<PAGE>
Filed By VeriSign, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933
And deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934
Subject Company: Network Solutions, Inc.
Commission File No. 000-22967
VERISIGN INCORPORATED
Moderator: Stratton Sclavos
March 7, 2000
7:00 am CT
Operator: Good day and welcome to this Verisign, Incorporated Strategic Special
Announcement conference call. Today's call is being recorded.
At this time for opening remarks and introductions I'd like to turn the
call over to Mr. Stratton Sclavos. Please go ahead sir.
Stratton Sclavos: Thank you and good morning everybody. And thanks for joining
us on the call.
Also here with me today is Jim Rutt, the Chief Executive Officer of Network
Solutions, Dana Evan, our Chief Financial Officer, and in Virginia, Bob
Korezeniewski, the Chief Financial Officer of Network Solutions.
<PAGE>
Before we begin the call I would like to inform you that a press release
covering today's announcement was sent over the wire this morning at 4:00
am Pacific Time.
And of course I also need to remind you that the matters we will be
discussing today may be forward-looking statements. As such they are
subject to the risks and uncertainties as described in both companies' most
recently filed 10-Qs and 10-Ks.
I will be spending the next 15 to 20 minutes discussing the business and
financial considerations for the strategic acquisition that Verisign is
announcing today. Then we'll open up the call for your questions. The call
will end promptly at 6:00 am Pacific Time or earlier if there are no
further questions.
Please feel free to call Jim, Bob, Dana or me later in the day if you'd
like further information. We'd be glad to take your call.
Okay, with the preliminaries out of the way let's begin. I'm very pleased
to announce that Verisign has entered into a definitive agreement to
acquire Network Solutions, the leading provider of domain name registration
and global registry services for the dot com, dot net and dot org domains.
In order to set the context for a more detailed discussion of this
transaction I'd like to first say a few words about our overall strategy.
Now as many of you know we describe our corporate mission as providing the
trust services that make e-commerce work. We plan to do this for every
transaction, every communication, everywhere around the world.
<PAGE>
Our authentication, payment and validation services have formed the basis
of this trusted environment for e-commerce for the last several years. With
today's announcement we're seeing a very exciting expansion of our notion
of this Internet trust infrastructure.
Again, Verisign is announcing today that we'll be acquiring Network
Solutions. We believe it creates a global Internet infrastructure leader
who can provide the critical life-cycle services for every e-business, from
the time they get on and get a domain name through their establishing of a
commercial presence all the way through simple e-commerce and on to global
trading.
We believe it's a highly complementary fit in both the technology and
infrastructure, the customer sets, channels of distribution, business
culture and personal culture of the companies and, of course, business
models.
We also believe there are numerous top- and bottom-line synergies that
we'll be explaining in a little bit more detail. And now this will give us
over 9 million customers on a global basis.
The transaction highlights are as follows. We will be issuing 2.15 Verisign
shares for each share of N-Sol. The pro forma ownership on a fully diluted
basis would be 60% Verisign, 40% Network Solutions. And the board
composition will include six representatives from the Verisign side and
three from Network Solutions.
The key management team in this combination will be myself as the CEO, Dana
as the Chief Financial Officer of the overall corporation, Jim continuing
on as the CEO of the NSI subsidiary and also taking on broader strategic
roles within the company. And Bob Korezeniewski will be the executive in
charge of the integration team to drive that forward and will then take on
a significant operating role within the company.
<PAGE>
The transaction is going to be treated as a purchase accounting transaction
where we target the close some time in Q3 of this year.
I want to step back for a second and talk a little bit about why we think
this is such a powerful combination. We really believe the keys to Internet
success have been proven to be the notion of being an enabler and therefore
beneficiary of both the Internet and e-commerce growth, the notion of being
the first mover in a given space and being able to prove scale and global
reach; coupling that with strong technology and distribution partnerships
and being a neutral trusted third party who delivers services to both B-to-
C and B-to-B environments.
And that's where I think you see a very highly complementary fit between
Network Solutions and Verisign. Network Solutions has been the market
leader in infrastructure for Internet identity and presence, where we've
been the leader in infrastructure for trusted e-commerce.
They were the first mover in domain registration. We were the first mover
in digital authentication and global public key infrastructures.
They're the exclusive Internet registry. And they provide the DNS
infrastructure. Verisign has been a unique technology imbedded in key
Internet applications like browsers that makes our services ubiquitous.
Both companies are market share and brand leaders and have hundreds if not
thousands of both channel partners and global affiliates. We both operate
on subscription-based business models and have shown strong financial
performance.
We think this is a great combination for customers as well. If you step
back for a second and look at the customer life cycle as a business enters
the Internet we first start with Web identity then
<PAGE>
move to commercial presence, simple e-commerce, customer and supply-chain
management and eventually global trading.
In each one of these steps Verisign and Network Solutions can now provide a
cohesive, integrated service to allow our customers to succeed. We've built
trusted infrastructure in the registry, DNS, directory, public key
infrastructure, payment and validation areas.
And we leveraged that very reliable 24-by-7 operation to now be able to
provide domain name registration, digital certificates, secure application
services for things like DPN, business to business exchanges in wireless,
payment services for credit cards, purchase cards and even ACH direct wire
transfers and eventually digital notary services for things like digital
receipts.
That means as we look at the market opportunity ahead of us we believe
there are almost 160 million businesses or entities that could some day
need a Web identity. There we'll be providing Network Solutions domain
names, directory listing and DNS services.
As companies move to commercial presence which we believe there could be
almost 40 million doing some time over the next four to five years, our Web
site creation and global management services, again out of Network
Solutions, make a tremendous amount of sense.
Many of those companies will move into simple e-commerce where Verisign's
Web site certificates and payment services through our recently closed
transaction with Signio will deliver the key e-commerce services needed.
