eBay will give VeriSign $370m in cash and stock to merge the payment gateway business with its own PayPal unit, and has agreed to use VeriSign’s services and products to secure its payments offerings.
The online auctions company will deploy up to one million authentication tokens from VeriSign as part of the deal, according to the companies. These will be rolled out to PayPal and eBay users starting next year, they said.
VeriSign would not say whether there is a minimum purchase commitment. Regardless, it could be a big unit boost for this year-old part of VeriSign’s business, where it faces an uphill struggle to whittle away RSA Security Inc’s massive installed base.
While the synergies for eBay are clear — the company expects to grow its payments business by an extra $100m of revenue with a 20% operating margin next year — it’s less clear why VeriSign would want to spin off this business.
The payment gateway has not been thought of as non-core in the past. Indeed, it has been seen as complementary to VeriSign’s SSL certificate business, and has often been used as a marketing tool to play up the company’s security credentials.
But VeriSign’s business has never been easy to encapsulate. It operates domain name registries, certificate authorities and telecommunications signaling systems. It offers managed security services and consulting. It also sells mobile phone ringtones.
Indeed, it is the ringtone business that has seemed most problematic of late. The company will report that its third-quarter revenue missed targets by up to $30m, due to higher churn caused by new ringtone advertising regulations in the UK and Germany.
VeriSign has not historically broken out the performance of its payments gateway business. However, it appears that despite adding thousands of merchants each quarter, it was still growing more slowly than the other businesses in its Internet Services Group.
Every quarter for the past year, the company has highlighted strong sequential growth in the other two ISG businesses — security and domain names — but has not similarly praised the payments business’s performance.
The sale to eBay comes as the company seems set on boosting its content-oriented businesses. The company bought Weblogs.com from Scripting News Inc last week for $2.3m, so it can offer infrastructure services to bloggers.
And it seems like the company will shortly announce it has purchased Moreover Technologies Inc, which aggregates new headlines and links and publishes them to enterprises and two third-party sites.
Moreover also offers a ping server much like Scripting News did. VeriSign would not confirm whether that deal is actually happening. Rumors of Moreover selling out have been circulating for a few weeks at least.
Ping services streamline the process of indexing frequently updated web sites like blogs by allowing publishers to push out a notification that their site has been updated, negating the need for constant spidering and scraping.
