 45 day window on and on, but renewal rates at the registrar also around the 60% number because the window at the registrar is actually a longer window than the one at the registry in terms of the limbo period, a little harder to predict that we are being pretty conservative.

And in terms of kind of what you are looking at Com and Net with 2.8 million this quarter, are you starting to see that number hit up 4, do we still have the kind of more somewhat down [________________] to get there.

Well I think it is certainly decreased, there was smallest decrease we had seen right in several quarters, I think it was only down 10% quarter over quarters, so that kind yields like you are starting to get a stabilization here, one of the interesting things we trying to get some firm data on, but I will give you the kind of the early look is, what happens to a nonrenewal name, how quickly or not does that get repurchased by somebody else, early indications are that more than 50% of names are repurchased within a matter of days, and so that tells you that the base is probably fairly stable, and that the new name growth from international market from its, new name growth from new products that are probably the growth factors for the future.

Great, and a final question will just be, there has been a lot of talk recently about domain names slamming. How serious of an issue is that for the registrar business and do you see further action being taken on that front outside the ICANN process.

No, I think it was very hard for us to complain about this, early on because frankly we were the evil empire and all the other registrars were branded dishonest. So we knew it's been a problem for 2 or 3 quarters now, the slamming that's been going on, which seems to go against the ICANN guidelines around this area. So we went to ICANN with our data, we received their concurrence with our strategy of making the registrant acknowledge the transfer prior to allowing it to be done. We have a significant amount of survey data conducted by third parties where the registrants had no idea their names were being transferred and there is a lot of rhetoric around why that could and couldn't be. The reality is it's going on, it's a big problem, and I think now that the market is starting to mature a little bit and it's less an issue of NSI or VeriSign against everybody else and more an issue of stabilization of the market. You are going to see this to be one of the more important things that I can have to wrestle with now in setting real policies for our competitive market as opposed to policies that were purely on just geared up towards creating competition at almost with anywhere they could come up with.

Thanks a lot.

We'll take our next question from Jordan Klein with UBS Warburg.

Good afternoon. Also let me add my congratulations. Can you guys talk about Europe and international theaters and we are hearing a lot of companies mention that seasonality. It would seem with your guidance that's not really a concern, or is it that your doing such a good job it is a concern, but you have taken that into consideration.

Well I think, we had small business in Europe on the PKI side because it was coming through the affiliates and most of the affiliates were still in their wrap-up phases. So, I think we are just benefiting from, it was small before this all occurred so it really doesn't need to grow that much up absolutely to still show growth. And the indications from the affiliates are that business is okay, that they are not seeing a tremendous amount of pressure because of economic circumstances over there, because just like we find here, if you are going to put an extra net up, right, you are probably going to do it with some kind of security like a certificate and so it has become relatively nondiscretionary and the VeriSign brand is carrying some weight over there as well as competitors have had some issues. So, I think that right now we are feeling okay about your monitoring it very closely and like everybody else wondering what Q3 will bring when are all gone on holiday.

Okay. ID names, are you still on target even though you are doing some changes there to do that 30 to 40 million in sales this year. Are you changing that to the upside downside? I was just a little confused on what your plans were for this online brand protection services.

Yeah, so we are not on target in that business, we are going to be over target significantly as we had talked about last quarter. It looks to be a business that we have underestimated the potential for it even in these times. The customer names are incredible, the amount that each customer is buying is going deeper and deeper, as new products like Biz and Info come on, the customers come to us and ask us what they should be doing and want us to provide a whole set of branding services for them and so as it relates to what other things we are going to be doing in addition to monitoring domain name site, of how their brands are appearing, we have been evaluating both internal and external technologies for monitoring how brands show up all across the Internet with spidering technology and watermark technology and the rest. This is not a tough sale, when you go into these corporations because online brand protection has become integrated with traditional offline brand protection and it's getting the budget normally associated with that much figure spend there.

Okay and now you are going to be cutting back in the consulting business. You said you had some challenges there, if you are, can you explain a little bit and how is the security reselling business? I know you guys resell a lot of other vendor's equipment, can you talk about that.

