Verisign Plans to Raise $40M in February Offering

Verisign Inc., a maker of digital authentication technology, said it expects to make an initial public offering in February to raise up to $40 million.

The company has filed a prospectus with the Securities and Exchange Commission, but it gave neither a prospective price range for the stock nor an estimate of the number of shares to be offered.

Contained in the prospectus, however, were settlement terms of a trademark infringement suit filed against Verisign by Verifone Inc., which has been acquired by Hewlett-Packard Co.

Under the settlement Hewlett-Packard will receive 250,000 shares of Verisign common stock with a projected value of $2 million.

This would seem to indicate an initial price of about $8 for a Verisign share. But Morgan Stanley, Dean Witter, Discover & Co.-the lead underwriter of the IPO-said Verisign's stock has not been priced yet. Hambrecht & Quist LLC, and Wessels, Arnold & Henderson are helping underwrite the offering.

Mountain View, Calif.,-based Verisign makes digital certificate technology that lets participants in Internet-based transactions verify each other's identity.

The certificates play a key role in the Secure Electronic Transaction, or SET, protocol supported by financial institutions and the credit card associations.

Verisign has issued more than 1.5 million of its Digital IDs to individual users and more than 35,000 to banks and other businesses involved in electronic commerce.

According to Forrester Research, the market for business-to-business electronic commerce is expected to soar from $8 billion this year to $327 billion in five years. Likewise, consumer use of electronic commerce is set to take off, Forrester said.

As more financial transactions move on-line, banks and other businesses will have a greater need to prove that participants in electronic commerce are who they purport to be, said Donald A. DePalma, an analyst with Cambridge, Mass.-based Forrester.

Verisign's revenues have grown in the last year, but so have its losses. For the nine months ending Sept. 30, it reported a net loss of $12.7 million on revenues of $6.1 million. During the same period last year, it lost $6 million on revenues of $774,000.

Pending regulatory approval Verisign stock will be traded on the Nasdaq under the symbol VRSN.

SEI Makes ProcessingDeal With State Street

SEI Corp., which provides technology for securities processing and investment management, has struck a five-year trust and custody processing deal with State Street Corp.

Financial terms of the outsourcing contract were not disclosed. SEI has signed similar deals this year with BankBoston Corp., Norwest Corp., Old Kent Financial Corp., and Wachovia Corp.

The new business has helped bolster the Oaks, Pa.-based company's stock price, analysts said. SEI shares were trading near their annual high of $42 last week.

In a recent report, Jackson E. Spears Jr., equity analyst at ABN Amro Chicago Corp., said SEI's new trust accounting customers could generate as much as $15 million in recurring annual revenues and another $7 million in one-time fees.

SEI had revenues of $247.6 million last year and is expected to report revenues of $285.3 million for this year, according to Mr. Spears.

Based in part on the strong sales, Mr. Spears has raised 1998 earnings estimates by 5 cents, to $1.75 per share. He also has increased his 12- month price target to $52.

SEI executives agree with the market's reaction to its performance.

"We are really humming," said Rick Lieb, president of SEI Investment Systems and Services.

State Street, which primarily provides securities processing services for large institutional customers, said its trust business is growing at a pace that calls for technological assistance. The bank currently handles its trust and custody accounting with an in-house system.

Officials at SEI and State Street expect to convert 38,000 State Street accounts as early as the third quarter of 1998.

Mr. Lieb said trust companies increasingly are open to processing through third parties.

The so-called year 2000 programming glitch is causing many companies- State Street included-to consider making a processing change sooner.

"Once they understood our strategy and our positioning with year 2000, they said rather than build, we'll go out-of-house and buy," Mr. Lieb said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER