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VERISIGN INC/CA
10-K405, 2000-03-22
COMPUTER PROGRAMMING SERVICES

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þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 1999

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _______________ to  _______________

Delaware (State or other jurisdiction of incorporation or organization)   1350 Charleston Road, Mountain View, CA (Address of principal executive offices)

94-3221585 (I.R.S. Employer Identification No.)   94043-1331 (Zip Code)

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				Page
PART I
Item 1.		Business		3
Item 2.		Properties		16
Item 3.		Legal Proceedings		16
Item 4.		Submission of Matters to a Vote of Security Holders		16
Item 4A.		Executive Officers of the Registrant		16
PART II
Item 5.		Market for Registrant’s Common Stock and Related Shareholder Matters		18
Item 6.		Selected Financial Data		19
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		32
Item 8.		Financial Statements and Supplemental Data		33
Item 9.		Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		34
PART III
Item 10.		Directors and Executive Officers of the Registrant		35
Item 11.		Executive Compensation		35
Item 12.		Security Ownership of Certain Beneficial Owners and Management		35
Item 13.		Certain Relationships and Related Transactions		35
PART IV
Item 14.		Exhibits, Financial Statement Schedule, and Reports on Form 8-K		36
Signatures				39
Summary of Trademarks				40
Financial Statements				41
Exhibits				66

Website Digital Certificate Services

Secure Site and Secure Site Plus Services.    Secure Site is our standard service offering that enables websites to implement basic SSL security features between their sites and individual end-user browsers. Secure Site includes certificate issuance, certificate lifecycle management, administration functions, records retention, directory integration and transaction security. We also offer an upgraded version of this service, called Secure Site Plus, that includes security monitoring, security assessment, site performance monitoring and additional warranty protection.

Global Site and Global Site Plus Services.    Global Site is an advanced version of Secure Site that incorporates all of the features and functionality of our Secure Site services that allows U.S. and international enterprises to offer stronger 128-bit encrypted SSL sessions between their websites and specially configured end-user browsers from Netscape and Microsoft. We offer the only commercially available certificates for Netscape and Microsoft that utilize 128-bit encryption. This service is typically targeted to global financial institutions and online merchants that require enhanced security. We also offer an upgraded version of this service, called Global Site Plus that includes security monitoring, security assessment, site performance monitoring and additional warranty protection.

WAP Server Certificates.    WAP Server Certificates provide authentication and encryption between wireless web servers and mobile devices utilizing WTLS (wireless transport layer security protocol). Our WAP server certificate service is compatible with WAP servers from Motorola, Nokia, Phone.com and others.

Enterprise Digital Certificate Services

OnSite Services.     OnSite Services support a wide range of digital certificate needs for both small and large user communities. OnSite can be used by customers to provide digital certificates for a variety of applications, including: controlling access to sensitive data and account information, enabling digitally-signed e-mail, creating an online electronic trading community, managing supply chain interaction or facilitating and protecting online credit card transactions. The OnSite service is designed to offer customers ease of use at a low initial investment combined with broad flexibility and scalability. OnSite services vary based on the nature and complexity of the application and the degree of control customers desire to maintain.

Go Secure! Services.    Go Secure! was introduced in June 1999 to provide managed applications services that enable enterprises to quickly build digital certificate-based security into their transaction and communication applications faster and more easily. Go Secure! services are similar in functionality to our OnSite Services and are designed to incorporate digital certificates into existing e-mail, browsing applications, directory and virtual private network devices.

VeriSign Affiliate Certificate Services

VeriSign Service Center.    The VeriSign Service Center provides a VeriSign Affiliate with all of the capabilities needed to perform subscriber enrollment and authentication, digital certificate issuance, directory hosting, customer support, billing integration and report generation from within their facilities while leveraging VeriSign’s secure data centers for back-end processing.

VeriSign Processing Center.    The VeriSign Processing Center provides a VeriSign Affiliate with all of the capabilities of the Service Center plus the WorldTrust modules required to perform all certificate processing functions from within their own secure data center.

Financial Services		Telecommunications		Manufacturing/Transportation
American Skandia Insurance		AT &T		CSX
Barclay’s Bank		BellSouth		Eastman Kodak
Bank of America		British Telecommunications		Ford Motor Company
Deutsche Bank		Japan Communication		General Electric Information Services
First Union Bank		MCI —Worldcom		Gillette
First USA Paymentech		NTT Communications		Johnson & Johnson
Merrill Lynch		US West		Miller Brewing Company
Morgan Stanley Dean Witter				United Parcel Service
Royal Bank of Canada		Technology
Sumitomo Bank				Government
TransUnion		Agilent
		EDS		Department of Agriculture
		Hewlett-Packard		Department of Justice
		Intuit		Federal Bureau of Investigation
		Netscape		Internal Revenue Service
		NEC		National Security Agency
		NTT Data		Patent & Trademark Office
		Texas Instruments		Social Security Administration
				State of New Jersey
				U.S. Army
				Veteran’s Administration

Subscriber Services Module.    Our subscriber services module supports requests for digital certificate issuance, revocation, renewal and replacement. Software toolkits are provided to permit rapid customization and integration of digital certificate services with a customer’s business-specific web-based solutions.

Authentication Services Module.    Our authentication services module supports manual, automated and delegated authentication of subscribers by designated sources prior to digital certificate issuance. We provide software toolkits and programming interfaces to allow for integration with various process models and database systems.

Administration and Support Modules.    Our administration and support modules provide lifecycle services such as digital certificate revocation, renewal and reissuance, as well as a customer support knowledge base to facilitate general reporting of CA activity, and web-based and e-mail-based support for customers and end users.

Directory Services Module.    Our directory services module utilizes database applications typically hosted at one of our secure data centers to support the storage of and access to digital certificates and associated information for a particular customer. VeriSign OnSite customers and our affiliates can also download updated copies of their directory information to their systems.

Service Control Module.    Our service control module is hosted at one of our secure data centers and acts as a gatekeeper, decoding and routing all digital certificate service requests based on customer type, application type, security protocol, authentication policies, certificate content and billing rules. This module utilizes a proprietary, data-driven programming model to define each service and dispatch the appropriate control and error commands to other modules.

Digital Certificate Processing Module.    Our digital certificate processing module is hosted at one of our secure data centers and creates digital certificates with digital signatures on each certificate, delivers digital certificates to subscribers and stores a copy of each digital certificate for archive, audit and directory purposes.

Distributed Servers.     We deploy a large number of high-speed servers to support capacity and availability demands. We can add additional servers to support increases in digital certificate volumes, new services introductions, new customers and higher levels of redundancy without service interruptions or response time degradation. The WorldTrust platform provides automatic fail-over, load balancing and threshold monitoring on critical servers.

