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By Nick Wakeman

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Nick Wakeman

Today's lessons from the biggest success of the dotcom era

I had the opportunity this week to hear Mike Daniels speak about his new book on Network Solutions Inc. and the early days of the Internet.

Network Solutions is one of the great success stories of any industry. Daniels, who was a Science Applications International Corp. executive when SAIC bought Network Solutions in 1995 for $4.7 million, was its chairman and CEO.

At the time of the acquisition, it was a small company with a five-year, $4.2 million cooperative agreement with the National Science Foundation to manage Internet domain names.

These were the pioneer days of the Internet, and while SAIC sensed it would be a good growth opportunity, no one had any idea that it would turn into the blockbuster it was, Daniels said.

He and SAIC founder Robert Beyster co-wrote the book about those heady days called Names, Numbers and Network Solutions: The Monetization of the Internet.

I haven’t read the book, but I know enough that “monetization” is an understatement.

Think about that $4.7 million purchase price in 1995. Over the next five years, SAIC recouped that initial investment manyfold. Network Solutions became a public company in 1997, and on the day of the initial public offering, SAIC made $9 million.

SAIC also retained a 76 percent interest in the company. In 1999, SAIC sold 9 million shares, reducing its stake to 45 percent and raising $776 million.

A follow-on offering in early 2000 raised another $2.3 billion, and then, on March 7, VeriSign announced it was buying Network Solutions for $19.3 billion. SAIC’s stake was worth $3.4 billion.

Beyster and Daniels modestly write in the book that the deal with VeriSign provided an “excellent return on investment for SAIC’s employee shareholders – and one that was not anticipated when the company acquired Network Solutions.”

I layout this rather long-winded description of Network Solutions’ and SAIC’s financial success because it’s powerful backdrop for one of the messages I think Daniels was trying to deliver when he talk to a group of IT executives gathered by the real estate firm CBRE, the accounting firm Baker Tilly and Marymont Group, an executive search firm.

Network Solutions' success wouldn’t have been possible without the federal government. First, the Defense Department and what was then known as Advanced Research Projects Agency built the foundation of the Internet.

The National Science Foundation spearheaded the privatization of the Internet.

Close cooperation between industry and government officials including, yes, Al Gore, and Secretary of Commerce Bill Daley laid the foundation for how the Internet is managed today -- a management structure that is under threat today, but that’s a whole other story.

But Daniels’ message was clear: Without the cooperation between government and industry, many of the technological advances we take for granted today wouldn’t have happened, not to mention the tremendous economic growth we’ve experienced over the last 15 years.

On one level, it’s a no-brainer message, but in today’s environment where anti-government and anti-industry rhetoric is so high on both ends of the political spectrum, it is always good to be reminded how powerful cooperation can be.

And when you think about the serious issues we face globally, from economic growth to environmental issues to health care to security threats, there has probably never been a better time for that kind of cooperation as there is now.

Posted by Nick Wakeman on Feb 13, 2014 at 9:25 AM

Reader Comments

Fri, Feb 14, 2014 Wash DC

I would be surprised if a Government sponsored monopoly didn't make money!!

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