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VeriSign Sells Network Solutions

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Oct 16, 2003 12:00 AM PDT    Text size: 
MOUNTAIN VIEW, Calif. -- Network Solutions went on the sale block today and will soon be under new management, according to parent company VeriSign, Inc.

The Internet and telecommunications network signed a definitive agreement with Pivotal Private Equity for $100 million, consisting of $60 million in cash and a $40 million senior subordinated note, the company announced.

Pivotal Private Equity, a Phoenix-based real estate developer, has reportedly made a recent push to buy up "under performing" technology companies.

When the transaction is complete by the fourth quarter, VeriSign will retain a 15 percent equity stake in Network Solutions.

VeriSign said in a statement that the sale of Network Solutions will enable it to focus exclusively on providing infrastructure services for Internet and telecommunication networks.

Although there is industry speculation that the sale of the high-priced business unit is an attempt to get out from under mounting liability VeriSign is currently facing, which includes the tail end of a six-year legal battle with Sex.com founder Gary Kremen, who recently won court approval to sue Network Solutions for liable after it unrightfully transferred ownership of the Sex.com domain name to a con man.

The sale of Network Solutions could change everything, Kremen told XBiz.

"We will not have our hard-won battle go away because of something like this," he said. "They are trying to get rid of liabilities like mine and that simply won't work. There are laws that won't allow that kind of thing."

Kremen and his legal team are currently reviewing their options, which range from obtaining a temporary restraining order, filing preliminary injunctions, and asking the court for other relief.

VeriSign acquired Network Solutions in 2000 in a deal valued at between $17-21 billion. Seven years prior to that, the Department of Commerce appointed Network Solutions as the first Internet domain registration service.

According to VeriSign, the sale only involves the registration unit of Network Solutions. VeriSign will retain control of the infrastructure side of the business, which includes the .com and .net registries.

The sale of Network Solutions comes a year after VeriSign made a fanfare of re-launching the brand name to control its domain name unit, and website and email service aimed at small and medium businesses.

"It's quite interesting to see this transition considering the hot bed of activity surrounding the world's largest registrar," SEGuru's Daron Babin told XBiz. "Pressure from ICANN and the registrar community sure makes this an interesting ride now. The question is, how active of a role will the new parent take, and how are their parenting skills? If the devil sold it, what kind of spawn picked it up?"

In a different announcement, VeriSign said it plans to re-launch its controversial Site Finder service.

VeriSign was ordered by ICANN earlier this month to suspend the service, which ICANN claimed was a breach of contract. VeriSign has been in talks with ICANN and has agreed to make certain changes to the re-launched version of Site Finder, which will include a second DNS wildcard entry, called an MX wildcard, that will prevent email servers from trying to send email to non-existent domains. VeriSign also promised to offer local language variants of the site.

VeriSign still faces three different federal lawsuits from companies claiming unfair business practices.

"This is not the end of the story," Kremen told XBiz. "Stay tuned."

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