And then into customer and supply-chain management and global trading where
things like extra-net services, business grade messaging, trusted
directories, buyer and seller credentials and ACH payments will fill out
the infrastructure services.
<PAGE>
We think there's an increasing value proposition. Customers can start with
us now at $35 per year for their Web identity and move up the food-chain
through things like commercial presence and Web site creation at $300 per
year on average to simple e-commerce where we may be seeing $1000 per year
per entity, to customer and supply-chain management that could generate
anywhere from $50,000 to $200,000 per year or more as these environments
take off.
So there's a full and increasing value proposition and a strong synergy
from bringing Web presence and identity services and coupling them with our
proven e-commerce services.
And we have very, very strong customer momentum on both sides of this
transaction. We have 9 million domain name customers, 200,000 e-commerce
sites we've served, over 1000 enterprises that now use our managed services
to roll out secure business and secure communications transactions, and
over 20 global affiliates, companies like British Telecommunications, KPN
and others within Europe, Asia, and Latin America that are now broadening
this global network of trust.
Many people are asking, why this combination now? Well I think both
companies and our boards felt that the Internet and e-commerce growth is
accelerating and that the biggest opportunity is still in front of us. We
also both have seen that customers are demanding integrated services. They
want service providers to do managed services for them and to provide
turnkey one-stop shopping for a broad range of services that can help them
roll out their e-business initiatives.
We also believe we have an ability right now to establish the lifetime
customer relationship from Web identity, which is a hugely sticky
proposition, all the way out through employee, customer and buyer and
seller identity credentials.
<PAGE>
We also on the technology and infrastructure side believe we combined, have
the potential to e-commerce enable every business overnight through work we
can do on the domain naming system with things like secure DNS as well as
through the global directory systems that we're both building we believe we
can build, really, a commerce infrastructure for the Internet.
And lastly we do believe this unique combination creates critical mass,
creates an entity that can now be the premiere provider of these services
on a global basis.
And we're seeing compelling synergies as we start to look forward. On the
customer side we see reduced acquisition costs and both a cross-sell and
up-sell opportunity in the services. With technology and products, things
like secure DNS, trusted directories and advanced messaging services come
to mind.
At the infrastructure, level we believe we can commerce enable both
infrastructures and link them and then extend our global reach through the
international affiliates program both companies have underway.
And in distribution there's over 4000 re-sellers now and we'll be offering
them a much more enhanced portfolio of services, cradle-to-grave one-stop
shopping for all of the needs that their customers have in moving onto the
Internet.
At this time I'd like to turn the call over to Jim Rutt, the CEO of Network
Solutions, for a few comments. And then we'll come back and touch on the
financial highlights. Jim?
Jim Rutt: Hello. Speaking for the management team of Network Solutions, we are
very pleased to be part of this transaction that will create the premiere
trusted Internet infrastructure services company. We have concluded that
there really are numerous near-term synergies and touch
<PAGE>
points between the two companies as well as very exciting long-term
strategic opportunities in this combination that make this the right deal
at the right time.
Speaking personally, I look forward to working with Stratton and Dana and
the rest of the Verisign team going forward.
Stratton Sclavos: Thanks Jim. We feel the same. On the business model side,
many of you know both companies very well. We each have multiple revenue
sources and an annuity-like recurring revenue stream because of our
subscription-based models.
We both also have significant deferred revenue, which not only gives
investors good predictability and visibility but also management a long-
term horizon for planning. We've both been seeing expanding margins at the
gross, operating and net models for the last two years. And we both
generate strong operating cash flow. In fact, the combination will have
approximately $1 billion on the balance sheet.
We see this as a way to accelerate both team's sales, marketing and
investment opportunities to expand these opportunities even more quickly.
Seeing the revenue momentum on both sides has been strong. Verisign's was
close to 300% top-line annual growth over the last few years, and Network
Solutions 130% or so.
Each company also reported record numbers in the fourth quarter of 1999,
revenues strongly up from previous quarters. And the deferred line again,
these are fees booked and collected right, but put on the balance sheet to
be ratably recognized in by both companies over those one to two year
periods of the subscription services we offer, have been growing
significantly, in fact, outpacing top-line growth over the last few
quarters.
So I think in summary, the combination produces one of the most powerful
business models on the Internet where we can combine market opportunity and
synergies, can drive revenue acceleration in the future and accretion on a
cash EPS basis. Of course we'll be trading into the purchase accounting
model. And so you'll be seeing goodwill amortized over approximately three
to five years.
So in summary, we think we've created the Internet trust company with
critical Internet infrastucture services from cradle to grave, from Web
site identify all the way through to global trading initiatives.
We believe we've got an untapped market opportunity and that with the
Verisign services in line with Network Solution services we'll be able to
exploit those opportunities more quickly into a higher level.
We now have the broadest range, we believe, of customer solutions on the
Internet from an infrastucture services perspective. And we've got global
distribution that has been quickly growing for both companies.
So let me just conclude by saying we couldn't be more excited and pleased
by this combination. It's something that I think the companies I think,
will rally behind at an employee level. And we'll see a passion for this
mission to provide the trust infrastucture to the Internet that
individually we could not have achieved.
So with that I'd like to open it up for your questions. And Operator, if we
could take the first question please.
<PAGE>
Operator: Today's question and answer session will be conducted electronically.
If you'd like to ask a question please press the Star followed by the digit
1 on your touch-tone telephone.
We'll pause a moment to assemble our roster.
We'll go first to Paul Merenblom with Prudential Securities.
Paul Merenblom: Hi. Good morning and congratulations. What a powerful
combination. Stratton, let's see if we've got this straight. You couldn't
buy the registry so you bought the whole thing? And...