Advanced Telecommunications.    We deploy and maintain redundant telecommunications and routing hardware and maintain high-speed connections to multiple ISPs and throughout our internal network to ensure that our mission critical services are readily accessible to customers at all times.

Network Security.     We incorporate advanced architectural concepts such as protected domains, restricted nodes and distributed access control in our system architecture. We have also developed proprietary communications protocols within and between the WorldTrust platform modules that we believe can prevent most known forms of electronic attacks. In addition, we employ the latest network security technologies including firewalls and intrusion detection software, and contract with security consultants who perform periodic attacks and security risk assessments. We will continue to evaluate and deploy new technological defenses as they become available. See “Management ’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results of Operations —System interruptions and security breaches could harm our business.”

Call Center and Help Desk.    We provide a wide range of customer support services through a phone-based call center, e-mail help desk and web-based self-help system. Our call center is staffed from 5 a.m. to 6 p.m. PST and employs an automated call director system. The web-based support services are available on a 24-hour, 7 days per week basis, utilizing customized auto response systems to provide self-help recommendations and a staff of trained customer support agents.

Disaster Recovery Plans.    Although we believe our operations facilities are highly resistant to systems failure and sabotage, we have developed a disaster recovery and contingency operation plan. We also have an agreement with Comdisco Corporation to provide replication of customer data, facilities and systems at another site so that all of our services can be re-instated within 24 hours of a failure. In addition, all of our digital certificate services are linked to advanced storage systems that provide data protection through techniques such as mirroring and replication. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results of Operations—System interruptions and security breaches could harm our business.”

International Affiliates.    VeriSign’s international affiliates are required to build, implement and maintain their infrastructure according to VeriSign’s requirements. VeriSign currently has affiliates located in Australia, Brazil, Canada, France, Germany, Greece/The Balkans, Greece/Cyprus Southeastern Europe, Ireland, Japan, Korea, Middle East, Netherlands, Netherlands/Belgium and Luxembourg, South Africa (SACA), South Africa/Chile, Uruguay and Paraguay, Taiwan and the United Kingdom.

Employees.     We use stringent hiring and personnel management practices for all operations and certain engineering personnel as well as all executive management. We utilize a licensed private investigation firm to conduct background checks into potential employees’ criminal and financial histories and conduct periodic investigations of such personnel on an ongoing basis.

Security Monitoring Systems.    We have sophisticated access control and monitoring systems that help prevent unauthorized access to secure areas and provide 24 hour, 7 days per week monitoring and logging of activities within our facilities. These systems include electronic key and biometric access control devices, video monitoring and recording devices, deployment and automatic arming of motion detectors, glass breakage detectors and remote alarm system monitoring.

Site Construction.    Our secure data centers have been built using construction techniques modeled after U.S. Army specifications for facilities accredited to handle classified information and contain a robust set of physical and environmental defenses. These defenses include double layer, slab-to-slab wall design, self-closing and locking metal doors at all secure entrances, man traps, tamper proof enclosures for cryptographic materials and fire prevention systems.

Back-up Power Systems.    We have invested in back-up power systems that automatically activate in the event of a failure in our primary power sources. These include uninterruptible power supply systems and a diesel generator and fuel supply. To ensure reliability, these systems are tested on a periodic basis.

Audits.     Our Practices and External Affairs Department periodically performs, and retains accredited third parties to perform, audits of our operational procedures under both internally developed procedures and externally recognized standards.

Practices.     Our Practices and External Affairs Department is responsible for the development of VeriSign’s practices for issuing and managing digital certificates. These practices are set forth in our Certification Practice Statement, which we provide in order to assure potential customers and strategic partners as to the trustworthiness of our Internet-based trust services. The Practices and External Affairs Department is also responsible for our accountability and security controls and regularly monitors all aspects of our secure data centers.

Policy Making Activities.    The Practices and External Affairs Department also takes a leading role in a variety of organizations that are defining standards for trusted and secure electronic commerce and communications over IP networks. For example, we actively participate in the United Nations Commission on International Trade Law, which created the United Nations Model Law on Electronic Commerce, the American Bar Association’s Information Security Committee, Section of Science and Technology, which has drafted digital signature guidelines, the International Chamber of Commerce ETERM Working Party, which is chaired by VeriSign’s Vice President of Practices and External Affairs, and the U.S. State Department Advisory Committee on Electronic Commerce.

British Telecommunications.    BT is a member of our international affiliate program. BT issues digital certificates and provides a range of services for secure Internet access and electronic commerce on a co-branded basis. With our support, BT has established CA infrastructure in the U.K., including the creation of a secure data center that adheres to our site construction specifications. We have agreed to collaborate to develop legal practices and policies to maintain compliance with U.K. and European-based regulations and standards as they emerge.

Cisco.     Our technology is incorporated in Cisco’s Internetwork Operating System through the use of the jointly developed Certificate Request Syntax (CRS) protocol, which enables digital certificate functionality in a variety of Cisco’s networking products. As a result, IP networks utilizing Cisco network devices such as routers and firewalls support applications that rely on VeriSign digital certificates for authentication and network management. We also engage in a variety of joint marketing efforts with Cisco. Cisco is one of our stockholders.

Microsoft.     We work with Microsoft to develop, promote and distribute a variety of client-based and server-based digital certificate services and we have been designated as the preferred provider of digital certificates for Microsoft customers. Our technology has been embedded in Microsoft’s Internet Explorer since version 2.0, allowing users to uniquely identify themselves to web servers and securely access information over the Internet. In addition, users can easily obtain their own digital certificate for use with Explorer by registering on our website for our digital certificates. We also provide Secure Site Services for Microsoft ’s Internet Information Server product. VeriSign’s services can be used in conjunction with Microsoft Outlook 98 to enable the delivery of secure email in extranet applications. In addition, in September 1998, VeriSign and Microsoft announced plans for enhanced integration of our digital certificate services with Microsoft Exchange Server 5.5. The new capability offers a secure email extranet “gateway” service that allows Exchange Server customers to issue and manage digital certificates within the global VeriSign Trust Network. VeriSign and Microsoft also jointly promote a set of technologies and security policies for the secure authentication and distribution of software over the Internet and engage in other joint marketing activities. Microsoft is one of our stockholders.

Netscape.     We work with Netscape on a variety of technology projects and joint marketing activities. Our technology has been embedded in Netscape’s Navigator since version 1.1 and in Netscape ’s Communicator since version 4.0. We also have an agreement with Netscape that provides that Netscape feature us as a premier provider of digital certificates on the Netscape website and also provides for VeriSign to have a first right of participation for any new Netscape products incorporating digital certificate technology. Users of Netscape browsers can easily enroll for standard VeriSign digital certificates using Netscape products. Netscape’s SuiteSpot product, including versions with 128-bit encryption capabilities, can also utilize our Secure Site and Global Site services. We also support Netscape’s object-signing technology, enabling software developers to digitally sign Java and JavaScript objects in order to authenticate the developer’s identity and assure end users that the downloaded objects have not been tampered with or modified.

