On the heels of a prosperous year for VeriSign's domain-name registry business, the company is bullish about the opportunities presented by the move to IPv6 and wider DNSSEC deployments in the year ahead.
VeriSign (NASDAQ:VRSN), which operates core Internet DNS infrastructure, reported fourth-quarter and year-end financial results this week, posting solid revenue growth and outlining its priorities and challenges in 2011.
One of the company's key achievements last year was to enable the root zone of the Internet for DNSSEC, a security protocol that provides additional authentication and integrity to DNS information and is seen as critical to the overall stability of the Internet. In 2008, security researcher Dan Kaminsky disclosed a flaw that could enable attackers to poison DNS and affect the operation of the Internet. DNSSEC is widely viewed as the solution to that vulnerability.
For VeriSign, DNSSEC represents both a cost and an opportunity for future revenue growth.
"DNSSEC in and of itself is a security protocol in the DNS, and is a long time in the making. And and it's actually a cost to us in order to DNSSEC-enable not only the root zone, but .net and .com," CEO Mark McLaughlin said during a conference call with analysts. "But while there's a cost aspect, it's in the public interest in order to make the Internet safer."
At the same time, McLaughlin noted that DNSSEC creates complexity for domain registries and registrars. As a result, VeriSign is ramping up service offerings to help enable registries to manage DNSSEC.
"That's a monetization opportunity," McLaughlin said.
Another monetization opportunity for VeriSign could come from the upcoming round of new generic Top Level Domains (gTLDs). McLaughlin noted that applications for the new gTLDs are due in the middle of 2011, and he expects that VeriSign will bid on internationalized versions of .com and .net.
The move to IPv6 also represents an opportunity for growth, though McLaughlin cautioned that there are challenges in the migration away from the aging IPv4 system. He noted that there will likely be a long period of time when people are attempting to manage both IPv4 and IPv6.
"That creates a translation problem between the two, and companies would have to run an IPv4 stack and IPv6 stack in order for all their applications to be able to interface," he said. "A lot of companies we think won't want to do that, and will look to a provider like VeriSign to provide that translation services between those two versions."
Looking back on 2010, McLaughlin highlighted VeriSign's ability to deliver a high level of uptime amid an increasing volume of traffic and other challenges.
"Last year, we processed over 22 trillion DNS queries, all without any unplanned downtime and in the face of well-publicized cyber attacks," he said. "We continue to be vigilant in anticipation of the growth of Internet usage and the accompanying scale of attacks."
The 22 trillion DNS queries represented a 22 percent increase from the 18 trillion queries that VeriSign processed in 2009. VeriSign reported that its daily query load in the fourth quarter of 2010 was 61 billion per day, an increase from the mark of 52 billion in the fourth quarter of 2009.
On the financial side, VeriSign reported revenues of $179 million for the fourth quarter, a 13 percent increase over the year-earlier period. For all of 2010, the company reported revenues of $681 million, a 10 percent increase over the 2009 mark.
VeriSign's growth in 2010 was fueled in part by an uptick in its Registry Services business unit, which includes management of the .com and .net registries. At the end of December, VeriSign tallied 105.2 million names between the two registries, a 9 percent increase from the end of 2009.
In the fourth quarter, VeriSign processed 7.6 million new registrations, a 4 percent year-over-year increase.