VeriSign (VRSN)

Internet Services Group

The Internet Services Group consists of the Information and Security Services business and Naming Services business. The Information and Security Services business provides products and services that protect

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online and network interactions, enabling companies to manage reputational, operational and compliance risks. The following types of services are included in the Information and Security Services business: SSL Certificate services; managed security services; iDefense security intelligence services; identity and authentication services, including managed public key infrastructure (“PKI”) services, unified authentication services, and VeriSign Identity Protection services; global security consulting services; intelligent supply chain services; real-time publisher services; and digital brand management services. The Naming Services business operates the authoritative directory of all .com, .net, .cc, and .tv domain names.

As part of our strategy to be more tightly aligned with our core competencies, we expect to divest all business lines in the Internet Services Group except the following: SSL Certificate Services, Identity and Authentication Services and Naming Services.

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $41.3 million and $117.6 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods last year. Our security services revenues increased $13.8 million and $41.3 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods last year primarily as a result of an increase in the installed base of SSL certificates and an increase in demand for our authentication, threat intelligence and identity protection services. Information services revenues increased approximately $24.0 million and $68.4 million, for the three and nine months ended September 30, 2007, respectively, as compared to the same periods last year as a result of an increase in managed active domain names ending in .com and .net. Our professional security consulting revenues increased $3.5 million and $7.9 million, for the three and nine months ended September 30, 2007, respectively, as compared to the same periods last year as a result of an increase in demand of our professional consulting services in the network security and the public service sector.

The following table compares active domain names ending in .com and .net managed by our information services business and the approximate installed base of SSL certificates in our commerce site services business as of September 30, 2007 and 2006:

Internet Services Group

Security Services

Revenues from the Security Services business are comprised of security services including managed security services and authentication services for enterprises.

Managed Security Services (“MSS”). Revenues from managed security services primarily consist of a set-up fee and a monthly service fee for the managed security service. Revenues from set-up fees are deferred and recognized ratably over the period that the fees are earned and revenues from the monthly service fees are recognized in the period in which the services are provided.

VeriSign also provides global security consulting services to help enterprises assess, design, and deploy network security solutions. Revenues from global security consulting services are recognized either on a time-and-materials basis as the services are performed, or for fixed price consulting as services are performed, completed and accepted. In some cases fixed price consulting is measured using the proportional performance method of accounting. Proportional performance is based upon the ratio of hours incurred to total hours estimated to be incurred for the project. VeriSign has a history of accurately estimating project status and the hours required to complete projects. If different conditions were to prevail such that accurate estimates could not be made, then the use of the completed contract method would be required and all revenue and costs would be deferred until the project was completed. Revenues from time-and-materials are recognized as services are performed.

Authentication Services. Revenues from the sale of authentication and security services primarily consist of a set-up fee, annual managed service and per-seat license fee. Revenues from the fees are deferred and recognized ratably over the term of the license, generally 12 to 36 months. Post-contract customer support (“PCS”) is bundled with authentication and security services licenses and recognized over the license term.

VeriSign Affiliate PKI Software and Services. VeriSign Affiliate PKI Software and Services (“International Affiliates”) are for digital certificate technology and business process technology. Revenues from the VeriSign Affiliate PKI Software and Services are derived from arrangements involving multiple elements including PCS and other services. These software licenses, which do not provide for right of return, are primarily perpetual licenses for which revenues are recognized up-front once all criteria for revenue recognition have been met.

VeriSign recognizes revenues from VeriSign Affiliate PKI Software and Services in accordance with SOP 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions,” when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable and (4) collectibility is probable. VeriSign defines each of these four criteria as follows:

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The Company’s determination of fair value of each element in multiple-element software arrangements is based on vendor-specific objective evidence (“VSOE”) of fair value. VeriSign limits its assessment of VSOE for each element to the price charged when the same element is sold separately. VeriSign has analyzed all of the elements included in its multiple-element software arrangements and determined that it has sufficient VSOE to allocate revenues to PCS and professional services components of its perpetual license arrangements. VeriSign sells its professional services separately, and has established VSOE on this basis. VSOE for PCS is determined based upon the customer’s annual renewal rates for these elements. Accordingly, assuming all other revenue recognition criteria are met, revenues from perpetual licenses are recognized upon delivery using the residual method in accordance with SOP 98-9.

VeriSign’s consulting services generally are not essential to the functionality of the software. The Company’s software products are fully functional upon delivery and do not require any significant modification or alteration. Customers purchase these consulting services to facilitate the adoption of VeriSign’s technology and dedicate personnel to participate in the services being performed, but customers may also decide to use their own resources or appoint other consulting service organizations to provide these services. Software products are billed separately and independently from consulting services, which are generally billed on a time-and-materials or milestone-achieved basis.