RSA Security.     We have an agreement with RSA Security (formerly Security Dynamics) under which RSA Security will incorporate custom digital certificate technology developed by VeriSign into RSA Security’s future products. RSA Security has also agreed to be a reseller of certain VeriSign OEM technology. We believe RSA Security is a market leader in enterprise security and that, by including our technology in RSA Security’s products, we will have a broader potential market for our digital certificate services. RSA Security, through a controlled entity, holds approximately 5% of our common stock.

VISA.     We have an agreement with VISA under which we provide SET digital certificate services to VISA on behalf of its member banks, enabling them to offer branded SET-compliant digital certificates to their cardholders and merchants.

Marketing

Sales and Distribution

Internet Sales.     VeriSign distributes many of its Internet-based trust services through its website. We believe that Internet distribution is particularly well suited for sales of certain of our website authentication products and Internet-based trust services. We also use our website to assist in disseminating services information and in generating services trials.

Direct Sales.     VeriSign’s direct sales force targets mid-sized and large corporations, financial institutions, commercial websites, electronic commerce providers and federal and state government agencies. We believe that these organizations have a substantial installed base of PCs, web servers, IP networks and high-speed access to the Internet and are most likely to be able to benefit quickly from the use of digital certificates. The direct sales force also targets international organizations that we believe are the most suitable to act as VeriSign affiliates. As of December 31, 1999, we had 70 sales and sales support employees in the United States, while the international direct sales and sales support groups consisted of 15 employees.

Telesales.     VeriSign’s internal telemarketing operation is responsible for customer prospecting, lead generation and lead follow-up. This marketing activity qualifies leads for further follow up by the direct sales force or inside sales team or leads the prospect to our website so that the prospect can access information and enroll for our Internet-based trust services.

VARs and Systems Integrators.    VeriSign works with VARs and systems integrators to package and sell its Internet-based trust services. We also have a VeriSign Business Partner Program that allows ISPs and web hosting companies to offer Secure Site services as an integral part of their secure web hosting services.

Name		Age		Position
Stratton D. Sclavos		38		President, Chief Executive Officer and Director
Dana L. Evan		40		Executive Vice President of Finance and Administration   and Chief Financial Officer
Quentin P. Gallivan		42		Executive Vice President of Worldwide Sales
Diana S. Keith		40		Vice President of Customer Services
Arnold Schaeffer		36		Executive Vice President of Engineering
Richard A. Yanowitch		43		Executive Vice President of Worldwide Marketing

		Price Range
		High		Low
Year ended December 31, 1998:
First Quarter (beginning January 30, 1998)		$   11.72		$   5.13
Second Quarter		12.25		6.50
Third Quarter		11.22		5.47
Fourth Quarter		19.38		4.85
Year ended December 31, 1999:
First Quarter		$   38.50		$15.00
Second Quarter		44.13		24.63
Third Quarter		58.00		29.47
Fourth Quarter		190.94		51.16

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fluctuations in our operating results;

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announcements of technological innovations or new Internet-based trust services by us or new products or services by our competitors;

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analysts’ reports and projections;

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regulatory actions; and

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general market, economic or political conditions in the U.S. or abroad.

		Years Ended December 31,												Period  from April 12, 1995 (inception) to December 31, 1995
		1999			1998			1997			1996
		(In  thousands, except per share  data)
Consolidated Statement of Operations Data:
Revenues		$   84,776			$38,930			$13,356			$   1,356			$   382
Total costs and expenses		88,086			62,075			34,657			12,415			2,524
Operating loss		(3,310	)		(23,145	)		(21,301	)		(11,059	)		(2,142	)
Minority interest in net loss of subsidiary		836			1,282			1,538			838			—
Net income (loss)		3,955			(19,743	)		(18,589	)		(10,288	)		(1,994	)
Basic net income (loss) per share		.04			(.24	)		(.65	)		(.52	)		(.11	)
Diluted net income (loss) per share		.03			(.24	)		(.65	)		(.52	)		(.11	)
		As of December 31,
		1999			1998			1997			1996			1995
		(In thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments		$156,480			$41,745			$12,893			$30,006			$2,687
Working capital		140,163			31,085			6,160			24,788			2,284
Total assets		341,166			64,295			26,904			36,537			4,052
Stockholders ’ equity		298,359			40,728			13,541			28,520			3,376

Revenues

		1999		Change			1998		Change			1997
		(Dollars in thousands)
Revenues		$84,776		118	%		$38,930		191	%		$13,356

Costs and Expenses

Cost of revenues

		1999			Change			1998			Change			1997
		(Dollars in thousands)
Cost of revenues		$31,898			64	%		$19,454			101	%		$9,689
Percentage of revenues		38	%					50	%					73	%

Sales and marketing

		1999			Change			1998			Change			1997
		(Dollars in thousands)
Sales and marketing		$34,145			49	%		$22,943			94	%		$11,826
Percentage of revenues		40	%					59	%					89	%

Research and development

		1999			Change			1998			Change			1997
		(Dollars in thousands)
Research and development		$13,303			58	%		$8,435			59	%		$5,303
Percentage of revenues		16	%					22	%					40	%

General and administrative

		1999			Change			1998			Change			1997
		(Dollars in thousands)
General and administrative		$8,740			14	%		$7,688			53	%		$5,039
Percentage of revenues		10	%					20	%					38	%

Special charges

		1999		Change			1998			Change			1997
		(Dollars in thousands)
Special charges		$ —		(100	)%		$3,555			27	%		$2,800
Percentage of revenues		—					9	%					21	%

Interest Income

		1999			Change			1998			Change			1997
		(Dollars in thousands)
Interest income		$7,365			223	%		$2,280			85	%		$1,235
Percentage of revenues		9	%					6	%					9	%

Other Expense, Net

		1999			Change			1998			Change			1997
		(Dollars in thousands)
Other expense, net		$(936	)		(485	)%		$(160	)		(162	)%		$(61	)
Percentage of revenues		(1	)%		—			—

Provision for Income Tax

Minority Interest in Net Loss of Subsidiary

Our business depends on the adoption and continued use of IP networks.

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potentially inadequate development of network infrastructure;

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security concerns including the potential for merchant or user impersonation and fraud or theft of stored data and information communicated over IP networks;

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other security concerns such as attacks on popular websites by “hackers; ”

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inconsistent quality of service;

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lack of availability of cost-effective, high-speed service;

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limited numbers of local access points for corporate users;

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inability to integrate business applications on IP networks;

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the need to operate with multiple and frequently incompatible products; and

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a lack of tools to simplify access to and use of IP networks.

