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VRSN » Topics » Payment Gateway business

This excerpt taken from the VRSN 10-K filed Feb 29, 2008.

Payment Gateway business

 

On November 18, 2005, the Company completed the sale of certain assets related to its Payment Gateway business pursuant to an Asset Purchase Agreement, dated October 10, 2005 (the “Agreement”), among PayPal, Inc., PayPal International Limited (collectively, “PayPal”), a wholly owned subsidiary of eBay Inc. Under the

 

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Table of Contents

VERISIGN, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

DECEMBER 31, 2007, 2006 AND 2005

 

Agreement, PayPal acquired certain assets related to VeriSign’s Payment Gateway business and assumed certain liabilities related thereto for $370 million in cash. The Payment Gateway business was part of the Internet Services Group segment.

 

In connection with the sale of the Payment Gateway business, the Company entered into a Transitional Service Agreement (“TSA”) with PayPal to provide certain transitional network and customer support services. The related fees were recorded as a direct reduction to the respective costs and expenses included in discontinued operations. The expected cash flows under the TSA did not represent a significant continuation of the direct cash flows of the disposed payment gateway business. In April 2006, PayPal elected to terminate the customer support services provided by VeriSign under the TSA. In September 2006, PayPal elected to terminate the billing services, production services and other transitional services provided under the TSA.

 

The following table presents the calculation of the gain on the sale of the Payment Gateway business:

 

     Year Ended
December 31, 2005
     (In thousands)

Proceeds from sale

    $ 370,000

Transaction costs

      2,778
      

Net proceeds

      367,222

Net liabilities assumed by PayPal

      7,600
      

Gain on sale before income taxes

      374,822

Income tax expense

      124,249
      

Gain on sale of discontinued operations, net of tax

    $ 250,573
      

 

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