VeriSign also receives ongoing royalties from each digital certificate or authentication service sold by the VeriSign Affiliate to an end user. The Company recognizes the royalties from affiliates over the term of the digital certification or authentication service to which the royalty relates, which is generally 12 to 24 months.

SSL Certificate Services. Revenues from SSL Certificate services include the sale or renewal of digital certificates. These revenues are deferred and recognized ratably over the life of the digital certificate, which is generally 12 to 36 months.

Information Services

Naming Services. VeriSign’s Information Services revenues primarily include registry services for the .com and .net gTLDs and certain ccTLDs, and managed domain name services. Domain name registration revenues consist primarily of registration fees charged to registrars for domain name registration services. Revenues from the initial registration or renewal of domain name registration services are deferred and recognized ratably over the registration term, generally one to two years and up to ten years. Fees for renewals and advance extensions to the existing term are deferred until the new incremental period commences. These fees are then recognized ratably over the new registration term, ranging from one to ten years.

Digital Brand Management Services. Revenues from digital brand management services include VeriSign’s domain name registration services and its brand monitoring services. Revenues from the registration fees are deferred and recognized ratably over the registration term and the revenues from the brand monitoring services are recognized ratably over the periods in which the services are provided, which is generally one to ten years.

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $40.3 million and $76.3 million for the three and six months ended June 30, 2007, respectively, as compared to the same periods last year. Our security services revenues increased $15.6 million and $27.7 million for the three and six months ended June 30, 2007, respectively, as compared to the same periods last year as a result of an increase in the installed base of SSL certificates and increased demand for our managed security services. Information services revenues increased approximately $21.6 million and $44.4 million, for the three and six months ended June 30, 2007, respectively, as compared to the same periods last year as a result of an increase in managed active domain names ending in .com and .net. Our professional security consulting revenues increased $3.1 million and $4.2 million, for the three and six months ended June 30, 2007, respectively, as compared to the same periods last year as a result of an increase in demand of our professional consulting services in the network security and the public service sector.

The following table compares active domain names ending in .com and .net managed by our information services business and the approximate installed base of SSL certificates in our commerce site services business as of June 30, 2007 and 2006:

The GeoTrust acquisition in September 2006 increased our installed base of SSL certificates by an additional 294,000 units. Excluding the GeoTrust acquisition, the installed base of SSL certificates increased by 13% compared to the same period last year.

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $36.1 million for the three months ended March 31, 2007, as compared to the same period last year. Our security services revenues increased $10.1 million during the three months ended March 31, 2007, as compared to the same period last year as a result of a higher installed base of digital certificates. Information services revenues increased by $26.0 million in the United States during the three months ended March 31, 2007, as compared to the same period last year as a result of an increase in managed active domain names ending in .com and .net.

The following table compares active domain names ending in .com and .net managed by our information services business and the approximate installed base of Web site digital certificates in our commerce site services business as of March 31, 2007 and 2006:

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The GeoTrust acquisition in September 2006 increased our installed base of digital certificates by an additional 279,000 units. Excluding the GeoTrust acquisition, the installed base of digital certificates increased by 12% during the three months ended March 31, 2007, compared to the same period last year.

Internet Services Group

The Internet Services Group consists of the Security Services business and Information Services business. The Security Services business provides products and services that protect online and network interactions,

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enabling companies to manage reputational, operational and compliance risks. The following types of services are included in the Security Services business: SSL certificate services; managed security services; iDefense security intelligence services; authentication services, including managed public key infrastructure (“PKI”) services, unified authentication services, and VeriSign Identity Protection services; and global security consulting services. The Information Services business operates the authoritative directory of all .com, .net, .cc, and .tv domain names, and provides other services, including intelligent supply chain services, real-time publisher services, and digital brand management services.

Internet Services Group

Internet Services Group revenues increased $32.9 million and $93.8 million for the three and nine months ended September 30, 2006, respectively, as compared to the same periods last year. Our information services revenue increased approximately $22.2 million and $62.4 million for the three and nine months ended September 30, 2006, primarily as a result of continued growth of the number of active domain names ending in .com and .net under management. Our Security services revenues increased $10.7 million and $31.4 million for the three and nine months ended September 30, 2006, as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates.

The following table compares active domain names ending in .com and .net managed by our information services business and the approximate installed base of Web site digital certificates in our commerce site services business as of September 30, 2006 and 2005:

The GeoTrust acquisition in September 2006 increased our installed base of digital certificates by an additional 245,000 units. Excluding the GeoTrust acquisition, the installed base of digital certificates increased by 12% year over year.

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Internet Services Group

Internet Services Group revenues increased $30.7 million and $60.9 million for the three and six months ended June 30, 2006, respectively, as compared to the same periods last year. Our information services revenue increased approximately $21.3 million and $40.2 million for the respective periods primarily as a result of continued growth in the number of active domain names ending in .com and .net under management. In addition, our security services revenues increased $9.4 million and $20.7 million for the respective periods, as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates.

