VeriSign (VRSN)

Naming Services

As of March 31, 2009, we had approximately 92.4 million domain names registered under the .com and .net registries, which are our principal registries. The number of domain names registered is largely driven by Internet usage and broadband penetration rates. Although growth in absolute number of registrations remains greatest in mature markets such as the U.S. and Western Europe, growth on an annual percentage basis is expected to be greatest in markets outside of the U.S. and Europe where Internet penetration has demonstrated the greatest potential for growth. We are largely insulated from the risk posed by fluctuations in exchange rates due to the fact that all revenues paid to us for .com and .net registrations are in U.S. dollars.

Naming Services

Revenues related to our Naming Services are derived from registrations for domain names in the .com, .net, .cc, .tv, .name and .jobs domain name registries. Revenues from .cc, .tv, .name and .jobs are not significant. For domain names registered with the .com and .net registries, we receive a fee per annual registration that is fixed pursuant to our agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”). Individual customers contract directly with third-party registrars or their resellers, and the third-party registrars in turn register the .com, .net, .cc, .tv, .name and .jobs domain names with VeriSign. Changes in revenues are driven largely by increases in the number of new domain name registrations and the renewal rate for existing registrations, as well as fee increases as permitted under our agreements with ICANN. As of March 31, 2009, we have the contractual right to increase the fees for .com domain name registrations up to 7% each year during any two years over the remaining four years of our agreement with ICANN through November 30, 2012. As of March 31, 2009, we have the contractual right to increase the fees for .net domain name registrations up to 10% each year during the remaining three years of our agreement with ICANN through September 30, 2011. From time to time, we offer promotional marketing programs for our registrars based upon market conditions and the business environment in which the registrars operate.

The following table compares active domain names ending in .com and .net managed as part of our Naming Services as of March 31, 2009 and 2008:

During the three months ended March 31, 2009, the growth in the number of domain names registered was primarily driven by continued Internet growth and adoption primarily within international markets, new domain name promotion programs, and some domain names being registered for the purpose of on-line advertising in advance of the final implementation of the ICANN consensus policy on use of the Add Grace Period (“AGP”) for registration deletions. A grace period is a specified number of calendar days following a generic top-level domain registry operation in which the operation may be reversed and a credit may be issued to a Registrar. AGP is typically the five-day period following the initial registration of a domain name. We expect that new name registrations and renewals from customers engaged in the business of registering domain names for the purpose of on-line advertising networks will continue to have a diminishing impact on our domain name base through 2009. During 2008, we started seeing signs of the slowing of growth in some areas of new traditional name registrations due to the current macro-economic environment. We expect that the weakening economic environment may contribute to a continued slowing of growth rates in 2009 for the total worldwide domain name zone as well as for the .com and .net domain name zones under our management, even as we continue to add to the net names in our domain name zones in absolute terms. We continue to experience growth in targeted international markets where we have focused efforts to develop regions of growth with potential in both our .com and .net domain name zones over time.

Our Naming Services revenues increased $21.1 million during the three months ended March 31, 2009, as compared to the same period last year, primarily due to a 9% year-over-year increase in the number of active domain names ending in .com and .net and increases in our .com and .net registry fees in October 2008 of 7% and 10%, respectively, to $6.86 and $4.23, respectively as per our agreements with ICANN.

Naming Services

Naming Services:    The Naming Services business operates the authoritative directory of all .com, .net, .cc, .tv, .name, and .jobs domain names.

We are the exclusive registry of domain names within the .com and .net generic top-level domains (“gTLDs”) under agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”) and the U.S. Department of Commerce (“DOC”). As a registry, we maintain the master directory of all second-level domain names in these top-level domains (e.g., johndoe.com and janedoe.net). These top-level domains are supported by our global constellation of domain name servers. In addition, we own and maintain the shared registration system that allows all registrars to enter new second-level domain names into the master directory and to submit modifications, transfers, re-registrations and deletions for existing second-level domain names (“Shared Registration System”).

We are also the exclusive registry for the .tv and .cc country code top-level domains (“ccTLDs”) and domain names within the .name gTLD and we operate the back-end systems for the .jobs and .edu gTLDs. These top-level domains are supported by our global constellation of domain name servers and Shared Registration System. We also provide internationalized domain name (“IDN”) services that enable Internet users to access websites in characters representing their local language. Currently, IDNs are available in more than 350 languages.

Domain names can be registered for between one and ten years, and the fees charged may only be increased according to adjustments prescribed by ICANN over the term of the applicable agreement. Revenues for registrations of .name, .cc and .tv domain names are based on a similar fee system and registration system, though the fees charged are not subject to the same pricing restrictions as those imposed by ICANN.

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Intelligent Supply Chain Services:    Our intelligent supply chain services enable trusted, secure and scalable information exchange and collaboration among global supply chain participants. We have been selected by EPCglobal, a not-for-profit joint-venture formed by The Uniform Code Council, Inc. and EAN International, to operate the authoritative root directory for the EPCglobal Network^TM. This root directory is the authoritative directory of information sources that are available to describe products assigned electronic product codes (“EPCs”). Additionally, we offer radio frequency identification (“RFID”) managed services that are designed to work in conjunction with RFID and bar code technology and the EPC root directory to facilitate the secure sharing of product data across diverse supply chains.

Naming Services

As of December 31, 2008, we had approximately 90.4 million domain names registered under the .com and .net registries, which are our principal registries. The number of domain names registered is largely driven by Internet usage and broadband penetration rates. Although growth in absolute number of registrations remains greatest in mature markets such as the U.S. and Western Europe, growth on an annual percentage basis is expected to be greatest in markets outside of the U.S. and Europe where Internet penetration has demonstrated the greatest potential for growth. We are largely insulated from the risk posed by fluctuations in exchange rates due to the fact that all revenues paid to us for .com and .net registrations are in U.S. dollars.

Naming Services

Revenues in our Naming Services business are derived from registrations for domain names in the .com, .net, .cc, .tv, .name and .jobs domain name registries. Revenues from .tv, .cc, .name, and .jobs are not significant. For domain names registered with the .com and .net registries, we receive a fee per annual registration that is fixed pursuant to our agreements with ICANN. Changes in revenues are driven largely by increases in the number of new domain name registrations and the renewal rate for existing registrations, as well as fee increases as permitted under our agreements with ICANN. As of December 31, 2008, we have the contractual right to increase the fees for .com domain name registrations up to 7% each year during any two years over the remaining four years of our agreement with ICANN through November 30, 2012. As of December 31, 2008, we have the contractual right to increase the fees for .net domain name registrations up to 10% each year during the remaining three years of our agreement with ICANN through September 30, 2011.

During 2008, the growth in the number of domain names registered was primarily driven by continued Internet growth and adoption, though we have seen some signs of slowing growth in domain name registrations for customers engaged in the business of on-line advertising. We expect that new name registrations and renewals from customers engaged in the business of participating in on-line advertising will continue to weaken through 2009 primarily due to a decrease in earnings-per-click for those domain name holders. We expect that on-line advertising domain names will become a smaller part of our business; these names comprise approximately 7% of our active domain names zone ending in .com and .net as of December 31, 2008. Towards the end of 2008, we started seeing signs of slowing growth in new name registrations for traditional names (other than on-line advertising names) as well due to the current macro-economic environment. We expect that weakening economic conditions will contribute to slowing growth rates in 2009 for the total worldwide domain name zone as well as for the .com and .net domain name zones under our management. We are experiencing declines in on-line advertising names and slowing growth in traditional names within North America. However, we are also experiencing continued growth in international markets where we have focused efforts to develop regions for growth with potential in both our .com and .net domain name zones over time.

Our Naming Services revenues increased $102.6 million in 2008, as compared to 2007, primarily due to a 12% year-over-year increase in the number of active domain names ending in .com and .net and increases in our .com and .net registry fees in late 2007 of 7% and 10%, respectively, to $6.42 and $3.85, respectively as per our agreements with ICANN. On October 1, 2008, we increased our .com and .net domain name registry fees by 7% and 10%, respectively, to $6.86 and $4.23, respectively, as per our agreements with ICANN. Our Naming Services revenues increased $88.8 million in 2007, as compared to 2006, primarily due to a 24% year-over-year increase in the number of active domain names ending in .com and .net.

Naming Services

VeriSign’s 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.

Naming Services

Revenues in our Naming Services business are derived from registrations for domain names in the .com, .net, .tv, and .cc domain name registries. Revenues from .tv and .cc are not significant. We receive a fixed fee per domain name registered with the .com and .net registries, at a fee per annual registration that is fixed pursuant to our agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”). Changes in revenues are driven largely by increases in the number of new domain name registrations and the renewal rate for existing registrations. During the third quarter of 2008, the growth in the number of domain names registered was primarily driven by continued Internet growth and adoption, though we have seen some signs of slowing growth in domain name registrations for customers engaged in the business of on-line advertising. We expect that new name registrations and renewals from customers engaged in the business of on-line advertising would continue to experience slower growth through 2009.

Our Naming Services revenues increased $26.2 million and $76.6 million during the three and nine months ended September 30, 2008, respectively, as compared to the same periods last year, primarily due to a 16% year-over-year increase in active domain names ending in .com and .net.

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Effective October 1, 2008, our .com and .net domain name registry fees further increased by 7% and 10%, respectively, to $6.86 and $4.23, respectively.

Naming Services

Revenues in our Naming Services business are derived from registrations for domain names in the .com, .net, .tv, and .cc domain name registries. We receive a fixed fee per domain name registered with the .com and .net registries, at a fee per annual registration that is fixed pursuant to our agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”). Changes in revenues are driven largely by increases in the number of new domain name registrations and the renewal rate for existing registrations.

Our Naming Services revenues increased $26.0 million and $50.4 million during the three and six months ended June 30, 2008, respectively, as compared to the same periods last year, primarily due to a 20% year-over-year increase in active domain names ending in .com and .net and partly due to an increase in .com and .net domain name registry fees which became effective during October 2007.

Our .com and .net domain name registry fees will increase further by 7% and 10%, respectively, which are expected to become effective on October 1, 2008.

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Naming Services

Naming Services.    We are the exclusive registry of domain names within the .com and .net generic top-level domains (“gTLDs”) under agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”) and the Department of Commerce (“DOC”). As a registry, we maintain the master directory of all second-level domain names in these top-level domains. We own and maintain the shared registration system that allows all registrars to enter new second-level domain names into the master directory and to submit modifications, transfers, re-registrations and deletions for existing second-level domain names.

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We are also the exclusive registry for domain names within the .tv and .cc country code top-level domains (“ccTLDs”). These top-level domains are supported by our global name server constellation and shared registration system. We also provide internationalized domain name, (“IDN”), services that enable Internet users to access Web sites in characters representing their local language. Currently, IDNs are available in more than 350 languages including Chinese, Greek, Korean and Russian.