For some Zions Bancorp shareholders, the company's increasingly distressed proposed merger with First Security Corp. is just one more distraction from what they see as they real jewel in the crown: a Zions business unit that, if spun off, could quickly reach a market capitalization rivaling the parent company's.

The subsidiary - called Digital Signature Trust, or DST - is valued for its resemblance to other high-flying New Economy firms in the same business rather than for being a part of Zions. Mountain View, Calif.-based Verisign Inc., which is seen as the heavyweight in the digital signature crowd, has a market capitalization of $19.5 billion, dwarfing Zions', which is at $3.4 billion.

"Verisign has a phenomenal valuation," said Erick Reim, an analyst at U.S. Bancorp Piper Jaffray. "And if you look at their platform and DST's and the whole development of the digital signature universe, they're not worlds apart," he said. He expects revenue from the unit could exceed $100 million by mid- to late 2000.

DST's potential market value is enough to whet the appetite of some bank investors eager for larger returns within the safety of a bank stock. But it has also attracted some technology-oriented investors who are eyeing DST's future first and foremost. This subset of Zions investors "really doesn't care about the bank - the only reason they own it is because within nine to 12 months it could be spun off and trade like Verisign," said Ben Crabtree, an analyst at George K. Baum & Co. of Kansas City, Mo.

Zions' management has indicated to analysts that it plans to spin off at least a portion of the unit in the near future.

DST is already providing digital authentication for several clients, including the National Institutes of Health and the Social Security Administration. But the real profit from the business is expected in 2001, when profits from a far-reaching government contract, among others, are expected to kick in.

As a result of these expectations, Zions' stock has been trading at about a 40% premium to other large regional banks for the last year, Mr. Crabtree said. Though Zions has run DST since the mid-1990s, it was only last year, when the unit was awarded a contract, known as ACES, to bid on the future digital certificate business of all U.S. government agencies, that the market really started to take notice.

"I don't think DST is reflected at all in the overall value of the stock," said Philip Carter, a director at Bain Capital, a Zions shareholder. Mr. Carter said he is an investor in large part because of the bank's fundamentals but he is also aware of DST's potential value as an earnings contributor. "Once this merger cloud passes over, I think this could be a real home run."

Which is another reason why one-track investors focused on Zions' technology potential were frustrated by the company's 25% stock drop on the day First Security announced that 2000 earnings would be significantly lower. The news shaved off about 20% of Zions' premium to other banks in George K. Baum's regional bank index.

"There's been significant short-term pain for what was supposed to be a safe investment," Mr. Reim said.

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