Public filing gives VeriSign investors jitters

PALO ALTO: The stock of computer security and Web address provider VeriSign

Inc. fell more than 9 per cent on Wednesday, after it disclosed this week that

more than 10 per cent of its 2001 revenues came from deals with customers and

companies to which it had given venture funding.

Speculation regarding those transactions had in recent weeks helped to send

VeriSign's stock on a roller-coaster ride.

The stock fell $2.71 to $26.42 on Nasdaq, as investors digested disclosures

VeriSign made in its Form 10-K filing with the U.S. Securities and Exchange

Commission late on March 19. The stock remains off its year-high of $67.94.

In its annual report to regulators, VeriSign also said it had significantly

increased its allowance for doubtful accounts.

VeriSign said $37.5 million -- about 3.8 per cent of its total 2001 revenue

-- came from deals in which it bought products or services from the likes of

International Business Machines Corp., Oracle Corp. and Phoenix Technologies

Ltd. at or about the same time it sold its wares to those companies.

In particular, VeriSign said it signed a master contract with IBM in December

2001.

Under that contract, VeriSign agreed to buy $30 million of IBM technology

over the next three years.

The Mountain View, California-based company said it got no revenue in 2000

and 1999 from the so-called "reciprocal" or "swap" deals.

Such deals -- while virtually unavoidable by large technology providers --

are controversial because software and hardware companies can use them to

inflate revenues. Investors and analysts pay particularly close attention to

such deals when they increase significantly in a quarter.

VeriSign also disclosed that it got about 6.5 per cent of its 2001 revenue,

or $64 million, from companies to which it provided private-equity financing.

Such transactions accounted for $13.2 million, or about 2.8 per cent of revenue,

in 2000. The deals totaled $900,000 in 1999 and accounted for about 1.1 per cent

of total revenue.

Critics of those transactions complained that such deals mask slowing

revenues in the company's key businesses, such as domain registry.

Elsewhere, VeriSign said it had increased its allowance for doubtful accounts

to $26.9 million in 2001 from $5.8 million the year earlier. VeriSign wrote of

$7.9 million in uncollectable bills in 2001, it wrote off $1.6 million in 2000.