VeriSign Inc. (NASDAQ: VRSN) is set report earnings after the close today, and First Call has estimates at $0.23 EPS on $231.39M in revenues.  Estimates for next quarter are $0.26 EPS on $240.59M in revenues, and fiscal Dec-2008 estimates are $1.00 EPS on $947.36M in revenues.

We featured this as a short sale candidate at the end of June in ourSpecial Situation letter when shares were trading at $39.26 with a tier-1target of $34.00 and an outlying target of $30.00. We have alreadycalled for investors to lock-in half of the gains in the put optionsfor over a 100% profit, but we have alerted to keep half of theposition on because if this company stumbles further you could see this tradeinto the high-$20’s if more problems arise beyond the CEO’s resignation. Here are the links to the two calls for verification, which are now off of embargo:

• http://a673b.bigscoots-temp.com/newsletters/SSIN_VRSN_062608.pdf
• https://a673b.bigscoots-temp.com/wp-content/uploads/2008/08/ssin_vrsn_070708.pdf

So you have the basics, but there are now some real questionssurrounding VeriSign that include its earnings and go beyond itsearnings.  We already saw a flag when the CFO and controller bothresigned simultaneously earlier this year, and now we are even moreconcerned since its CEO resigned early last month.  That manyresignations isn’t a 100% certainty that issues are cropping up, but itsure doesn’t give a ringing endorsement.

The company is also in the middle of a share buyback, so it is possiblethat it has offset some of the issue.  But the divesting of non-coreassets has been a lengthy process.  That is unfortunately a risk intoday’s climate where web properties are evaluated on real dollar termsas opposed to hypothetical values when some of these were accumulated.

Here are the key metrics to evaluate besides estimates today:

• Analysts still have an average price target north of $40.00.
• Its chart had been very strong until the start of summer and nowit has broken its 50-day moving average and 200-day moving averages.The 50-day is $36.78 and the 200-day is $35.89.  In short, this stockshould have a lot of resistance above.  For another line of resistance,this stock petered out between $35.00 and $36.00 on each rally attemptsince its CEO quit.
• Options traders appear to be braced for a move of close to $1.80 depending on which contracts you use for your pivot.

Jon C. Ogg
August 6, 2008

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