In Silicon Valley, where five years is a lifetime for most companies, VeriSign CEO Stratton Sclavos dreams of creating a conglomerate that will last a hundred.

As a digital middleman, VeriSign makes sure that text messages and mobile phone calls move smoothly between different networks like Cingular and Verizon. VeriSign manages directories to identify the underlying numeric strings of .com and .net domains to route you to where you want to go on the web.

Verizon

Mr. Sclavos, 44, has more ambitious plans. He wants to be to the digital era what the railroads were to the industrial revolution. Just as railroads helped move goods faster, VeriSign’s networks would move data in any form more easily and more quickly to points that were previously inaccessible.

After a flurry of acquisitions in 2005, Mr. Sclavos says he has set VeriSign on a 20-year path to becoming the heart of the digital universe. In a span of six months, he made three acquisitions and sold one business unit in pursuit of his new role as the infrastructure enabler and data carrier of the digital world.

Mr. Sclavos insists there’s a method to his purchases. “We have tried to build up intelligent infrastructure in areas that put VeriSign in the middle of the interaction between thousands of millions of parties,” he says. “It is not about playing any fad or new technology wave, but about understanding the tectonic shifts in the industry.”

He has always been shrewd about positioning the company for the next shift. From issuing digital security certificates, VeriSign, based in Mountain View, California, moved to running the “root” servers that manage the 51 million or so .com and .net domain names on the World Wide Web.

It’s the Network

VeriSign owns the signaling networks that make it possible for different phone carriers to connect with each other. Every day, VeriSign switches nearly 5 million text messages across carriers, handles more than 50 percent of roaming phone traffic in the United States, and delivers more than 10 million caller IDs. The same networks also help the company deliver value-added services like ring tones, mobile multimedia messages, and VoIP calls to phones throughout the country.

“They have identified a very valuable niche central to the functioning of the Internet and telephone networks,” says Kevin Werbach, co-founder of the Supernova Group, a technology analysis and consulting firm. “And [they] have quite wisely gained assets on traditional telecom and Net infrastructure, anticipating the convergence of the two worlds.”

Publicly, VeriSign has said it aims to offer “intelligent infrastructure services.” VeriSign wants to build and maintain the pipes, servers, gateways, databases, and networks that help companies do business in a digital world. “They are saying they can create the infrastructure and then as the gatekeepers be the toll collector,” says Mr. Werbach. Tolls totaled $1.26 billion in the first three quarters of 2005, yielding net income of $135 million. Analysts project earnings of $175 million on revenues of $1.62 billion for the full year, a sales increase of 40 percent from a year earlier.

If successful, VeriSign’s networks and databases could power the next version of the World Wide Web and link data that could change the texture of every business from telecom to retailing. It’s one of the boldest ideas a technology company has come up with in recent times.

VeriSign may have the cash flow and the audacity to pull it off, but first it needs to sell the idea to a skeptical market that would rather see the company stabilize its existing businesses. A bet on VeriSign is a bet on the central points of control, say experts. That may play out in a traditional telecom scenario, but on the Internet it can be a gamble. On the web, technologies change rapidly, and when that happens, VeriSign could find its networks bypassed or in direct conflict with the businesses it serves.

The stock market’s doubts are reflected in the stock price. Shares of VeriSign have fallen nearly 35 percent in a year, trading at $21.60 on January 10, just about three dollars more than its lowest price in a year. “The trick will be to bring together the networks and the applications they can deliver on top of them,” says Scott Sutherland, senior vice president at investment bank Wedbush Morgan Securities. “They still have to prove they can bring in applications like ring tones and content on top of it in a clean, integrated manner.”

Bubble Baby

It’s been a long road for VeriSign, an RSA Security spin-off that became one of the darlings of the dot-com era, reaching a high of $255 per share on March 6, 2000. It was a dizzying milestone for a company that had been created in 1995 by Mr. Sclavos and his partner, Jim Bidzos, with $2 million in funding and four employees. Mr. Sclavos, who grew up in San Francisco and earned a degree in electrical engineering at the University of California, Davis, worked at Taligent and Go Computing before starting VeriSign.

He initially planned to sell digital security certificates to Apple Macintosh and Lotus Notes users. VeriSign got its big break when it decided to embed those certificates into Netscape’s browser. From there Mr. Sclavos maneuvered the company into its role as a trusted third-party services provider. Today the company also offers infrastructure services in areas like VoIP, wireless content, and RFID.

Apple

At the height of the tech bubble in 2000, VeriSign made its biggest bet and bought domain name registrar Network Solutions for $21 billion. Analysts gasped at the 48 percent premium that VeriSign paid, but the company remained confident that the deal would boost revenues.

