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SG Cowen Technology Conference. VeriSign, Inc. September 2003. Disclosure.

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sg cowen technology conference

SG Cowen Technology Conference

VeriSign, Inc.

September 2003

disclosure
Disclosure

Statements in this presentation other than historical data and information, including but not limited to, statements regarding new business relationships and new service offerings, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve risks and uncertainties that could cause VeriSign's actual results to differ materially from those stated or implied by such forward-looking statements.

The potential risks and uncertainties include, among others, VeriSign's limited operating history under its current business structure; the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results; the ability of VeriSign to successfully develop and market new services and customer acceptance of any new services; the risk that VeriSign's announced strategic relationships may not result in additional products, services, customers and revenues; increased competition and pricing pressures; and risks related to potential security breaches.

More information about potential factors that could affect the company's business and financial results is included in VeriSign's filings with the Securities and Exchange Commission, especially in the company's Annual Report on Form 10-K for the year ended December 31, 2002 and quarterly reports on Form 10-Q. VeriSign undertakes no obligation to update any of the forward-looking statements after the date of this annual report. VeriSign is a registered trademark of VeriSign, Inc. Other names may be trademarks of their respective owners.

The company provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles. Along with this information, we typically disclose and discuss certain pro forma financial information in our quarterly earnings press releases, during earnings calls and at investor conferences and related events. We believe that the pro forma info enhances investors’ overall understanding of our financial performance and the comparability of the company's operating results from period to period. We’ve provided a reconciliation of the pro forma financial information that we report each quarter with the comparable financial information prepared in accordance with GAAP and have made these reconciliations available on our web site under the Investor Relations tab at www.verisign.com.

verisign s mission
VeriSign’s Mission

Provide the critical infrastructure services that make the Internet and telecommunications networks more reliable, intelligent and secure

Naming &Directory

Security

Transaction

Telecom

ATLAS Infrastructure

15 data centers

25+% of N.A. e-commerce

2 billion SS7 messages

10 billion DNS queries

400,000 e-commerce sites

4,000 enterprise customers

1,000 carrier customers

Exclusive registry for .com .net

verisign services portfolio

Trusted Infrastructure & Application Services

Network & Security Services

Authentication & Access

Digital Brand Management

Payment Services

Web Presence Services

Domain Names

Web Site Security

Web Presence Services

Domain Names

Web Site Security

Web PresenceInfrastructure

Web PresenceInfrastructure

Security

Infrastructure

Security

Infrastructure

Telecom

Infrastructure

Telecom

Infrastructure

Payment

Infrastructure

Payment

Infrastructure

ATLAS Directory & Routing Infrastructure

ATLAS Directory & Routing Infrastructure

VeriSign Services Portfolio

22%

38%

40%

Internet InfrastructureServices

Network & Security Services

Authentication & Access

Payment Services

IP Addressing

Directory Services

Telecom Infrastructure Services

SS7 Signaling

Database Services

Wireless Billing

Clearing & Mediation

Web Presence Services

Domain Names

Web Site Hosting

Domain-based e-mail

Web PresenceInfrastructure

Security

Infrastructure

Telecom

Infrastructure

Security

Infrastructure

Payment

Infrastructure

Transaction

Infrastructure

Telecom

Infrastructure

Web PresenceInfrastructure

ATLAS Directory & Routing Infrastructure

ATLAS Directory & Routing Infrastructure

Q2’03 Revenue Mix

q2 03 financial snapshot
Q2 ’03 Financial Snapshot

Income Statement

Revenue$265 million Anticipated decline in Network Solutions

Gross margin56%Consistent with guidance

Operating margin(pf)17%Maintained margin through revenue decline from continued cost controls & expense management

Net income(pf)$47 millionLeverage in model generated solid income

EPS(pf)$0.14In-line with expectations, consistent QTR-QTR

Operating Cash Flow$81 millionAhead of guidance of $60-70m

Balance Sheet

Cash & cash equivalents$530 millionIncreased $55m QTR-QTR

A/R$101 millionContinued benefits; declined by $18m from Q1

Deferred revenue$502 millionGrew by 1% quarter-over-quarter

managing what we can control
Managing What We Can Control

Over the last 4 quarters …

  • $350 million in operating cash flow
  • $250 million increase in cash and equivalents
  • $145 million reduction in AR
  • 44 day reduction in net DSO’s
  • $50+ million reduction in quarterly operating expenses
  • Deployed new infrastructure and business systems
  • Continue to develop new services for the future
solid growth drivers
Solid Growth Drivers

Security

  • Extend network security
  • Strong authentication for users, devices, networks
  • App security for Web services
  • Transaction intelligence