Yeah, just couple of things there. One, this was a good point to talk about it. Although, headcount only went up 45 for the corporation as a whole, we probably hired 145 people in the quarter and took out about 100 others in areas that were either redundant from some of the merger activities or in areas that were not sized appropriately for the revenues contributions that includes the consulting area where we took some resource out. That being said, we still think there is good opportunity in that area and we may look to begin to build that backup over the course of the next few quarters because with the new management team coming into place here this quarter, and what looks like a little bit of upturn in that market, we are expecting that to get back on track. As it relates to security product reselling, most notably Check Point and Nokia stuff, just to be very clear that has never been more than a $6 or $7 million a quarter product line for us. We'd have expected it to actually be larger right now, but I've certainly found the last couple of quarters to be flat. So, that's what we are trying to assess with the new management team and as you know, is that a growth business or is it really a stable one. I think that market was tough in Q2, and I think we will see how it goes through the rest of the year.

And then I'll end it after this. Did you give out ASP for large deals and PKI.

We did not. Last quarter it was around 185 on the large deals, I think this quarter closer to 195-200. I said it was flat because I think we are just trying to assess what's really going on in the market.

Okay, it's fair enough. Thanks a lot.

Thanks Jordan.

We will take our next question from Matt Barzowskas with FAC Equities.

Thanks. I don't know if you guys have ever broke this down before, but in 2 different divisions, is there some way to understand what is new revenue versus the old revenue or new products coming out. I am just trying to get a feeling as you say more new products are coming out towards the end of this year, what that percentage is or what you are shooting for versus new and old stock.

Yeah, Matt. I think the honest answer there is that new products are generating very little of the revenue today, because anything new we've introduced in Q2, Q3, or Q4, will hit deferred revenue first, because they are generally all subscription services. I think the plan for the year on the 975 to 1 billion was probably somewhere around 30 or 40 million of that coming from new products, so a very, very small percentage, which we think is really a good thing. It's allowing us to build up the product portfolio for next year and the year after while we use the existing products to kind of tower to generate this year's revenue deferred.

And if you would look at, I guess on the foot side, if you look at deferred revenue as a percentage in there or it's 50-50%.

I am sorry.

Why, you were talking about you have a new service rolled out, it actually hits deferred revenue versus hitting the income line. I am just wondering if you look at the total deferred revenue, and if you could break it down of that percentage, what is newer services that come out versus old or is that something you are going to look at.

Yeah, I mean, I think the only one that's currently in the deferred, that you and I would call a new service, is the multilingual or the international domain names, which add a little over a million, million one names at times $6. So it's not very much of the $570 million of deferred. Most of the other new products that have the higher ASPs like managed DNF services, some of the Cambridge network services, E-mail stuff, those are adjust in allocating, so towards the end of this year, it might be high single digit percent of deferred, but it's not a big deal this year.

Okay, thanks a lot.

We will take our next question from Sanjay Puri with Thomas Weisel Partners.

Hi, really great quarter and particularly on the guidance for the second half. Just wanted to get a little bit more granular on the operating margin and it seems like sales and marketing came down to about 28% of revenues this quarter and do you expect that to, kind of, from 30% in the first quarter and do you expect that to continue to trend down going forward, is that where the operating margins lift will come in, and then secondly just the kind of come back to the enterprise segment. I think, if I remember correctly, it's kind of comprised of managed PKI, corporate domain name management, and consulting services and so, it seems like you are fairly bullish on the corporate domain name management, is that where the lift is really coming from or is it, kind of, strength across, all three of those areas or two of those areas barring consulting services.

Yeah, other than consulting services and zero revenue business in wireless at the moment, pretty much everything else is growing in lockstep. So, while I keep talking about cooperate domain name its because it's growing at so much faster a rate, but it started at a much smaller absolute business size. The PKI business, the affiliate business, both saw good sequential growth in the quarter. So, let me tell you one's doing great, everything else, is kind of, this way or that, but at least in notes 3, affiliate PKI, and corporate domain name stuff, they all seem to be growing in large steps right now.

