VeriSign woes affect Illuminet

Lacey-based telecom company sees shares fall nearly 19 percent

OLYMPIAN STAFF, NEWS SERVICES

LACEY -- Shares in VeriSign Inc., which oversees the database of dot-com and other Internet addresses, plunged nearly 20 percent Friday over worries about the company's outlook.

VeriSign's third-quarter results, released late Thursday, exceeded expectations, but key measures in the company's core domain-name registration business were lower than anticipated, analysts said.

"This is a crazy stock. It doesn't really trade off reported numbers," said Jordan Klein, an analyst at UBS Warburg.

Lacey-based Illuminet, which announced Sept. 24 that it was being acquired by VeriSign for $1.2 billion in stock, was caught in the wake of VeriSign's tailspin.

Shares of Illuminet were off $9.18, or 18.81 percent, to finish at $39.63 on Friday.

With the impending VeriSign acquisition, Illuminet's share price moves with VeriSign, not necessarily on its own merits.

"Illuminet is now tied to VeriSign," Steve Levenson, a New York-based research analyst with Gerard Klauer Mattison, said after the acquisition was announced. "Its stock price no longer has anything to do with Illuminet and its management."

In what could be its last quarterly earnings report, Illuminet announced last week that net income increased from $9.9 million in the third quarter last year to $10.9 million for the quarter ending Sept. 30.

Under the acquisition, Illuminet shareholders will receive 0.93 shares of stock in Mountain View, Calif.-based VeriSign for each Illuminet share.

Illuminet shareholders and federal regulators must approve the deal for it to go through. It is expected to close at the end of this year or in the first quarter of 2002, Illuminet spokeswoman Penny Thomas said.

Illuminet, with about 250 employees in Lacey, was founded in 1981 and became a publicly traded company in 1999. It posted a net income of $30.3 million for 2000.

The specialized company helps telecommunication carriers, both wireless and traditional, route calls with its computerized signaling system. It also connects carriers to the databanks necessary for toll-free calls, caller ID and other such services.

Before the acquisition was announced, Illuminet was trading at $34.98 a share and VeriSign at $38.30.

Thursday, VeriSign said it lost $386.7 million in the third quarter, or $1.91 per share, compared with a loss of $1.32 billion, or $6.78 per share in the same period a year ago.

The company posted earnings of $59.7 million, or 28 cents per share, compared with $36 million, or 17 cents per share, a year ago. Analysts surveyed by Thomson Financial/First Call were expecting earnings of 17 cents per share for the most recent third quarter.

Revenue for the three months that ended Sept. 30 was up 47 percent, to $255.2 million from $173.1 million a year ago.

A measurement of the average time it takes to collect bills was reported at about 80 days, up by about 10 days from the second quarter, Klein said.

"If it's going up and up, it raises questions about your ability to collect your receivables," he said.

Deferred revenue from sales booked in advance -- another barometer -- grew 3 percent to $585 million. That was at the low end of the guidance provided by the company at the end of the second quarter.

"If that starts to weaken, you would have concerns over future revenue growth," Klein said.

Olympian business editor Chris Clough contributed to this report.

On the market

Illuminet

- Stock: Traded on Nasdaq under the symbol ILUM

- Friday's close: $39.63, down $9.18 or 18.81 percent

- Volume: 4.8 million shares for day. Average volume of 743,318 shares

- 52-week high, low: $49.29 and $13.06

Verisign

- Stock: Traded on Nasdaq under the symbol VRSN

- Friday's close: $42.82, down $10.52 or 19.72 percent

- Volume: 48.1 million shares for day. Average volume of 9.3 million shares

- 52-week high, low: $187.31 and $26.25

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