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The following table compares active domain names ending in .com and .net managed by our information services business and the approximate installed base of Web site digital certificates in our commerce site services business as of June 30, 2006 and 2005:

Internet Services Group

Internet Services Group

Internet Services Group

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $31.3 million for the three months ended March 31, 2006, primarily due to an increase in our information services revenues of $18.9 million as a result of an increase in the number of active domain names ending in .com and .net under management. In addition, our security services revenues increased $12.4 million for the period, as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates.

The following table compares active domain names ending in .com and .net managed by our naming and directory services business and the approximate installed base of Web site digital certificates in our commerce site services business as of March 31, 2006 and 2005:

We expect Internet Services Group revenues will continue to grow during the second quarter of 2006 as demand for our information services and security services is expected to grow.

Internet Services Group

Internet Services Group

Fiscal 2005 compared to fiscal 2004: Revenues from our Internet Services Group increased approximately by $117.8 million in 2005, in comparison to 2004, primarily due to the increase in Information Services and Security Services revenues of approximately $62.1 million and $55.7 million, respectively. The Information Services revenue increase was attributed to an increase in the number of active domains ending in .com and .net under management. The increase in Security Services revenues was primarily due to an increase in Website digital certificate revenues of $29.2 million and an increase in managed security services and security consulting revenues of $17.2 million.

Fiscal 2004 compared to fiscal 2003: Internet Services Group revenues increased approximately $117.2 million in 2004, as compared to 2003, primarily due to increases in Information Services and Security Services revenues of approximately $65.7 million and $51.5 million, respectively. Information Services revenues increased as a result of recognizing revenues from Network Solutions, that were previously eliminated prior to the sale of the domain name registrar business and as a result of an increase in the number of active domain names ending in .com and .net under management. The Security Services revenue increase was due to increases in managed security services and consulting services revenues of $18.5 million primarily attributable to the acquisition of Guardent in February 2004 and increases in Web site digital certificate revenue of $22.3 million.

The following table compares active domain names ending in .com and .net managed by our Information Services business and the approximate installed base of Web site digital certificates in our commerce site services business as of the end of each year presented:

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We expect Internet Services Group revenues will grow in the first quarter of 2006 as demand for domain names as well as the number of installed digital certificates is expected to continue to increase.

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $33.8 million and $92.2 million for the three and nine months ended September 30, 2005, respectively, primarily due to an increase in our naming and directory services revenues of $16.1 million and $30.3 million for the respective periods, as a result of an increase in the number of active domain names ending in .com and .net under management. In addition, our security services revenues increased $17.7 million and $61.9 million for the respective periods, as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates.

The following table compares active domain names ending in .com and .net managed by our naming and directory services business and the approximate installed base of Web site digital certificates in our commerce site services business as of September 30, 2005 and 2004:

We expect Internet Services Group revenues will continue to grow during the fourth quarter of 2005 as demand for our Naming and Directory Services and Security Services is expected to grow. This guidance does not take into account the potential impact of the previously announced sale of our payment gateway business to PayPal, a subsidiary of eBay, that is expected to close during the fourth quarter of 2005.

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Internet Services Group

Internet Services Group

Internet Services Group revenues increased $29.3 million and $58.4 million for the three and six months ended June 30, 2005, respectively, primarily due to an increase in security services revenues of $15.3 and $33.0 for the respective periods as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates, and an increase in the number of active online merchants in our secured payment services business. In addition, our naming and directory services revenues increased approximately $14.0 million and $25.3 million for the respective periods, as a result of an increase in the number of active domain names ending in .com and .net under management.

The following table compares active domain names ending in .com and .net managed by our naming and directory services business, the approximate installed base of Web site digital certificates in our commerce site services business and the approximate number of active online merchants in our secured payments services business as of June 30, 2005 and 2004:

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We expect Internet Services Group revenues will continue to grow during the third quarter of 2005 as demand for our Naming and Directory Services and Security Services is expected to grow.

Internet Services Group

Internet Services Group

Internet Services Group revenues increased $29.0 million during the three months ended March 31, 2005, compared to the same period last year. Revenues from security services increased approximately $17.7 million primarily as a result of increased managed security services revenues and as a result of a higher installed base of digital certificates, and an increase in the number of active online merchants in our secured payment services business. In addition, our naming and directory services revenues increased approximately $11.3 million as a result of an increase in the number of active domain names ending in .com and .net under management.

The following table compares active domain names ending in .com and .net managed by our naming and directory services business, the approximate installed base of Web site digital certificates in our commerce site services business and the approximate number of active online merchants in our secured payments services business as of March 31, 2005 and 2004:

We expect Internet Services Group revenues will continue to grow for the remainder of 2005 as demand for our Naming and Directory Services and Security Services is expected to grow.

Internet Services Group