VeriSign Goes Shopping

It's a sign of all good companies: listening to customers. This happened to Internet and telecom infrastructure service provider VeriSign (Nasdaq: VRSN  ) , when it was approached by a major wireless carrier looking for a wireless content subscription service. The carrier knew wireless would be a strong differentiator, but lacked the time or resources to deal with content providers, technology solutions, integration, and billing.

VeriSign wanted to help, but didn't have a solution either. So it went hunting, scanning the world market and identifying more than 120 companies to possibly fit the bill. VeriSign had strict criteria. The solution had to be highly scalable, end to end (including publisher and carrier relationships), and offer billing capabilities.

Yesterday, VeriSign announced the winner: Jamba!, which agreed to a $273 million deal for cash and stock. It should be no surprise that Jamba! is based in Europe, which has rich experience in the wireless marketplace.

With a content library of more than 50,000 files, Jamba! serves more than 4 million customers in nine European countries. The firm also has billing relationships with nine European carriers.

Over the past few years, the carriers have focused on cost cutting, but this is starting to morph toward revenue enhancement. Also, the handset manufacturers -- like Motorola (NYSE: MOT  ) and Nokia (NYSE: NOK  ) -- are developing much more robust devices. The software is getting much more sophisticated, such as with Sun Microsystems' (Nasdaq: SUNW  ) Java language and server solutions.

The deal is expected to add $70 million in incremental revenues for the second half of 2004 and be neutral in terms of the earnings-per-share impact. However, VeriSign said that there might be a positive impact for 2005 and 2006, in which the wireless market may experience "inflection points."

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Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.