Stratton Sclavos: Well, Paul, as you know I've been associated with Network
Solutions for some time. And I've always believed that this is a very
strong business model independently. And as we began to have discussions
about strong partnering and about looking at registry services it became
very obvious that the holistic combination together was the right path to
go down.
Paul Merenblom: Actually I think Jim's career track is the one that's going to
make sense to everybody on Wall Street now - come in, take a company for
six months and then set new records.
But the question at hand, I guess, is threefold. Number one, what does this
mean for the spinout of the registry? Number two, what does this mean from
a competitive perspective, what Verisign can and can't do? You now have a
new partner in the form of ICANN and the Department of Commerce. Will that
change any of Verisign's activities?
And number three, do you see this changing the competitive landscape in
general over the next six to 12 months, and if so, how?
Stratton Sclavos: Sure. I think Jim and I can both talk a little bit about
that.
<PAGE>
In terms of the registry, registrar spinouts, of course, you know, the
company had been going down a path to look at the strategic options there.
We will, you know, come on board and get ourselves educated along with
their team. And we'll still look at all those options.
Clearly there are many and potentially even new ones now because of this
combination. And we're pretty excited at any of the options or any of the
paths we might take.
From the ICANN perspective and the Department of Commerce perspective, both
have been informed of this transaction event. We have received positive
reaction form the Department of Commerce.
And, you know, we do believe obviously we'll be upholding any and all of
the agreements that N-Sol has with both those entities. And because the
companies had really complementary offerings as opposed to offerings that
were on top of each other, you know, we do see a very nice fit here.
Jim Rutt: And I would focus you on exactly that point. The companies' product
lines are very complementary and we think this combination will actually
work to the benefit of the customer.
Paul Merenblom: And two quick follow-up questions. You mentioned goodwill. Can
you give us a sense for size and scope of that?
Dana Evan: So goodwill will be approximately $20 billion amortized over three
to five years.
Paul Merenblom: And are there any lockups in place? (SEIC) still has a pretty
good chunk of stock.
<PAGE>
Stratton Sclavos: Right, there'll be, you now, normal covenants in the
transaction. And we have received an agreement from (SEIC) to in fact vote
their shares in favor of this transaction.
Paul Merenblom: Great, thank you and congratulations.
Dana Evan: Paul, let me just add to - you know, the of course, goodwill will be
determined, you know, in its finality when we close the deal.
Paul Merenblom: Thank you Dana. Again, congratulations.
Man: Thanks Paul.
Dana Evan: Thanks.
Operator: We'll go next to Ray Archibold, JP Morgan.
Ray Archibold: Good morning and congratulations. Just a couple follow-up
questions. When you mentioned I guess, that you're still going to review
the options related to registry and registrar, when you begin the
integration process between Verisign and Network solutions, how is that
going to be affected when you look at the two businesses in terms of what
Verisign is currently is offering vis-a-vis the registry and the registrar?
Stratton Sclavos: Right, I think that, you know, - and Bob and Jim can jump in
here -- with Bob taking on the key integration role of course, he's very
aware and up-to-date on, you know, all of the potential models for that.
And so certainly at the registrar level there's, you know, very low hanging
fruit in terms of being able to do some co-marketing of services. And we'll
begin those fairly quickly.
<PAGE>
At the registry level, things like procured DNS and other securities
provisions around the naming system, made sense for Verisign Network
Solutions to be working on anyway. So I don't think you're going to see the
registry registrar split issue of - create any drag in terms of new
companies moving forward in looking at synergies. However, you know, as I
said, we're going to evaluate all those opportunities in the very near
future.
Ray Archibold: Very good, thank you.
Operator: Goeff Beard, Thomas Weiss & Partners.
Goeff Beard: Good morning, just a couple follow-up questions. One, the company
has obviously enjoyed a very close relationship in the past. And I wondered
sort of, if we could go through, you know, another cut at sort of what - at
the end, the impetus was for seeing that strategic need to have the
companies together as opposed to, you know, occupying that close
relationship as you have to date.
And I think the second question is, you know, sort of as it relates to some
of the synergies from a financial perspective in the deal, if you could
sort of walk through a little more there that would be great.
Stratton Sclavos: Sure, and I think both Jim and I will comment a little bit on
the reason for the fit. I mean clearly things are accelerating in e-
commerce. Things are accelerating in even companies coming on to the Web.
And we did believe that the biggest opportunity, potentially as much as
90%, 95% of it is in front of us.
So this combination gives us an ability to add lots more customers, provide
more services to those customers now with the extensions to the Verisign
services right, upsell and potentially generate
<PAGE>
more revenue per customer as we bring them along the curve more quickly
from just Web identity through to full e-commerce initiatives.
And we really do believe there is customer benefit here in having this be
together. And from a company perspective, you know, we really achieve
critical mass.
Jim Rutt: Yes, and from a standalone basis, we've been working our strategy
over the last several months to expand our portfolio of offerings. It's
become clear to us that the next ten million people trying to business on
the Internet are different from the last bunch. These are people that want
to buy (bundle). They want to press a button. They want to make it happen.
They don't want to integrate itself.
So we have been looking at other possible combinations for some time as
concluded for all the all possible combinations out there, there is the one
that's truly compelling in terms of linking together the right set of
products at the right part of the life cycle that almost zero overlap. They
can be brought together end to end and provide the customer service from
the very first time they establish a presence on the Internet to the time
that they're a global conglomerate through a international trading partners
on a worldwide basis.
Stratton Sclavos: And Jeff, as you know, I mean we both have individually have
great businesses that have been shown very strong performance over the last
couple of years. We think this takes it to a whole new level.
Goeff Beard: Great, one last follow-up. Stratton, as it relates to sort of
accelerating and the deployment of certificates, would there ever be a day
where, you know, you would consider charging on a per use basis, sort of a
razor, razor blade type situation where, you know, you made the presence of
certificates ubiquitous and then, you know, charge, you know, very small
fees on a per use basis?