Our market is new and evolving.

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market acceptance of products and services based upon authentication technologies other than those we use;

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public perception of the security of digital certificates and IP networks;

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the ability of the Internet infrastructure to accommodate increased levels of usage; and

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government regulations affecting electronic commerce and communications over IP networks.

System interruptions and security breaches could harm our business.

We have a limited operating history.

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the rate and timing of the growth and use of IP networks for electronic commerce and communications;

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the extent to which digital certificates are used for such communications and commerce;

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the continued evolution of electronic commerce as a viable means of conducting business;

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the demand for our Internet-based trust services;

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competition levels;

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the perceived security of electronic commerce and communications over IP networks;

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the perceived security of our services, technology, infrastructure and practices; and

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our continued ability to maintain our current, and enter into additional, strategic relationships.

To address these risks we must, among other things:

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successfully market our Internet-based trust services and our digital certificates to our new and existing customers;

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attract, integrate, train, retain and motivate qualified personnel;

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respond to competitive developments;

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successfully introduce new Internet-based trust services; and

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successfully introduce enhancements to our existing Internet-based trust services to address new technologies and standards.

We may not be able to integrate our recent acquisitions successfully

Ÿ

the additional expense associated with the amortization of goodwill and other intangible assets, which we expect will be an aggregate of approximately $2 billion for the two acquisitions, and will be amortized generally from two to three years;

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unanticipated costs or the incurrence of unknown liabilities;

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the need to manage more geographically-dispersed operations, such as Thawte’s offices in North Carolina and South Africa;

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diversion of management’s resources from other business concerns;

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the inability to retain the employees of the acquired businesses;

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adverse effects on existing customer relationships of Thawte or Signio;

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the difficulty of assimilating the operations and personnel of the acquired businesses;

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our inability to incorporate acquired technologies successfully into our Internet-based trust services; and

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the inability to maintain uniform standards, controls, procedures and policies.

We must manage our growth and expansion.

We must establish and maintain strategic and other relationships with third parties.

Certain of our Internet-based trust services have lengthy sales and implementation cycles.

Our international operations are subject to certain risks.

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regulatory requirements;

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legal uncertainty regarding liability;

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export and import restrictions on cryptographic technology and products incorporating that technology;

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tariffs and other trade barriers;

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difficulties in staffing and managing foreign operations;

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longer sales and payment cycles; problems in collecting accounts receivable;

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difficulty of authenticating customer information;

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political instability;

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seasonal reductions in business activity; and

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potentially adverse tax consequences.

Acquisitions could harm our business.

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the difficulty of assimilating the operations and personnel of the acquired businesses;

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the potential disruption of our business;

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our inability to integrate, train, retain and motivate key personnel of the acquired business;

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the diversion of our management from our day-to-day operations;

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our inability to incorporate acquired technologies successfully into our Internet-based trust services;

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the additional expense associated with completing an acquisition and amortizing any acquired intangible assets;

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the potential impairment of relationships with our employees, customers and strategic partners; and

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the inability to maintain uniform standards, controls, procedures and policies.

		1999		1998		Change
		(Dollars in thousands)
Cash, cash equivalents and short-term investments		$156,480		$41,745		275	%
Working capital		$140,163		$31,085		351	%
Stockholders ’ equity		$298,359		$40,728		633	%

		Maturing in
		Six  Months or Less			Six  Months to One Year			More  than One Year			Total		Estimated Fair Value
		(Dollars in thousands)
Included in cash and cash equivalents		43,130			—			—			43,130		43,130
Weighted-average interest rate		6.10	%		—			—
Included in short-term investments		52,669			33,966			—			86,635		86,098
Weighted-average interest rate		5.70	%		6.0	%		—
Included in long-term investments		—			—			14,000			14,000		13,849
Weighted-average interest rate		—			—			5.99	%

		1999
		Quarter Ended												Year Ended December 31
		March 31			June 30			September 30			December 31
		(In thousands, except per share data)
Revenues		$15,582			$18,736			$22,782			$27,676			$84,776
Total costs and expenses		19,011			20,679			22,781			25,615			88,086
Operating income (loss)		(3,429	)		(1,943	)		1			2,061			(3,310	)
Minority interest in net loss of subsidiary		250			178			294			114			836
Net income (loss)		(1,993	)		(152	)		1,567			4,533			3,955
Basic net income (loss) per share		(.02	)		.00			.02			.04			.04
Diluted net income (loss) per share		(.02	)		.00			.01			.04			.03
		1998
		Quarter Ended												Year Ended December 31
		March 31			June 30			September 30			December 31
		(In thousands, except per share data)
Revenues		$   6,662			$   8,552			$10,505			$13,211			$38,930
Total costs and expenses		12,146			14,322			19,087			16,520			62,075
Operating loss		(5,484	)		(5,770	)		(8,582	)		(3,309	)		(23,145	)
Minority interest in net loss of subsidiary		389			324			237			332			1,282
Net loss		(4,703	)		(4,789	)		(7,717	)		(2,534	)		(19,743	)
Basic net income (loss) per share		(.07	)		(.05	)		(.09	)		(.03	)		(.24	)
Diluted net income (loss) per share		(.07	)		(.05	)		(.09	)		(.03	)		(.24	)

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continued market acceptance of our Internet-based trust services;

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the long sales and implementation cycles for, and potentially large order sizes of, certain of our Internet-based trust services;

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the timing and execution of individual contracts;

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customer renewal rates for our Internet-based trust services;

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the timing of releases of new versions of Internet browsers or other third-party software products and networking equipment which include our digital certificate service interface technology;

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the mix of our services sold during a quarter;

Ÿ

our success in marketing other Internet-based trust services to our existing customers and to new customers;

Ÿ

continued development of our direct and indirect distribution channels, both in the U.S. and abroad;

Ÿ

market acceptance of our Internet-based trust services or our competitors ’ products and services;

Ÿ

our ability to attract, integrate, train, retain and motivate a substantial number of sales and marketing, research and development and technical support personnel;

Ÿ

our ability to expand our operations;

Ÿ

our success in assimilating the operations and personnel of SecureIT and any other acquired businesses;

Ÿ

amortization of goodwill and intangible assets from acquisitions;

Ÿ

other acquisition-related expenses;

Ÿ

the amount and timing of expenditures related to expansion of our operations;

Ÿ

the impact of price changes in our Internet-based trust services or our competitors ’ products and services; and

Ÿ

general global economic conditions and economic conditions specific to IP network industries.