We are always happy to hear that all of them are doing great.

Yeah.

It relates to the operating margins. I think what you are seeing, predominantly, in that sales and marketing line is that we can spend equal or less dollars in the current environment and get as much advertising [_______________] more than we had before, so its more efficiency around the spending, we still hire people in that area, we will continue to do that going forward and the operating efficiencies, we have look to see those from all of the different operating areas.

Great. Thank you.

We will take our next question from Dane Lewis with Robertson Stephens.

Thank you. Let me add my congratulations as well. Two questions for you guys, first on the TOBs, the new one, specifically, Dot-Biz, Dot-Info. Can you just go through how many quarters this spike might last and how that plays out, and maybe what the driver of that is. Is it Dot Com owners trying to extend their coverage to Dot-Biz and Dot-Info or is a primary driver new customers that can't get the Dot Com or the Dot Net name that they want moving to these new TOBs?

Yeah, I wish I had that crystal ball, Dane; I would give you a better guidance for the future. We think from what we can tell, from our own marketing activity, there is a high degree of interest in both Biz and Info, believe it or not, actually about equal interest in both right now from what we can see. There is a lot of it coming from existing Com owners who want to make sure they cover themselves in that state, and that obviously, goes for company names, and product names, and the rest. The generics are going to be a free-for-all like sales Dot-Biz or Support Dot-Biz. There was also going to be free-for-all in these lotteries, and that's coming from every large and small consumer business, you name it, there is a lot of creativity being applied in trying to get those. We just did an interesting survey as well, asking customers what are the most desired name extension, and in this survey, people said Dot Com is first, Dot Net is second, BIZ and Info kind of came in tied for third, and believe it or not, beyond that they are saying a third level Dot Com. Now, third level Dot Com means a something Dot something Dot Com. So lets say certificate.verisign.com. is called a third level name. We are actually thinking that's an interesting area, obviously, that we would like to begin building some product capability, and so, I know the honest answer is its going to be a free-for-all. I would expect to see some spikes in Q3 and Q4 on a global basis around Biz and Info, and I think we will see what happens in Q1, what the rate of PKI is. I know the projections that of the guys who own those registries are 5 to 10 million in their first 18 months.

Okay, thank you. That helps. And the second question was about the current deferred level. I noticed that that was flat sequentially, and I was just doing back-of-the-envelope calculation of what current deferred was relative to my forward 12-month revenue estimate, and it was 36%, if you take 435 million relative to 1.2 billion revenue estimate going forward, and then I can tell you that the Q1 and Q4, in Q1 it was 41% and in Q4 it was 46%, so it seems to be going down. What does that say, are you driving, I don't know, you explain that to me, you probably have a better idea.

Well, I think there are a couple of things right.

Yeah.

The deferred one is not a traditional accounting metric, in the sense that you always have a, as we call, that-goes-into and that-goes-out-of phenomena. So you are pulling right, out every quarter, based on historical new business run rate and putting in right. So, it's really not kind of a simple calculation as we have shown everybody. In essence, the reason is short term is, kind of, staying flat right now, and while it went down a few quarters ago, because a year ago, you were reporting 5 million names in this short-term right, now you are putting 2.8 million names. So, on the short-term version that has got to be lower from that goes into than that goes out, but the long-term is almost starting to grow again, and every month, some amount of long-term starts flowing in the short-term, so I know, it's a long-winded answer. The reality is the coverage for future revenue is probably not good to look at current deferred, you know the short-term deferred, try not going to look at long-term defer. There is some formula there up, and remember that a significant amount of the revenue was also coming from non-yearly subscription, but more monthly subscriptions, or indicates the affiliate business in royalties that get paid in quarters. So the mix of what the coverage is for the future, if you took them of these other things, it is significantly higher than the 36 or the 41, and I know I probably confused you more with that, so we will try to get you a more concise answer here in a hour or so.