<PAGE>
It seems like, you know, this sort of combination creates a dominate force
where, you know, potentially you could change the operating policies of the
company radically.
Stratton Sclavos: Well I think we, you know, we've certainly looked at that as
a standalone company over the last few years, in fact do have one contract
with the US government from the General Services Administration where we do
in fact have a paid-for-use financial model. So it's certainly something we
know how to do and have been gauge before.
I think it's too early to tell Jeff, whether this would accelerate a move
to that model. You know, in general the model is currently is working
pretty well. We may add that as another deployment model that we would use.
I don't think we'd ever replace the existing one in certain markets.
Goeff Beard: Okay great. Thank you.
Operator: Jeff Camp, Morgan Stanley.
Jeff Camp: Thanks very much. Hi Stratton and Jim. I've got two questions. First
is just a simple one on the terms. Were the any callers on the share price
for the transaction?
And the second, is if you could go back a little bit on your relationship
to date and maybe talk about what experience you've had so far? In other
words, from Verisign's point of view, you know, where the majority of your
customers coming off of Network Solutions partnership arrangement and vice
versa the take rate from Network Solutions partnership arrangement and vice
versa the other take rate from Network Solution's point of view on Verisign
products and so forth?
Stratton Sclavos: So the transaction is at a fix exchange ratio of the 2.15
shares. And there are no callers.
<PAGE>
In terms of the partnership, you know, they have a small number of Verisign
shares. I have actually been a board member there for over two years. So a
lot of this has come through both the personal relationships we've enjoyed.
I think we were literally engaging in what Jim, maybe half a dozen new
initiatives together, projects where certificates were going to used within
the registrar system where we were going to be offering them as part of new
assurance packages that Network Solutions was going to put together. And
we're beginning to look at technical integrations for things like secured
DNS.
So really where we had kind of had a arms length relationship in having
just a simple resale offering, the companies were embarking on some fairly
integrated programs that were taking a lot of bandwidth. So it seems like,
again, like the right time to accelerate that.
Jim Rutt: Yes as part of the ah ha, there's a lot more here together than there
were apart as we started looking at - more than just looking, but actually
negotiating deals, as Stratton said, across the - I couldn't contract them
all. But the deal negotiations that were actually underway at least as of
up until about 10 o'clock last night.
Jeff Camp: Should I take that to mean in terms of the technical integration of
the truck services and so forth into the registry and registrar businesses
as you've largely made a lot of progress on that? When do you think that
will actually, you know of those half dozen projects, when will some of it
actually start to materialize do you think?
Jim Rutt: I think you, you know, could see them in one to two quarters right?
<PAGE>
Stratton Sclavos: There are different timelines from those around
authentication for customer self-service which can be on very quick
timelines to, you know, vary (D-plays) around secure DNS which could take,
you know, a couple of years. So that, in fact, that's one of the beauties
of this combination is not all pie-in-the-sky when we die, nor is it all
just short term stuff that you work through in a quarter or two then you're
struggling again.
There is fuel in this thing for a long time to come, both in the immediate
touch points as well as in the strategic opportunities in the out years.
Jeff Camp: Great, thank you very much.
Operator: Todd Weller, Legg Mason.
Todd Weller: Thanks, and congratulations everybody. Stratton, just for those
less familiar with Verisign's business model, could you just give us some
insights into the subscription level and the average duration for your
certificates? Thanks.
Stratton Sclavos: Sure Todd. We have the certificate services which we put
under the authentication services label. And we also have added payment
services through our acquisition of Signio this last quarter.
So in the authentication area, we offer digital certificates for Web sites
where there's anywhere from $349 per year per service, upwards to $1295 per
year per server depending on the level of certificate, the insurance you
want to take and various other value-added services. Those are
subscription-subscription model, fees are collected up front, put on the
balance sheet and then recognized (inratably) either over the one or two
year lifetime.
<PAGE>
In the enterprise markets, in the B-to-B markets we offer a managed digital
certificate and PKI service where we actually issue and manage digital
credentials for folks like Texas Instruments and Hewlett-Packard and Ford
Motor Company under their name and to their customers or employees. But we
provide the infrastructure back end.
In that area, we charge per user per year, the number of credentials that
are issued. And it can be anywhere from $10,000 to $20,000 on the low end
to upwards of $300,000 or $400,000 per year again on the high end.
Again, most of the fees, except for professional services and consulting
are collected up front and put on the balance sheet even on those
environments. And that's where you see our deferred revenue growth having
outstripped the top line revenue growth over the last few quarters.
Now that's in certificates. In the payment area with Signio, they charge a
monthly flat fee both in the B-to-C environment for merchant and in the B-
to-B environment with folks like Commerce One and others, who are
integrating that platform in for buyer and seller payments, things like
purchase card transactions or (HDH) transaction, very excited about Signio.
They had about 1800 merchants at the end of December. As of the end of
February, they had more than doubled that. So the growth rate there is
extraordinary. And we'll treat those as monthly fees that we collect in.
But we'll also over time, add yearly models where we would provide discount
on the fees if someone would pay for the full year subscription. So we
like this yearly subscription model as you can tell.
Todd Weller: Great. Thanks and congratulations.
Stratton Sclavos: Thanks a lot Todd.
<PAGE>
Man: Thanks Todd.
Operator: James Pettat, Chase, Hambrecht & Quist.
James Pettat: Hey guys, congrats on the deal. Two quick questions. Number one,
and I may have missed this, but could you talk about any identified
synergies on the cost side, and then any initial color specifically on
revenues synergy sand then timing of?
And then second and a little bit more indirect, but with $1 billion in cash
and the potential for obviously a key infrastructure positioning, well what
are your collective thoughts now on a formulized B-to-B kind of venture
incubator kind of strategy going forward here? Thanks.