1.   Financial statements

Ÿ Management ’s Report
Ÿ  Independent Auditors’ Report
Ÿ    Consolidated Balance Sheets           As of December 31, 1999 and 1998
Ÿ  Consolidated Statements of Operations      Years Ended December 31, 1999, 1998 and 1997
Ÿ  Consolidated Statements of Stockholders’ Equity      Years Ended December 31, 1999, 1998 and 1997
Ÿ  Consolidated Statements of Comprehensive Income (Loss)      Years Ended December 31, 1999, 1998 and 1997
Ÿ  Consolidated Statements of Cash Flows      Years Ended December 31, 1999, 1998 and 1997
Ÿ Notes to Consolidated Financial Statements

2.   Financial statement schedules

Ÿ

Financial statement schedules are omitted because the information called for is not required or is shown in either in the consolidated financial statements or the notes thereto.

3.   Exhibits

				Incorporated by Reference
Exhibit Number		Exhibit Description		Form		Date		Number		Filed Herewith
2.01		Agreement and Plan of Reorganization dated as of July 6, 1998 by and between the Registrant, VeriSign Merger Corp., SecureIT and the shareholders of SecureIT		8-K		7/6/98		2.01
2.02		Agreement and Plan of Reorganization dated as of December 17, 1999 by and among the Registrant, Signio, Inc. and BEHAD Acquisition Corp.		8-K		3/7/00		2.1
2.03		Exchange Agreement dated as of December 17, 1999 by and between the Registrant and Mark Shuttleworth		8-K		2/16/00		2.1
2.04		Agreement and Plan of Reorganization dated as of March 6, 2000 by and among the Registrant, Nickel Acquisition Corporation and Network Solutions, Inc.		8-K		3/8/00		2.1
3.02		Third Amended and Restated Certificate of Incorporation of the Registrant		S-1		1/29/98		3.02
3.04		Amended and Restated Bylaws of the Registrant		S-1		1/29/98		3.04
3.05		Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant		S-8		7/15/99		4.03
4.01		Investors’ Rights Agreement, dated November 15, 1996, among the Registrant and the parties indicated therein		S-1		1/29/98		4.01

				Incorporated by Reference
Exhibit Number		Exhibit Description		Form		Date		Number		Filed Herewith
4.04		First Amendment to Amended and Restated Investors’ Rights Agreement dated as of July 7, 1998 by and between the Registrant and certain stockholders of the Registrant		8-K		7/6/98		4.01
4.05		Registration Rights Agreement dated as of July 6, 1998by and between the Registrant and the former shareholders of SecureIT		S-8		7/7/98		4.09
4.06		Registration Rights Agreement dated as of December 19, 1999 by and between the Registrant and the Mark Shuttleworth								X
10.01		Registrant ’s 1998 Equity Incentive Plan		S-8		7/15/99		4.04
10.02		Registrant ’s 1998 Employee Stock Purchase Plan		S-8		7/15/99		4.05
10.03		Form of Non-Plan Stock Option for options granted to certain non- executive officer employees		S-8		7/15/99		4.06
10.05		Form of Indemnification Agreement entered into by the Registrant with each of its directors and executive officers		S-1		1/29/98		10.05
10.06		Registrant ’s 1995 Stock Option Plan and related documents		S-1		1/29/98		10.06
10.07		Registrant ’s 1997 Stock Option Plan		S-1		1/29/98		10.07
10.08		Registrant ’s 1998 Directors’ Stock Option Plan and related documents		S-1		1/29/98		10.8
10.09		Registrant ’s 1998 Equity Incentive Plan and related documents		S-1		1/29/98		10.09
10.10		Registrant ’s 1998 Employee Stock Purchase Plan and related documents		S-1		1/29/98		10.10
10.11		Registrant ’s Executive Loan Program of 1996		S-1		1/29/98		10.11
10.14		Form of Full Recourse Secured Promissory Note and Form of Pledge and Security Agreement entered into between the Registrant and certain executive officers		S-1		1/29/98		10.14
10.15		Assignment Agreement, dated April 19,1995 between the Registrant and RSA Data Security, Inc.		S-1		1/29/98		10.15
10.16		BSAFE/TIPEM OEM Master License Agreement, dated April 18, 1995, between the Registrant and RSA Data Security, Inc., as amended		S-1		1/29/98		10.16
10.17		Non-Compete and Non-Solicitation Agreement, dated April 18, 1995, between the Registrant and RSA Security, Inc.		S-1		1/29/98		10.17
10.18*		Microsoft/VeriSign Certificate Technology Preferred Provider Agreement, effective as of May 1, 1997, between the Registrant and Microsoft Corporation		S-1		1/29/98		10.18
10.19*		Master Development and License Agreement, dated September 30, 1997, between the Registrant and Security Dynamics Technologies, Inc.		S-1		1/29/98		10.19
10.20		License Agreement, dated December 16, 1996, between the Registrant and veriSign Japan K.K.		S-1		1/29/98		10.20

				Incorporated by Reference
Exhibit Number		Exhibit Description		Form		Date		Number		Filed Herewith
10.21		Loan Agreement, dated January 30, 1997, between the Registrant and Venture Lending & Leasing, Inc.		S-1		1/29/98		10.21
10.22		Security Agreement, dated January 30, 1997, between the Registrant and Venture Lending & Leasing, Inc.		S-1		1/29/98		10.22
10.23*		VeriSign Private Label Agreement, dated April 2, 1996, between the Registrant and VISA International Service Association		S-1		1/29/98		10.23
10.24*		VeriSign Private Label Agreement dated October 3, 1996, between the Registrant and VISA International Service Association		S-1		1/29/98		10.24
10.25		Lease Agreement, dated August 15, 1996, between the Registrant and Shoreline Investments VII		S-1		1/29/98		10.25
10.26		Lease Agreement, dated September 18, 1996, between the Registrant and Shore-line Investments VII		S-1		1/29/98		10.26
10.27		Sublease Agreement, dated September 5, 1996, between the Registrant and Security Dynamics Technologies, Inc.		S-1		1/29/98		10.27
10.28		Employment Offer Letter Agreement, between the Registrant and Stratton Sclavos, dated June 12, 1995, as amended October 4, 1995		S-1		1/29/98		10.28
10.30		Amendment Number One to Master Development and License Agreement dated as of December 31, 1998 between the Registrant and Security Dynamics Technologies, Inc.		S-1		1/5/99		10.30
10.31		Amendment Number Two to BSAFE/TIPEM OEM Master License Agreement dated as of December 31, 1998 between the Registrant and RSA Data Security, Inc.		S-1		1/5/99		10.31
10.32		Sublease dated as of September 25, 1998 between the Registrant and Silicon Graphics, Inc.		S-1		1/5/99		10.32
21.01		Subsidiaries of the Registrant								X
23.01		Consent of KPMG LLP								X
27.01		Financial Data Schedule (in EDGAR version only)								X

*	Confidential treatment was received with respect to certain portions of this agreement. Such portions were omitted and filed separately with the Securities and Exchange Commission.