Telecom

Naming & Directory

  • New end-user services in naming
  • Expand international footprint
  • Drive ATLAS into new markets
    • RFID, DRM
  • Tier 1 share of wallet
  • New mandated services
  • New wireless data platform
  • Expand international footprint
solid growth drivers1

VeriSign

  • Network intelligence & monitoring
  • VoIP directory, security and mediation
  • Propagation into all devices, networks
  • ATLAS everywhere
Solid Growth Drivers

Security

  • Extend network security
  • Strong authentication for users, devices, networks
  • App security for Web services
  • Transaction intelligence

Telecom

Naming & Directory

  • New end-user services in naming
  • Expand international footprint
  • Drive ATLAS into new markets
    • RFID, DRM
  • Tier 1 share of wallet
  • New mandated services
  • New wireless data platform
  • Expand international footprint
security services

Security Services

Ben Golub

SVP, Security Services

September 2003

unique data and intelligence on internet security threats
Unique Data and Intelligence on Internet Security Threats

“With a company like VeriSign, who does this for many other companies, as well as the data they have from running the .com domains, they probably have more information about security incidents than anyone else. It also gives us early warning. They can, often before others can, see an attack occurring on the Internet.”

David Bauer CSO, Merrill Lynch

Source: InformationWeek, May 21, 2003

we play in a large and growing market
We Play in a Large and Growing Market …

Source: IDC 28604 (12/02); IDC WW IT spending data (Apr 2002)

where 15 of companies account for 70 of the security market

100%

80

60

40

20

0

… Where 15% of Companies Account for 70% of the Security Market

Total US Market Size 2003

4.8M

$361B

$12.6B

  • Financial services
  • Banking

Regulated

cutting-edge

  • Utilities
  • Telecom
  • Government
  • Healthcare
  • Insurance

Regulation-

centric

  • % of Retail*
  • % of Wholesale*
  • % of Discrete mfg.*

Internet

centric

  • Services
  • Process mfg
  • Transportation
  • Resources
  • Education
  • % of Retail
  • % of Wholesale
  • % of Discrete mfg

Largely

satisfied

Companies

IT spend

Estimated

Security spend

Source: IDC; US Census Bureau; www.bizstats.com; Bain analysis

Note: # of companies is for corporations only- excludes 17.6M sole proprietorships. * Retail and Wholesale – 1% of #,

66% of IT spend, 90% of IT security spend allocated to Internet centric, the rest to Largely Satisfied; Discrete

Manufacturing – 20% of high-tech vertical companies, 30% of overall IT spend, 85% of overall IT security spend.

customers face unprecedented pressures

Cost

  • Less capital and operating budget
  • Staff reduction
  • Rely on Internet to save connection cost
  • Leverage existing investment
  • Complexity
  • Increase demand for access
  • Inconsistent environment
  • Lack of control
  • Keeping up with vulnerability
  • Threats from new technology
  • Compliance
  • - Sarbanes-Oxley
  • HIPAA
  • Patriot Act
  • Gramm-Leach-Bliley
  • Privacy Acts
  • Increasing Risk
  • Business Disruption
  • Lost Revenue
  • Corporate Liability
  • Customer Trust
  • Shareholder Confidence
Customers Face Unprecedented Pressures

Security is critical strategic issue to business continuity

which we address with the right model for security

Partner/Supplier

Financial Networks

Remote Office

Internet

Customers

… Which We Address with the Right Model for Security

Intelligence and Control Services

Data, Intelligent Infrastructure, Technology, Expertise, Integration

verisign security solutions

Business Continuity

Regulatory Compliance

Business Partner

Integration

eCommerce Enablement

Security, Payments

Network Infrastructure Continuity

HIPAA, FDA

Secure Extranets

Provide targeted

Solutions to business needs

Network

Security

Tranaction

Security

Strong Authentication

Secure Access

To Networks

Intelligent

Monitoring &

Management

Secure Web Services

Fraud Protection

With flexibly deployed

Offerings

Application

Security

Technology

Data

Intelligence/

Expertise

LeveragingWorld-Class Assets

(Managed Security Services, DNS, PKI, Trust Gateway, SSL, Payment Gateway)

(enterprise event data, 9 billion DNS transactions, 25% N. American payment volume, SSL certificate validation)

(Internet health monitoring, event correlation, fraud detection engine)