Okay that sounds great. May be just to ask that in another way, Dana, I think, you have said in the past that deferred going in to any given quarter, might be, I don't know, was it 70% or 80% of that next quarters revenue estimate, is that still the case or has that changed?

And so we talked about was that 70% to 80% is what our recurring revenue stream is in a quarter and that still holds true, because as Stratton said the amount of subscriptions that were starting to see for some of these services while they are not paid on an annual basis, they are monthly subscriptions, and so they do add to that recurring revenue strength. They are not one-time sales or things.

And I think the point is 70% to 80% of revenue coverage that was the traditional network solution domain name only. Selling business used to have that much of the quarter revenue done. The VeriSign's side has always been closer to the 40% to 50% and the kind of blended right now with all the other dynamics we just talked about right. You can see what that is but there are a lot of other pieces that flow through that.

Great, thank you guys. Nice job.

We will take our next question from Michael Carboy with Deutsche Banc Alex Brown.

Good afternoon, Stratton and Dana. Just a couple of questions for you. First of all, Stratton, can you give us any insight into the certificates that have issued here for PKI activities. Do you have any view as to whether they are been deployed primarily for internal uses or whether they are being deployed for external uses at those customers? Is there any way you can tell that?

Well, we can't tell by what goes out, the data is not [________________], but we can tell kind of anecdotally from customers like Hewlett-Packard for most part has always been internal, two quarters ago, started doing external, and now that looks like that will kind of the bigger opportunity going forward. So it seems that it's probably about 60% internal right, now 40% external, although our expectation is, as you know, these private supply chains get billed and some of these federated kind of corporate partnerships get setup. Over time, external would be the higher percentage.

Sure. And Stratton, you had made the remark about the very weak tech environment. I am wondering if, do you see that helping you of sliming down your own capex, if you are just finding equipment and services and people. Is that a much cheaper rates, and how do you see that changing perhaps next year as we get a recovery. Should we expect a big jump up in capex in '02.

I think without getting any of my friends in the valley mad at us, you know, we are certainly seeing good negotiating sessions as it relates to capex hardware and software. I think this relates to what will happen in '02. We have a significant amount of infrastructure that got put out last year and a significant amount we are buying this year. Our spend for next year, while we have said, would most likely to be around the same 100 million, it is not clear to what should actually needs to be that high any longer by the time we get through this year and from the new deployment. So in that sense, I don't think capex will go up when the pricing power returns to the vendors because, I think, we are going to be through most of our major build out.

And then lastly, on this issue of some of the value added services for Dot Com and Dot Net names, to the extent that those domain names are not currently been hosted by VeriSign, I don't think it's possible to avail oneself of those services. What proportion of Dot Com names, in particular, do you think are hosted or not hosted by VeriSign right now?

I don't know that actual percentage, but we do have the ability to allow the website business to be hosted at a number of our partners right. That's one of the options in the Image Cafe service. I don't know exactly what that is. We, today, don't host any of those ourselves. We are a reseller or an OEM, if you will, of hosting services from traditional ISPs.

Right.

On the E-mail box side, now we do all of that ourselves, but of course, the domain for the website can still be hosted by an ISP, whereas the E-mail can be hosted by us, and then DNS magically will find the right place to go.

Okay. Terrific. Thank you very much.

We will take our final question from Chris Hovis with Robinson Humphrey?

Hi. Nice job everyone. Most of my questions have been addressed. I did have one regarding pricing on the registrar business, whether nor not you are seeing any pricing pressure or that's remained stable?

Seems to be stabilizing, may be even ticking up a little bit, that would be our expectation here in Q3 and Q4. As the new products come in, in particular, I think that Dot-Info name is $50, Dot-Biz name is, I think, it's 35, although remember the terms are 5 years and 2 years respectively, so that stuff looks like it's going to settle out okay.

Okay! Thanks a lot.

Thanks Chris.

I would like to thank everyone again for joining us today and as always please feel free to call us if there are any further questions that didn't get answered. Thank you.

This concludes today's VeriSign second quarter earnings conference call. Thank you for your participation.