No reports on Form 8-K were filed in the quarter ended December 31, 1999.

VERISIGN , INC .

/s/     STRATTON D. SCLAVOS

By

Stratton D. Sclavos,

President and Chief Executive Officer

Signature		Title
/s/     STRATTON  D. SCLAVOS                                                                                                                                     Stratton  D. Sclavos		President, Chief Executive Officer and Director
/s/     DANA  L. EVAN                                                                                                                                     Dana L.  Evan		Executive Vice President of Finance and Administration and Chief Financial Officer
/s/     D. JAMES  BIDZOS                                                                                                                                       D. James  Bidzos		Chairman of the Board
/s/     WILLIAM  CHENEVICH                                                                                                                                     William  Chenevich		Director
/s/     KEVIN  R. COMPTON                                                                                                                                     Kevin R.  Compton		Director
/s/     DAVID  J. COWAN                                                                                                                                     David J.  Cowan		Director
/s/     TIMOTHY  TOMLINSON                                                                                                                                     Timothy  Tomlinson		Director and Secretary

Global Site ™

Global Site Plus ™

OnSite ®

Secure Site ™

Secure Site Plus ™

SecureIT ™

VeriSign Logo

VeriSign Service Center

VeriSign Processing Center

VeriSign is a registered trademark exclusively licensed to VeriSign, Inc.

GoSecure! SM

The Internet Trust Company SM

The Sign of Trust on the Net SM

VeriSign OnSite SM

VeriSign Trust Network SM

WorldTrust SM

Financial Statement Description		Page
Ÿ  Management’s Report		42
Ÿ  Independent Auditors’ Report		43
Ÿ  Consolidated Balance Sheets As of December 31, 1999 and 1998		44
Ÿ  Consolidated Statements of Operations For the Years Ended December 31, 1999, 1998 and       1997		45
Ÿ  Consolidated Statements of Stockholders’ Equity For the Years Ended December 31, 1999,       1998 and 1997		46
Ÿ  Consolidated Statements of Comprehensive Income (Loss) For the Years Ended       December 31, 1999, 1998 and 1997		48
Ÿ  Consolidated Statements of Cash Flows For the Years Ended December 31, 1999, 1998 and       1997		49
Ÿ  Notes to Consolidated Financial Statements		50

VERISIGN , INC .

/s/     Stratton D. Sclavos

By

Stratton D. Sclavos,

President and Chief Executive Officer

/s/     Dana L. Evan

By

Dana L. Evan,

Executive Vice President of

Finance and Administration and

Chief Financial Officer

/s/   KPMG LLP

		December 31,
		1999			1998
ASSETS
Current assets:
Cash and cash equivalents		$     70,382			$   22,786
Short-term investments		86,098			18,959
Accounts receivable, net of allowance for doubtful accounts of $1,108 in 1999 and                 $517 in 1998		22,727			9,769
Prepaid expenses and other current assets		3,635			2,174
Total current assets		182,842			53,688
Property and equipment, net		10,194			9,234
Long-term investments		144,751			436
Other assets, net		3,379			937
		$ 341,166			$   64,295
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$       4,665			$     5,472
Accrued liabilities		6,237			4,035
Deferred revenue		31,777			13,096
Total current liabilities		42,679			22,603
Minority interest in subsidiary		128			964
Commitments
Stockholders ’ equity:
Preferred stock —par value $.001 per share
Authorized shares: 5,000,000
Issued and outstanding shares: none		—			—
Common stock—par value $.001 per share
Authorized shares: 200,000,000
Issued and outstanding shares: 103,482,841 at December 31, 1999 92,346,768 at                 December 31, 1998		103			92
Additional paid-in capital		258,239			92,728
Notes receivable from stockholders		—			(409	)
Unearned compensation		(172	)		(276	)
Accumulated deficit		(47,452	)		(51,407	)
Accumulated other comprehensive income		87,641			—
Total stockholders’ equity		298,359			40,728
		$ 341,166			$   64,295

		Year Ended December 31,
		1999			1998			1997
Revenues		$   84,776			$   38,930			$   13,356
Costs and expenses:
Cost of revenues		31,898			19,454			9,689
Sales and marketing		34,145			22,943			11,826
Research and development		13,303			8,435			5,303
General and administrative		8,740			7,688			5,039
Special charges		—			3,555			2,800
Total costs and expenses		88,086			62,075			34,657
Operating loss		(3,310	)		(23,145	)		(21,301	)
Interest income		7,365			2,280			1,235
Other expense, net		(936	)		(160	)		(61	)
Income (loss) before minority interest		3,119			(21,025	)		(20,127	)
Minority interest in net loss of subsidiary		836			1,282			1,538
Net income (loss)		$     3,955			$(19,743	)		$(18,589	)
Net income (loss) per share:
Basic		$         .04			$       (.24	)		$       (.65	)
Diluted		$         .03			$       (.24	)		$       (.65	)
Shares used in per share computation:
Basic		100,531			83,492			28,484
Diluted		114,610			83,492			28,484

		Year  Ended December 31,
		1999		1998			1997
Preferred stock:
Balance, beginning of year:
No shares at January 1, 1999
40,124,024 shares at January 1, 1998
40,124,024 shares at January 1, 1997		$ —		$40			$   40
Conversion of preferred stock to common stock (40,124,024) shares in 1998		—		(40	)		—
Balance, end of year:
No shares at December 31, 1999
No shares at December 31, 1998
40,124,024 shares at December 31, 1997		—		—			40
Common stock:
Balance, beginning of year:
92,346,768 shares at January 1, 1999
35,145,704 shares at January 1, 1998
31,439,848 shares at January 1, 1997		92		36			32
Issuance of common stock:
81,600 shares in 1998
487,232 shares in 1997		—		—			—
Issuance of common stock for litigation settlement:
1,000,000 shares in 1997		—		—			1
Issuance of common stock for preferred provider agreement:
400,000 shares in 1997		—		—			1
Issuance of common stock through public offerings:
6,390,000 shares in 1999
13,800,000 shares in 1998		6		13			—
Conversion of preferred stock to common stock:
40,124,024 shares in 1998		—		40			—
Issuance of common stock under employee stock purchase plan:
547,896 shares in 1999
232,900 shares in 1998		1		—			—
Exercise of common stock options:
4,198,177 shares in 1999
2,962,540 shares in 1998
2,131,124 shares in 1997		4		3			2
Repurchase of common stock:
(312,500) shares in 1997		—		—			—
Balance, end of year:
103,482,841 shares at December 31, 1999
92,346,768 shares at December 31, 1998
35,145,704 shares at December 31, 1997		103		92			36