Delivered from Solid Infrastructure

Atlas, 24*7 redundancy, secure operations, PKI roots

VeriSign Security Solutions
strong authentication

Network

Security

Transaction

Security

Strong

Authentication

Application Security

Strong Authentication

Business drivers

What we have today

  • Need to protect critical networks and applications with stronger authentication of users and devices
  • Increased use of remote access, VPN and wireless LAN
  • Regulatory and audit requirements
  • Government mandates (National IDs, OMB memo)
  • Managed PKI / Digital certificates for users and devices
  • Key partnerships with Intel, Microsoft, IBM
  • Partner solutions
    • Smart cards
    • USB tokens
    • Biometrics
strong authentication case study

Business Challenge

  • Secure virtual system for sharing justice information by authorized federal, state, county and local users

Results

VeriSign Solution

  • Strong Authentication using Managed PKI
  • Integration with wireless access devices (e.g., PDAs) used by law enforcement officials
  • Sensitive criminal information now shared securely across agencies
  • Homeland Security network in place and operating in Pennsylvania
Strong Authentication – Case Study
network security

Strong Auth

Network

Security

Transaction Security

Application Security

Network Security

Business drivers

What we have today

  • Increased demand for access outside traditional enterprise boundaries
  • New technologies blurring the perimeter (e.g., Wireless LAN)
  • Regulatory requirements
  • Minimize disruptions due to security events
  • Managed Firewall, VPN, IDS, Authentication, Routers with broad device coverage
  • eBusiness Assurance (MSS + DNS + Consulting)
  • Vulnerability scanning and management
  • Event correlation within and across enterprise
  • World-class operations with industry leading SLAs
network security case study

Results

VeriSign Solution

  • Security Architecture & Consolidation
  • Managed Firewall
  • Managed IDS
  • Over 300 Devices
  • Faster detection and response
  • Security infrastructure continuity
  • Cost savings
Network Security – Case Study

Business Challenge

  • Augment advanced security infrastructure with Internet-wide intelligence for fastest possible detection and response
  • Achieve significant operational efficiencies

“We chose to work with VeriSign because of its powerful event correlation capabilities, industry leading service level, and security and infrastructure expertise”

– David Bauer, Merrill Lynch

secure customer portals case study

Business Challenge

  • Grow online brokerage business by enabling secure online transactions
  • Simplify account set-up process
  • Dramatically reduce 80% abandonment rate

Results

VeriSign Solution

  • Digital certificates issued by Barclays to all online clients
  • Leveraging VeriSign’s global PKI service
  • Design and implementation of fully automated account set up process
  • Reduced account set-up time from weeks to minutes
  • Acquired 125,000 clients in one year
  • Increased online trading volume by 10X
Secure Customer Portals – Case Study
application security our roadmap
Application Security: Our Roadmap

How we are getting there

Future roadmap

  • Web Services security assessment
  • Managed security services for Web Services
    • Monitor & manage Trust Gateway
    • Application-level IDS
  • Maintain leadership in Web Services security standards
  • Sign up “light house” enterprise accounts
    • Fortune 500 healthcare provider
    • Govt agency
  • Propagate technology through security appliances

Network

Security

Strong

Auth

Application Security

Transaction

Security

slide22

Security

Incidents =

117% CAGR

Growth Index (1998 = 100)

2,500

Avg. Loss Per

Financial Fraud

Event = 84%

CAGR

2,000

1,500

Total Financial

Fraud Losses =

79% CAGR

1,000

Web commerce

Growth =

74% CAGR

500

100

0

1998

1999

2000

2001

2002

Transaction Security

Trend: Web crime growing faster

than web commerce

Snapshots from 2002

  • Online credit card fraud 17 times offline fraud, 7% of merchant revenues
  • Installed base of 375K SSL sites and 90,000 merchants
  • Currently process over 28% of North American e-commerce
  • Transaction based pricing today
  • Great renewal rates, and merchants process 40% this year than last year
  • Opportunities to increase per transaction fees through fraud offering, additional services

Network

Security

Application

Security

Strong Auth

Transaction

Security

the security services strategy
The Security Services Strategy
  • Expand solutions with emphasis on 4 key areas
    • Expand breadth of offering in strong authentication
    • Aggressively grow the network security business
    • Long-term bet on application security services
    • Move transaction security deeper into the enterprise
  • Develop and extend services and channels through partnerships and international expansion
  • Focused Marketing
    • Key verticals – Financial Services, Public Sector, Healthcare
    • New positioning and packaging solutions
verisign s industry leading security services
VeriSign’s Industry-leading Security Services
  • Highly attractive, large and growing market
  • #1 position in key markets
    • SSL and Internet payments
    • Continued top and bottom line growth
  • Solid top line and bottom line growth expected with large enterprises
    • Targeting key verticals and concentrating on four primary service offerings.
  • All are platform-based businesses
    • Scale drives growth in profitability
sg cowen technology conference1

SG Cowen Technology Conference

VeriSign, Inc.

September 2003