Stratton Sclavos: Well this is certainly not a deal driven by a desire for cost
savings on either side. Both companies are hiring as fast as they can and
seeing if businesses expand pretty dramatically. So we would expect not
only to keep all of the current employees on both sides, but in fact, both
companies are ramping up hiring.
On the revenue synergy side, we expect to see, you know, top line synergies
from the deal over time. We're going to give further guidance on that in
the near future.
But obviously what we can do now is, with the registrar as the entry point
to the Internet and with, you know, eight million folks having registered
and that growing pretty dramatically, we'll begin to be offering the
Verisign upsell services as higher end packages very, very quickly.
<PAGE>
And Doug (Wolford) and his team on the registrar have done a fabulous job
creating that franchise. And we will be putting in the Verisign services
very quickly. Those are the low hanging fruit things that Jim and I have
talked about.
You know, as it relates to what we're going to do with the cash and the
whole incubation model, both companies have been pretty strategic and
aggressive over the last few quarters in investments in both small Internet
technology companies as well as, you know, infrastructure plays. And I
would see that continuing and as probably a role that Jim will kind of
expand his responsibility in into, you know, marshaling the resources of
the combined company as we bring them together.
Jim Rutt: Yes it still makes - like even more sense for us to continue to make
both minority investments and taxable acquisitions around functionality and
around distribution partnerships and alliances on a global basis.
James Pettat: Yes, and I guess just along that line, I guess I'm wondering,
will we expect to see an accelerated pace though in that regard?
Stratton Sclavos: Well I think we're kicking this around. And we talked about
this over the weekend when we got the deal done. You know, we're kind of
viewing that we're probably going to become a magnet right now and have a
lot of incoming.
And so, you know, just by that simple notion of probably seeing a lot more
and from the fact that we'll be able to - to tap the combined resources of
Jim, myself, Dana, Bob and some of the other folks on both teams, that is
not an unlikely scenario that you might see some acceleration.
<PAGE>
Now, I'd like to be very clear on it though. We will stay on theme. This
will be the trusted infrastructure play. And it is going to be, you know,
first priority to get the integration right, second priority to begin
looking at expansion opportunities.
Jim Rutt: And I would add Jim, as you know, I am a real stickler on developing
a strategy framework and sticking to it. And Stratton and I are absolutely
on the same page on that one.
James Pettat: Thanks everybody. It looks like a very powerful marriage.
Stratton Sclavos: Thanks Jim.
Operator: Steve Sigmund, Dain Rauscher and Wessels.
Steve Sigmund: Good morning and congratulations. This is terrific. Have you
taken a look at the long term operating model yet? I understand you're not
giving exact guidance, but just curious with, you know, growth rates and
maybe potentially long term margin?
Stratton Sclavos: Yes, I think that, you know, we're going to have to take some
time to get the guidance straight and look at those models Steve. But, you
know, clearly we do believe there are synergies to bring - to generate more
revenue per customer than either company is currently doing because of the
expanded... and we do believe that that is something that will, you know,
occur in the near term. And that that potential could accelerate, be
combined with company.
So we're pretty excited about it. And as you know, first steps are simple
steps. We do the low hanging fruit things and, you know, put this together
in a structured way.
<PAGE>
Steve Sigmund: And you mentioned a couple times, the secure email and the
messaging component of the solution. Can you comment, I guess Jim, on the
status of the critical (patent) and Dana, you know, how you see that
component fitting in as a trusted service longer term?
Jim Rutt: We have a substantial investment in critical path and they're our
provider of back end services. And that's just something Stratton and I
talked about apparently over the weekend. It's a very interesting synergy.
Some people kind of disrespect the email outsourcing service thing. How can
you compete with Hotmail, right? And we concluded that we bring some
serious special thoughts. We bring the ability to brand your email with
your own domain brand on the Network Solution side. And then on the
Verisign side, we do bring the ability to sign mail, to encrypt mail and to
provide validation and delivery service guarantees around it.
So the two companies together, combine with a back end provider such as our
friend at critical path, have a unique opportunity to offer a mail solution
that really is not (plungable) and really does add some special sauce in
it.
Stratton Sclavos: I do know Steve, from our side, we've been looking at
delivering a certified messaging service and potentially leveraging
technology partners like a critical path to others. And I think as Jim and
I have realized, probably together, we have an opportunity to do that
faster and a much bigger way.
Steve Sigmund: Great, thanks and congratulations.
Man: Thank you.
<PAGE>
Operator: Mark Fernandes, Merrill Lynch.
Mark Fernandes: Thank you. Stratton, for those of us not familiar with Network
Solutions, can you describe the plans and synergies in the infrastructure
of the two companies? And secondly, can you talk about how this will
specifically impact your progress in B-to-B space?
Stratton Sclavos: Let me let Jim talk a little bit about the currently deployed
infrastructure. And then I'll give you how that mirrors our own.
Jim Rutt: The company is located in Herndon Virginia. We have approximately
1000 employees and similar folks on had. We operated a substantial data
center, take registrations as a registrar level.
We also operate the core infrastructure for all the domain name system on a
worldwide basis in (Camdon) and (Norg) where all the competing registrars.
Also, use our registry service, pay us $6 per name per name. And the
registry also operates the top level of the domain name system around
(Camdon) and (Norg) on a worldwide basis, so that every time someone types
in www.aol.com, the resolution infrastructure plays its part in connecting
that logical name to the computer system on the back end.
We have a very substantial technology group. We have a 300 person call
center on a 7 by 24 basis, speaks 15 languages, supports our customers
around the world.
We're one of the very companies on the Internet that actually have
customers in every single country on Earth, even the obscure and the
smallest ones. So we really are a very substantial operation that's equally
embedded in the operation on a day to day basis of the Internet.