		Year Ended December 31,
		1999			1998			1997
Additional paid-in capital:
Balance, beginning of year		$   92,728			$   45,360			$   41,272
Issuance of common stock		—			70			643
Issuance of common stock for litigation settlement		—			—			1,999
Issuance of common stock for preferred provider agreement		—			—			800
Issuance of common stock through public offerings, net of offering                 expenses of $7,239 in 1999 and $4,561 in 1998		121,354			43,729			—
Issuance of common stock under employee stock purchase plan		1,989			693			—
Unearned compensation related to common stock options		—			1,176			414
Repurchase of common stock		—			—			(10	)
Income tax benefit from exercise of employee stock options		29,778			—			—
Exercise of common stock options		12,390			1,700			242
Balance, end of year		258,239			92,728			45,360
Notes receivable from stockholders:
Balance, beginning of year		(409	)		(644	)		(543	)
Loans to stockholders to purchase stock options		—			—			(116	)
Repurchase of common stock		—			—			10
Payments on notes receivable		409			235			5
Balance, end of year		—			(409	)		(644	)
Unearned compensation:
Balance, beginning of year		(276	)		(380	)		—
Stock-based compensation expense related to stock options		—			—			(414	)
Amortization of stock-based compensation		104			104			34
Balance, end of year		(172	)		(276	)		(380	)
Accumulated deficit:
Balance, beginning of year		(51,407	)		(30,871	)		(12,282	)
Net income (loss)		3,955			(19,743	)		(18,589	)
Subchapter S distributions of SecureIT, Inc.		—			(793	)		—
Balance, end of year		(47,452	)		(51,407	)		(30,871	)
Accumulated other comprehensive income:
Balance, beginning of year		—			—			—
Unrealized gain on investments, net of tax		87,641			—			—
Balance, end of year		87,641			—			—
Total stockholders’ equity		$298,359			$   40,728			$   13,541

		Year Ended December 31,
		1999		1998			1997
Net income (loss)		$   3,955		$(19,743	)		$(18,589	)
Other comprehensive income:
Unrealized gain on investments, net of tax		87,641		—			—
Comprehensive income (loss)		$91,596		$(19,743	)		$(18,589	)

		Year Ended December 31,
		1999			1998			1997
Cash flows from operating activities:
Net income (loss)		$       3,955			$(19,743	)		$(18,589	)
Adjustments to reconcile net income (loss) to net cash provided by                 (used in) operating activities:
Special charges		—			—			2,800
Depreciation and amortization		5,404			3,946			2,621
Minority interest in net loss of subsidiary		(836	)		(1,282	)		(1,538	)
Stock-based compensation		104			1,280			34
Loss on disposal of property and equipment		381			42			63
Changes in operating assets and liabilities:
Accounts receivable		(12,958	)		(6,379	)		(2,628	)
Prepaid expenses and other current assets		(1,461	)		(1,180	)		(208	)
Accounts payable		(807	)		1,968			1,036
Accrued liabilities		2,202			1,689			250
Deferred revenue		18,681			7,829			3,323
Net cash provided by (used in) operating activities		14,665			(11,830	)		(12,836	)
Cash flows from investing activities:
Purchases of short-term investments		(132,238	)		(63,383	)		(11,209	)
Maturities and sales of short-term investments		65,099			52,375			3,258
Purchases of long-term investments		(26,896	)		(436	)		—
Purchases of property and equipment		(6,019	)		(4,413	)		(6,823	)
Other assets		(3,168	)		(119	)		(505	)
Net cash used for investing activities		(103,222	)		(15,976	)		(15,279	)
Cash flows from financing activities:
Proceeds from bank borrowings		—			—			2,420
Repayment of bank borrowings		—			—			(2,678	)
Proceeds from issuance of common stock, net of repurchases		135,744			46,208			771
Collections on notes receivable from stockholders		409			235			5
Subchapter S distributions by SecureIT, Inc.		—			(793	)		—
Issuance of capital stock by subsidiary to minority interest		—			—			2,533
Net cash provided by financing activities		136,153			45,650			3,051
Net increase (decrease) in cash and cash equivalents		47,596			17,844			(25,064	)
Cash and cash equivalents at beginning of year		22,786			4,942			30,006
Cash and cash equivalents at end of year		$     70,382			$   22,786			$     4,942
Supplemental cash flow disclosures:
Noncash investing and financing activities:
Issuance of notes receivable collateralized by common stock		$         —			$       —			$       116
Income tax benefit from exercise of stock options		$     29,778			$       —			$       —
Unrealized gain on investments, net of tax		$     87,641			$       —			$       —
Cash paid for income taxes		$         698			$       —			$       —

Business

Consolidation

Foreign Currency Translation

Cash, Cash Equivalents, and Short and Long-Term Investments

Property and Equipment

Computer Software Costs

Revenue Recognition

Research and Development Costs

Advertising Expense

Income Taxes

Stock-Based Compensation

Net Income (Loss) Per Share

		Year Ended December 31,
		1999		1998		1997
		(In thousands)
Shares used to compute basic net income (loss) per share:
Weighted average shares outstanding		100,531		83,492		28,484
Dilutive stock options		14,079		—		—
Shares used to compute diluted net income (loss) per share		114,610		83,492		28,484

Concentration of Credit Risk

Related Party Transactions

Impairment of Long-Lived Assets

Use of Estimates

Recent Accounting Pronouncements

		Six Months Ended June 30, 1998			Year Ended December 31, 1997
		(In thousands)
Revenues:
VeriSign, Inc.		$     9,303			$     9,382
SecureIT, Inc.		5,911			3,974
Combined		$   15,214			$   13,356
Net income (loss):
VeriSign, Inc.		$(10,092	)		$(19,195	)
SecureIT, Inc.		600			606
Combined		$   (9,492	)		$(18,589	)

		As of December 31, 1999
		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
		(In thousands)
Classified as current assets:
Cash		$   22,645		$       —		$—			$   22,645
Commercial paper		57,243		20		—			57,263
Corporate bonds and notes		28,349		—		(345	)		28,004
Money market funds		4,602		—		—			4,602
Medium term corporate notes		23,276		1		(100	)		23,177
Market auction securities		5,000		—		—			5,000
U.S. government and agency securities		15,876		—		(87	)		15,789
		156,991		21		(532	)		156,480
Included in cash and cash equivalents									$   70,382
Included in short-term investments									$   86,098
Classified as non-current assets:
Equity securities		12,925		117,977		—			130,902
U.S. government and agency securities		14,000		—		(151	)		13,849
		26,925		117,977		(151	)		144,751
Total cash and securities		$183,916		$117,998		$(683	)		$301,231

		As of December 31, 1998
		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
		(In thousands)
Classified as current assets:
Cash		$   3,619		$ —		$ —			$   3,619
Commercial paper		21,451		6		—			21,457
Corporate bonds and notes		5,031		—		(8	)		5,023
Money market funds		4,600		—		—			4,600
Medium term corporate notes		4,049		2		(5	)		4,046
Market auction securities		3,000		—		—			3,000
		41,750		8		(13	)		41,745
Included in cash and cash equivalents									$22,786
Included in short-term investments									$18,959
Classified as non-current assets:
Equity securities		436		—		—			436
Total cash and securities		$42,186		$       8		$     (13	)		$42,181

		December  31,
		1999		1998
		(In  thousands)
Property and equipment, net
Computer equipment and purchased software		$   15,231		$11,402
Office equipment, furniture and fixtures		2,438		1,774
Leasehold improvements		3,996		3,136
		21,665		16,312
Less accumulated depreciation and amortization		11,471		7,078
		$ 10,194		$   9,234
Accrued liabilities
Employee compensation		$     3,878		$   2,255
Professional fees		284		288
Other		2,075		1,492
		$     6,237		$   4,035

Stock Splits

Preferred Stock

Common Stock

Notes Receivable From Stockholders

Stock Option Plans

		Year Ended December 31,
		1999					1998					1997
		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of      year		16,516,368			$   4.79		10,371,156			$   .75		6,432,300			$   .20
Granted		7,300,926			35.66		9,735,024			7.69		6,406,608			1.06
Exercised		(4,198,177	)		3.10		(2,962,548	)		.58		(2,131,124	)		.12
Canceled		(1,783,755	)		9.60		(627,264	)		2.84		(336,628	)		.23
Outstanding at end of      year		17,835,362			16.77		16,516,368			4.79		10,371,156			.75
Exercisable at end of year		2,424,728			3.36		1,673,860			.82		1,032,352			.20
Weighted average fair value      of options granted during      the year					21.86					4.01					.26

Range of Exercise Prices		Shares Outstanding		Weighted- Average Remaining Contractual Life		Weighted  - Average Exercise Price		Shares Exercisable		Weighted  - Average Exercise Price
$     .01 - $   .56		2,254,814		4.00 years		$       .36		962,603		$     .31
$    1.00 - $  3.03		2,436,140		4.79 years		1.70		681,212		1.72
$    6.44 - $  9.81		5,086,540		5.77 years		7.39		636,697		7.40
$  10.03 - $ 18.25		1,670,768		5.93 years		13.31		136,716		12.11
$  22.50 - $ 29.63		2,265,800		6.26 years		26.13		—		—
$  30.70 - $ 38.50		3,206,030		6.57 years		36.85		—		—
$  41.19 - $ 46.41		437,100		7.39 years		42.29		7,500		41.19
$  53.03 - $ 54.44		152,210		6.75 years		53.49		—		—
$  61.75 - $ 92.91		225,560		6.86 years		75.62		—		—
$ 112.38 - $190.94		100,400		6.97 years		133.19		—		—
$   .01   - $190.94		17,835,362		5.70 years				2,424,728

1998 Employee Stock Purchase Plan

Pro Forma Information

		Year Ended December 31,
		1999			1998			1997
		(In thousands, except per share data)
As reported:
Net income (loss)		$     3,955			$(19,743	)		$(18,589	)
Net income (loss) per share:
Basic		$         .04			$       (.24	)		$       (.65	)
Diluted		$         .03			$       (.24	)		$       (.65	)
Pro forma:
Net (loss) under SFAS No. 123		$(24,667	)		$(24,117	)		$(18,904	)
Net (loss) per share:
Basic		$       (.25	)		$       (.29	)		$       (.66	)
Diluted		$       (.25	)		$       (.29	)		$       (.66	)

		Year Ended December 31,
		1999			1998			1997
Stock options:
Volatility		85	%		70	%*		0	%
Risk-free interest rate		5.54	%		4.95	%		6.14	%
Expected life		3.5 years			3.5 years			5 years
Dividend yield		zero			zero			zero
Purchase Plan options:
Volatility		85	%		70	%		—
Risk-free interest rate		5.00	%		5.35	%		—
Expected life		1.25 years			1.25 years			—
Dividend yield		zero			zero			—

*	Volatility was zero under the minimum value method for grants prior to January 30, 1998 and for all grants made by SecureIT prior to its acquisition by VeriSign.

		(In  thousands)
Continuing operations:
Current:
Federal		$       1,514
State		212
		1,726
Deferred:
Federal		(1,514	)
State		(212	)
		(1,726	)
Income tax expense		$         —
Comprehensive income:
Deferred		$     16,875
Charge to comprehensive income in lieu of income taxes attributable to                 disqualifying dispositions of stock options		(46,653	)
		$ (29,778	)

		(In  thousands)
Income taxes at Federal statutory rate		$   1,345
Foreign losses		1,108
Reduction in valuation allowance		(1,726	)
Research and experimentation credit		(1,101	)
Other		374
Income taxes		$     —

		December  31,
		1999			1998
		(In thousands)
Deferred tax assets:
Net operating loss carryforwards and deferred start-up costs		$   49,011			$   22,188
Tax credit carryforwards		3,240			1,521
Property and equipment		54			1,135
Other		2,084			1,331
		54,389			26,175
Valuation allowance		(7,736	)		(26,175	)
Deferred tax liabilities:
Unrealized gain		(46,653	)		—
Net deferred tax assets		$       —			$       —

Leases

		(In thousands)
2000		$   4,337
2001		3,853
2002		3,003
2003		2,831
2004		2,787
Thereafter		971
Total minimum lease payments		$17,782

Merger-related expenses

VeriFone

Microsoft

Geographic information

		Year Ended December 31,
		1999		1998		1997
		(In thousands)
Revenues:
United States		$61,997		$33,650		$12,122
All other countries		22,779		5,280		1,234
Total		$84,776		$38,930		$13,356

		Year Ended December 31,
		1999		1998		1997
		(In thousands)
Long-lived assets:
United States		$155,992		$   8,655		$7,619
All other countries		2,332		1,952		2,008
Total		$158,324		$10,607		$9,627

Major customers

Thawte Consulting (Pty) Ltd.

Signio, Inc.

Network Solutions, Inc. (Unaudited)

Exhibit Number		Exhibit Description
4.06		Registration Rights Agreement dated as of December 19, 1999 by and between the Registrant and the Mark Shuttleworth
21.01		Subsidiaries of the Registrant
23.01		Consent of Independent Auditors
27.01		Financial Data Schedule