Network Solutions Takes a Wild Ride

By John Makulowich

In a dizzying ride that would give any investor vertigo, Network Solutions Inc. stock gyrated widely Nov. 13, at one point jumping $9 a share, but ended the day basically where it started at $68. For the year, the company with a stranglehold on Internet addresses, sanctioned for the next two years by the Commerce Department, is up over 420 percent.

No sooner did those fluctuations fade from investor memory than the company got hit with another shot from its blind side. Its CEO, Gabriel Battista, abruptly announced his resignation and his plan to take the top job at Tel-Save Holdings Inc., an upstart telecommunications company in New Hope, Pa. That news sent Network Solutions stock falling as much as $5 Nov. 16, finally ending down $3. So much for stable stocks in the high-technology sector.

So, Network Solutions seems on a steady course, focusing on the domain naming system. The company serves as the exclusive registrar for new domains on the Internet that end in .com, .net and .org, so-called top level domains, or TLDs in the arcane world of Internet Protocol addressing and network routers.

Bob Korzeniewski, chief financial officer for Network Solutions, said part of the reason for the gyrations lately is the bevy of Internet IPOs, like, which have skyrocketed in price at the opening bell. More to the point for Korzeniewski is the reason for the low valuation for his company at the start of the year.

"We exceeded all expectations for profit and performance. We saw the low valuation reflecting concern over the future of [domain naming system] governance. But as we have gone through each successive order [from the National Science Foundation to the Department of Commerce], we have been able to build investor confidence in our business model," Korzeniewski said.

He sees the potential market for domain names at around 100 million. That's a serious number, given that there were only 2.8 million in the company's registry at the end of the third quarter.

The mantra Korzeniewski chants and that frames his approach to the target market is identity, communication, commerce. What that amounts to is a rich identity conferred by a domain name, a means to communicate with potential customers, and finally a way to close a transaction. The method by which Network Solutions intends to do this is by working with top tier Internet service providers and Web hosting partners both in the United States and overseas.

The company now has 60 premier partners domestically and 50 overseas. Just last week, the company signed an agreement with EarthLink, the world's largest independent ISP. Under the agreement, EarthLink offers its members a link to Network Solutions' domain name registration and other services, and Network Solutions provides its customers a link to EarthLink's Web hosting and dial-up Internet access services.

Typical of the overseas effort, the company recently signed an agreement with ASCII Corp., a Japanese company, that gives it a full-scale entry into the Japanese market. That includes a Japanese version of its registration service for global addresses. ASCII will support the new online registration site with advertising and marketing to make .com, .net and .org registrations easy for Japan.

"We intend to be more sophisticated in the future, extending all the way out to commerce," said Korzeniewski. "Our target market is small business. We want to help them look like large businesses on the Internet. We see the domain name not just as an identity, but as a brand name. Our effort will be to make the total process from identity to communication to commerce a seamless one. Our focus is partnership. We don't need to build everything ourselves."

On Oct. 6, Network Solutions signed an agreement with the National Telecommunications and Information Administration, a unit of the Commerce Department, for a two-year extension of their so-called Cooperative Agreement. It calls for a transition of U.S. government authority to a new nonprofit corporation to coordinate a variety of domain name system functions.

Part of the agreement calls for Network Solutions and NTIA to plan for the transition to a shared registration system starting March 31, 1999, with full implementation by June 1, 1999.

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