<PAGE>
Stratton Sclavos: And so you fit our data centers Mark, Network Solutions are
very much like that in terms of the securities perspective, the scaling
perspective. In fact, they have tremendously more bandwidth coming into
these data centers than we do because of the tremendous volumes they
handle.
So I think from an infrastructure level, you know, this is nothing but good
news for us. And we're already looking for some of our new services like in
the payment area and in the validation area where you have to have, you
know, as we would call it, five or six nines -- 99.99% up times right --
this type of reliability and scalability. And the combined data centers we
think is going to be a boon. They're rolling out the new services more
quickly and with a higher quality of service.
As it relates to what do we do with - in B-to-B here? Well clearly we've
been making great progress in B-to-B. And there's quite a bit more to come
as we've kind of previewed for folks in terms of buyer and seller
credentials, enhanced payment services and a unified offering.
Now with Network Solutions, we can go into those same organizations, give
them global name management, international trademark and brand protection.
We can put together trusted directory systems that use certificates right,
as well as the domain naming infrastructure to roll out community
directories.
And as we've put together some of these new ideas in a transaction or
commerce-enabled DNS system, I think you'll find that there's some exciting
possibilities to kind of accelerate e-commerce transaction usage in a B-to-
B environment.
Mark Fernandes: Great, thanks a lot and congratulations.
Stratton Sclavos: Thanks Mark.
<PAGE>
Operator: Todd Reger, Credit Suisse First Boston.
Todd Reger: Hi, good morning guys, congratulations. I few questions for you.
Can you talk specifically, in the SSL landscape, what does this acquisition
do to some of the other relationships you guys have out there?
Stratton Sclavos: Well I think that this really is, you know, is a front end to
much of that in terms of customer acquisition. Of course, Network Solutions
is still the premier starting point on the Internet in terms of getting
your Web identity and putting it into motion. We think that will give both
Verisign and our channel partners an ability to upsell and cross sell into
those environments.
Network Solutions has an expanding international presence. As you know,
we've got a very aggressive affiliate program with some of the largest
infrastructure players in Europe, Asia and Latin America. We hope to break
some synergies there from the Verisign side to help Network Solutions
expand that global infrastructure more quickly.
Jim Rutt: We'll also say, to point out that there is very substantial overlap
in our reseller and sales partner programs. So there's some real
opportunities to provide even higher touch and higher level of customer
service as we spread the relationship over a larger revenue base.
Stratton Sclavos: I think we can go to those entities especially in the
reseller or wholesale channels as Network Solutions calls it, the Web
hosting companies and the ISPs and stem of the, you know, marketshare
erosion that you're seeing because of new entrants in the registrar
business. Because now we can go into those channels and offer them a
complete package of integrated services that they can have a one stop shop
for reselling.
<PAGE>
Todd Reger: Okay, I recognize the power of that, but what does it do from the
certificate perspective? Are you shutting off part of your market here?
Stratton Sclavos: I must not be following your point Todd. How would we be
doing that?
Todd Reger: I mean a registered dot com, are they going to be more likely to be
using someone else's certificate now?
Stratton Sclavos: Well that's, I guess a possibility, although, you know, we
will provide all the services, the same way that Network Solutions registry
provides services to competing registrars. We'll continue to provide our
services through there. And obviously in some of those environments, it
will have to be that our product is a better fit than competitive ones.
Todd Reger: Okay, can you guys give us some guidance? I think you mentioned
that Signio is actually closed. Now that you've got (Thought) and Signio
done, can you give us revenue guidance for Verisign standalone?
Stratton Sclavos: You know, we're going to be doing that in just the next few
days (Todd). You know, as Dana said, we wanted to get ourselves through
this and not confuse the market. But we'll certainly be talking to all of
you in the next few days about that guidance.
Todd Reger: Okay, and last question and I apologize -- it's a little off the
beaten track here -- but (Entrust) is making a lot of noise this morning
with Ariba.
Stratton Sclavos: Right.
<PAGE>
Todd Reger: Can you speak specifically to that? And, you know, I know we're
going to see some news hopefully in this space, but what's your take on
that?
Stratton Sclavos: Yes, all I'll say is stay tuned all right. In that
environment, we believe we've got some compelling offerings coming. We've
got some partnerships laid out. And now we'll be bringing some of the
Network Solution's bandwidth into play as well.
So we're very comfortable with our position in B-to-B and how we're going
to accelerate our momentum there.
Todd Reger: Great, thanks a lot guys.
Operator: John Powers, Robertson Stevens.
John Powers: Hi, congratulations. In the face of all these riches, I hesitate
to ask what's next. But it seems to me like, you know, Verisign has
obviously dramatically repositioned itself with the acquisitions of the
last few months. And I wonder, wouldn't rights management be a logical area
to extend this sort of end to end life cycle registration and e-commerce
management system into?
Stratton Sclavos: Well I think that there are a lot of opportunities out there
John. And Jim and I are - and our teams, I think are going to be focused on
doing the integration right. I mean that is job number one. So, you know,
we're not in a rush to go out and do some things.
But I think you have characterized it correctly that, you know, this has
changed the landscape in some ways. You know, Verisign is not viewed as
simply a security play. I don't think Network Solutions will be viewed as
simply a domain name registration name. Now it really is the trusted
<PAGE>
Internet infrastructure services company. And there are other, you know,
likely - as Jim would say, stars in that constellation to be brought to
bear.
John Powers: Okay thanks, congrats.
Stratton Sclavos: Thanks John.
Operator: Steven Birer, Robertson Stevens.
Steven Birer: Just a small question. Are there any breakup fees?
Stratton Sclavos: There is a breakup fee approximately 2% of the DO which is,
you know, at this point in time would be a little over $400 million.
