Network Solutions Sold to VeriSign in $21 Billion Stock Purchase

Strategic Insights -

Network Solutions, the holder of the master list of Internet domain names, has been sold to VeriSign Inc. in a stock purchase deal worth $21 billion. The acquisition marks a significant milestone in the company's 21-year history, which began in 1979 as a computer services company for government agencies. Network Solutions was chosen by the National Science Foundation in 1992 to manage the registration of Internet domain names, catapulting the company to the forefront of the emerging e-economy. However, the company's control over the registration process has been a subject of controversy, with critics accusing it of monopolistic practices.

Key Takeaways:

  • Network Solutions was founded in 1979 as a computer services company for government agencies and was chosen by the National Science Foundation in 1992 to manage the registration of Internet domain names.
  • The company has been criticized for its monopolistic practices in the registration process, with the Justice Department launching an investigation in 1997 and lawyers suing over the registration practices and costs.
  • In 1998, the Clinton administration offered a plan to gradually transfer domain registration to the private sector, and in 1999, James Rutt replaced Gabriel Battista as chief executive of Network Solutions.
  • The company has registered over 8.1 million domain names, with growth rates of 1 million in 4 years, 2 million in 15 months, and 5 million in 3 months.
  • The $21 billion stock purchase deal by VeriSign is subject to antitrust review by the Department of Justice and approval by the Commerce Department.
  • The acquisition marks a significant change in the company's business model, with Rutt stating that the company has had to reinvent itself as it loses its control over registration.
  • David G. Post, a professor at Temple University Law School, notes that the legal status of Network Solutions is firmly established in the agreements with the Commerce Department and ICANN, and that the company's private assets are subject to private control.
  • Esther Dyson, head of ICANN, welcomes the deal, stating that the more competition there is in the industry, the less it matters who owns any particular player.

Statistics:

  • 1979: Network Solutions begins as an IBM systems developer for U.S. government agencies.
  • 1992: National Science Foundation selects NSI to manage registration for the emerging Internet.
  • 1995: Science Applications International Corp. buys NSI.
  • 1997: Justice Department begins an antitrust investigation into NSI's domain name registration business.
  • 1998: Clinton administration offers a plan to gradually transfer domain registration to the private sector.
  • 1999: James Rutt replaces Gabriel Battista as chief executive.
  • 2000: VeriSign agrees to buy NSI for $21 billion in stock.
  • 8.1 million: Number of registered domain names owned by Network Solutions (as of the time of the acquisition).

Sources:

  • The Washington Post, March 8, 2000
  • Network Solutions
  • The company, Bloomberg News
  • Copyright (C) 2000, The Washington Post. Reprinted with permission. Reported By The Washington Post, http://www.washingtonpost.com.