The controversial company VeriSign Inc. (NASDAQ: VRSN) has gone up nearly $4 since the sudden resignation of embattled CEO Stratton Sclavos this past Tuesday. I wrote earlier this week that Stratton Sclavos was indeed a polarizing figure, but had survived the Silicon Valley merry-go-round by having lasted 12 years at the helm. Some major institutional investors did not want to be involved with VeriSign's stock as long as Stratton Sclavos was the CEO.This past week has changed that thinking as the stock has lifted from $26 to $30.
As I wrote in my book Stop Losing Money Today, the most important factor in making a decision in owning a stock is the senior management. If an investor cannot get comfortable with a company's CEO, chances are they will avoid the stock. The CEO sets the tone and the vision of the company, plain and simple. The CEO selects the people to run and operate the divisions within a company. The CFO -- chief financial officer -- is entrusted with delivering the vision by the numbers and too communicate effectively with Wall Street as to the composition and direction of those numbers.
Stratton Sclavos was indeed a visionary with VeriSign. When he took over the reigns in 1995, the yet to be public company was doing about $10 million in revenues and was viewed basically as a security company. Under Stratton's watch, VeriSign has grown to a $1.6 billion revenue base company with healthy margins and a strong bottom line. So what happened?
Stratton Sclavos was an acquiring CEO. He believed that whenever something could not be developed internally in a timely fashion -- go out and buy it. Buy it he did. Stratton kept investment bankers busy and always searching for the next property to put into VeriSign's portfolio. Several missteps happened along the way, as well as some good, solid acquisitions. Stratton annoyed some investors as they were concerned about VeriSign deviating away from its core competencies.
VeriSign is "the" registry for .com and .net domain addresses. As you clicked on AOL.com, your request without your knowledge went right through the VeriSign data center. All .com and .net e-mails, website inquiries, and so on all go through VeriSign's data center. The company maintains 65 million plus .com and .net domain addresses and collects $6 per year, per address. Price increases have been approved by the U.S. Department of Commerce, and VeriSign will put through a 7% increase later this year.
VeriSign is also the de facto standard for web e-commerce security. Its website digital certificates encrypt and secure e-commerce transactions. Next time you transmit sensitive bank information or make an online purchase, look for the familiar "VeriSign Inside" logo.
The cash cow that has become VeriSign was derailed a bit with some questionable acquisitions, like the ring tone business from German-based company Jamba. This move concerned investors. The one constant investors look for from any major company is -- no surprises. Do what you do well and make profits doing it!
Stratton Sclavos turned off many institutional investors over the years, but he also appealed to many for his vision of the internet and its direction. He will come back after a time "at the beach" in some senior capacity, or knowing Stratton as I do, with a new start-up offering cutting-edge "something." Stratton Sclavos is a talented technologist and visionary, and he is better suited with a new start-up.
In the meantime, the stock has gone up nearly $4, and since Tuesday's announcement several institutions are getting back into the stock.
Georges Yared is the CIO of Yared Investment Research. For more growth ideas visit his website.
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Reader Comments (Page 1 of 1)
6-03-2007 @ 9:32AM
Steve said...
Must be humbling for Stratton's ego.
To know that your company increase by over 12%, just because you left.