Steven Birer: Great, congratulations.
Stratton Sclavos: Thank you.
Operator: Bob Lam, Bear Stearns.
Bob Lam: My question has been answered, congratulations.
Stratton Sclavos: Thanks Bob.
Jim Rutt: Thanks Bob.
Operator: Ed Kressler, Angello Gordon.
<PAGE>
Ed Kressler: Good morning and congratulations. The question on whether there
were callers on the deal was already asked, on - given the stock are there
any caps or walkaway prices?
Stratton Sclavos: No there are not, straight exchange ratio.
Ed Kressler: Great. In terms of expected close, the press release mentioned
third quarter which seems relatively long. Can you give a little more
detail on why third quarter and where in the third quarter you would
expect?
Stratton Sclavos: Just a, you know, complicated transactions with the, you
know, HSR filing. Certainly we have, you know, to go to the appropriate
regulatory bodies and seek their approval and explain transaction.
So I think that's our long pole timing on this. Just as that expectation's
right, we're hopeful it could happen through the registration of an S4 and,
you know, happen more quickly. And we'll just see. And we'll keep people
updated. You know, as we know more, you'll know more.
Ed Kressler: Great. In terms of - you mentioned Hart-Scott-Rodino, what other
sort of regulatory approvals or approvals or conditions are pursuant to
this deal?
Stratton Sclavos: Certainly we'll be talking to the Department of Commerce and,
you know, with the S4 filing with the SEC and just getting all that
information straight. You know, on the registry business, Network Solutions
has a cooperative agreement with the Department of Commerce and with ICANN.
And so while this is not a true requirement to assign any contract because
it's a reverse triangular merger, in fact, you know, we certainly want to
make sure that we're very upfront with all the departments and we gain
their support.
<PAGE>
Jim Rutt: And we communicated with the Department of Commerce yesterday and
with ICANN this morning. And we're reasonable confident at this point that
people look favorably upon this transaction.
Ed Kressler: Okay, and then I'm sorry, I'm - slightly ((inaudible)) here. The
Department of Commerce and then this ICANN, they're just large contracts
that you have that don't require necessarily approval but just sort aren't
going to matter for the business going forward?
Stratton Sclavos: Right, that's right.
Ed Kressler: Terrific. Great, thanks very much.
Operator: Martin Pyykkoen, CIBC World Markets.
Martin Pyykkoen: Yes thanks, congratulations as well. A couple questions. I'm
just wondering in terms of pricing as you go forward -- not looking for
ASPs here at this level -- but just kind of structurally, will things be
pursued or considered differently than sort of just, you know, in other
words marrying the two companies from a pricing standpoint, first question.
And then secondly, I think it was sort of referred to in terms of bundling,
you know, for all of the enthusiasm about e-commerce and so forth. Is this
partly a move to bundle to get maybe the second wave of initial e-commerce
players into the fold more quickly as opposed to having them - having to
mix the pieces themselves to go forward?
<PAGE>
And then thirdly, just in terms of your three businesses, you sort of
talked about them traditionally from the Verisign side, does this, you
know, coming together have more of an impact to any one of those three
individually or is it, you know, really equally as you see it? Thanks.
Man: We found the answer to the - at least one of the answers to the question
about pricing. You know, Network Solutions I think - get Verisign as well.
We found that bundling is the answer. And as you said, for the next
generation of e-commerce people, this is no longer in the craft industry
stage. This is where people want to buy from here a set of services, find a
vendor they can rely upon and have them execute for them. So we think that
at least in the short term, the interesting things in pricing is in terms
of bundling.
Man: And I think from the, you know, Verisign perspective, we now know where
all the customers are okay. And we're talking about eight million domain
names having been registered and a pretty healthy rate, you know,
continuing here. So we know where the customers are. We can offer these
combined services to them. And we believe we actually can help them roll
out their e-business strategies more quickly because we can provide such a
one-stop shop.
So, you know, we will increase customer success. And as a by-product of
that, we hope we'll increase revenue per customer for both companies.
As it relates to the three businesses Martin, you know, certainly there is
on both the authentication business and certificates, going into, you know,
new domains or register, helping those folks move to a simple e-commerce
model with certificates on their Web site, and frankly with Signio because
of the simple model that Signio has for enabling a Web site to take credit
card payments literally within a few hours of signing up and getting a
merchant account.
<PAGE>
We think both of the authentication and payment business will benefit
greatly from this combination.
Martin Pyykkoen: Just on - I had a quick follow-up on Signio. I know it's not
the topic for, you know, for this call here today. But I'm just intrigued
by two months of doubling customers. Is that largely from bringing the
Signio service to the Verisign customer base and some quick hits or
anything else that's gone on in there that you can share?
Stratton Sclavos: Well I'm sure we'd love to take credit for it. But frankly
the Signio team had been seeing accelerating momentum. As we talked about
that acquisition back in December, that was one of the reasons that was one
of the reasons we did it.
We believe that it was still slightly invisible as to what was actually
going on there. Their motto on the B-to-C side was taken off. They got
integration with QuickBooks 2000 and it shipped in December and rolled out
in January. They seeing, I believe now, close to 1000 QuickBooks customers
sign on in just a little over 45 days of it being available. So they were
gaining tremendous traction on their own.
With that deal closed now, as you'd expect, we are putting the marketing
brain trust together and looking to put together some combinations that we
think will be powerful and hopefully keep that going.
Martin Pyykkoen: Thanks a lot.
Stratton Sclavos: Thanks Martin.
Operator: Dang Nguyen, Soros Fund Management.
<PAGE>
(John Gillory): Hi, this is (John Gillory). I work with Dang - go into a little
more detail about the regulatory approvals? I think you said earlier that
you just needed to notify as to a couple of contracts, one with the
Commerce Department.
