RBC Capital Cuts VeriSign Opinion

Analyst Robert Breza recommends investors step aside until the company's business model firms

RBC Capital cut its investment opinion on VeriSign (VRSN ) to sector perform from outperform.

Analyst Robert Breza said the company's early release on weak Jamba revenue was disappointing. He noted that management cited instability in Europe, lack of "hit" content, and seasonal churn as the cause for revenue variance. However, he believes operating margins are likely to improve year over year due to a reduction in marketing, and will salvage previously guided 27 cents third quarter earnings per share guidance. He lowered his $1.07 2005 earnings per share estimate to $1.04 and $1.75 billion revenue to $1.66 billion. He kept his 2006 earnings per share estimate, but believes downside risks exists. He cut his $30 target to $22 and recommends investors step aside until the business model firms and positive catalysts appear.

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