It turned out Mr. Sclavos did pay too much. The domain registry business currently brings in only about $220 million annually; the acquisition pushed the company into the red and forced it to write off $17 billion. VeriSign finally returned to profitability in the last quarter of 2004.

Mr. Sclavos says he hasn’t lost his appetite for big deals. If anything, he says he can now pull off big deals better. “We have the courage and better discipline to pick our spot to do a large deal,” he says.

About a year ago, VeriSign decided to focus on emerging opportunities where trusted third parties would be needed. Two areas caught the company’s attention: the real-time web (Really Simple Syndication, or RSS, blogs, and stock quotes, among other things) and supply chain management.

Today’s web content has to wait for search engines to index it or for users to come to it. In a real-time web, content can be pushed to the users through ping servers, which signal users using pings, or alerts. VeriSign says the current ping network is unreliable and cannot scale up. If syndication and RSS has to be used to do something important like commerce or business, VeriSign has to take charge of the system, says Mark McLaughlin, senior vice president and general manager of naming and directory services at VeriSign.

That’s why in October 2005 the company acquired the granddaddy of ping servers, Weblogs.com, for $2.3 million, giving it the ability to handle 70 percent of all ping traffic on the Net. Combine this infrastructure with the ability to contextualize and aggregate the content enabled by Moreover Technologies, which it bought for $30 million in 2005, and VeriSign could reshape the Internet, bringing an element of immediacy to its content and classifying it in a way that can be mined by businesses for competitive intelligence.

Glossing Over the Rough Spots

But to keep Wall Street happy, VeriSign will need to concentrate on problem areas in its current business division—like Jamba, the wireless content unit that it acquired in 2004 for $273 million. Jamba offers downloadable songs, graphics, games, and applications to cellular phone users in Europe and the U.S.

Jamba’s growth plummeted from a high of 80.3 percent to 9.5 percent in the first three quarters of 2005—bad news for a company like VeriSign, whose communications services group contributes almost 60 percent to revenues. In November VeriSign relaunched Jamba as Jamster in the U.S. and Europe with a new brand campaign and simplified subscription plans.

Analysts fear that no amount of gloss can bring back the shine to Jamba. And related mobile content may not take off in the U.S., which the unit has targeted for these services, and analysts see few other items in the company’s portfolio to generate the kind of growth Jamba promises.

“VeriSign’s existing businesses, including security, have moderate growth rates and they can’t match the hyper-growth that the wireless messaging business can offer,” says Richard Williams, an analyst at brokerage firm Garban Institutional Equities.

Vernon Irvin, executive vice president at VeriSign’s telecommunications content service group, blames Jamba’s poor performance on the seasonal nature of the business. He says VeriSign is working on Jamba’s appeal by partnering with labels like the Warner Music Group to create Jamba-specific content and to offer music downloads.

VeriSign also faces trouble on the domain registry front. Two trade groups, the World Association of Domain Name Developers and the Coalition for ICANN Transparency, which together represent nearly 300 domain name registrars, have sued VeriSign and ICANN, alleging a recent settlement between the two over the domain name registry violates U.S. antitrust law. The legal slugfest has forced ICANN to say that the settlement is not yet final and that it is open to feedback from registrars. This action has thrown into doubt the incremental revenues of $40 million that a price hike could bring.

The dispute serves as a reminder of a bigger battle that VeriSign has to face. The creation of the conglomerate that VeriSign is today has left the company with no single competitor, but has also laid it open to cuts from a number of specialists.

Pulling it All Together

Competitors say VeriSign has spread itself too thin. RSA says it hasn’t seen much of VeriSign since Mr. Sclavos announced plans 18 months ago to move into the authentications services business. VeriSign, already known for the digital security certificates it issues, planned to issue security tokens that would cut into the heart of RSA’s business.

RSA says it is not worried. “We get the impression that they are... dabbling,” says John Worrall, vice president of worldwide marketing at RSA.

Mr. Sclavos says he responds to customers rather than competitors. “There’s no question from our customers as to what we are doing and where we will be,” he says.

VeriSign says it has to stay ahead of the curve in order to make a change. But to people like Peter Cohan, president of Peter S. Cohan & Associates, a management consulting and venture capital firm, the acquisitions come off as an attempt to fill gaps in a map that Mr. Sclavos has drawn. “I have a lot of trouble seeing the thread that holds the different business units together, and investors have trouble seeing it too,” says Mr. Cohan.

If Mr. Sclavos stays focused on the next five years, instead of the next 100, he probably stands a better chance of making his investors happy—at least in their lifetime.