Is it your contention that only Hart-Scott-Rodino approval for example and
getting a proxy out through the SEC are the necessary approvals here -
higher approvals for the merger?
Stratton Sclavos: Yes it is. Yes it is.
(John Gillory): Okay, thank you.
Operator: Due to time constraints, our final question comes from Paul Merenblom
with Prudential Securities.
Paul Merenblom: ((inaudible)) pose any issue with regard to the registrar sign
on rate Jim? Do any of the registrars such as Network Solutions who
recently went public or any of the others you have in the queue have any
claim that this represents an unfair market condition?
Jim Rutt: Keep in mind, the businesses today are very complementary. This is
not a vertical integration of any sort. So you never know what people might
claim. But on the surface, this appears to be, you know, a very reasonable
and complementary combination that will work for the benefit of the
customers.
Paul Merenblom: We completely agree with that. It's a - the synergies
identified here are tremendous. I'm just wondering if there's a source for
outside noise that could in any way interfere with the closing of this
transaction?
<PAGE>
Man: I think there's always a source for outside noise from somewhere Paul
right? And certainly, you know, the press release went on the wire at 4:00.
I don't believe this was well-known before that. So we'll see what comes up
here. But we're pretty confident that this is a pretty simple idea.
We've scrubbed this thing as well as we could and feel quite confident.
Paul Merenblom: Great, thank you.
Operator: Mr. Sclavos, I'll turn it back over to you for any additional or
closing remarks.
Stratton Sclavos: Thanks very much everybody, appreciate the time you've spent
with us and the good questions. I'm sure there's plenty more that you've
got and more that you'll think of through the day and the next few weeks.
So again, myself and Jim, Bob Korezeniewski and Dana, our Investor
Relations Manager, Katie Oschner, we're all standing by to take those calls
and we'll try to get you in as quickly as we can. And we are all traveling
today through various pieces of the country. But we'll get back to you as
soon as we can.
Thanks again and we'll talk to you all soon.
Operator: Again, thank you for your participation in today's conference. You
may disconnect at this time.
END
<PAGE>
Cautionary Note Regarding Forward-Looking Statements
This transcript contains forward-looking statements within the meaning of the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are based on the current expectations and beliefs of managements
of VeriSign and Network Solutions and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. In particular, the following
factors, among others, could cause actual results to differ materially from
those described in the forward-looking statements: failure of the transaction to
close due to the failure to obtain regulatory or other approvals; failure of the
VeriSign or Network Solutions stockholders to approve the merger; the risk that
the VeriSign and Network Solutions businesses will not be integrated
successfully and unanticipated costs of such integration; failure of the
combined company to retain and hire key executives, technical personnel and
other employees; failure of the combined company to manage its growth and the
difficulty of successfully managing a larger, more geographically dispersed
organization; failure of the combined company to successfully manage its
changing relationships with customers, suppliers and strategic customers;
failure of the combined company's customers to accept the new service offerings
and, in particular, the risk that businesses and consumers may not adopt the
Internet for electronic commerce as rapidly as anticipated; the risk that
security breakdowns on the Internet might adversely affect the growth of
electronic commerce; and competition in the various markets serviced by the
combined company.
For a detailed discussion of these and other cautionary statements, please refer
to the joint proxy statement/prospectus to be filed by both companies as
described below, as well as the companies' filings with the Securities and
Exchange Commission, especially in the "Factors That May Affect Future Results
of Operations" section of the Management's Discussion and Analysis section of
VeriSign's Form 10-K for 1999, Form 10-Q for the quarter ended September 30,
1999, the "Risk Factors" section of VeriSign's S-3 Registration Statement filed
with the Securities and Exchange Commission on January 11, 2000, the "Factors
Affecting Operating Results" section of the Management's Discussion and Analysis
section of Network Solutions' Form 10-Q for the quarter ended September 30, 1999
that was filed with the Securities and Exchange Commission on November 15, 1999
and the "Risk Factors" section of Network Solutions' S-3 Registration Statement
filed with the Securities and Exchange Commission on December 22, 1999 and
subsequently amended.
Where You Can Find Additional Information
Investors and security holders of both VeriSign and Network Solutions are
advised to read the joint proxy statement/prospectus regarding the business
combination transaction referenced in the foregoing information, when it becomes
available, because it will contain important information. VeriSign and Network
Solutions expect to mail a joint proxy statement/prospectus about the merger to
their respective stockholders. Such joint proxy statement/prospectus will be
filed with the Securities and Exchange Commission by both companies. Investors
and security holders may obtain a free copy of the joint proxy
statement/prospectus (when available) and other documents filed by the companies
at the Securities and Exchange Commission's web site at
<PAGE>
http://www.sec.gov. The joint proxy statement/prospectus and such other
- ------------------
documents may also be obtained from VeriSign or Network Solutions by directing
such requests to the respective addresses listed below.
VeriSign and its officers and directors may be deemed to be participants in the
solicitation of proxies from VeriSign's stockholders with respect to the
transactions contemplated by the merger agreement. Information regarding such
officers and directors is included in VeriSign's Proxy Statement for its 1999
Annual Meeting of Stockholders filed with the Securities and Exchange Commission
on April 22,1999. This document is available free of charge at the Securities
and Exchange Commission's Web site at http://www.sec.gov and from the VeriSign
contact listed below.
Network Solutions and its officers and directors may be deemed to be
participants in the solicitation of proxies from stockholders of Network
Solutions with respect to the transactions contemplated by the merger agreement.
Information regarding such officers and directors is included in Network
Solutions' S-3 Registration Statement filed with the Securities and Exchange
Commission on December 22, 1999, and subsequently amended. This document is
available free of charge at the Securities and Exchange Commission's Web site at
http://www.sec.gov and from the Network Solutions contact listed below.
