It was easy to liken domain registrations in the 1990s to the California gold rush a century earlier. Folks would dig a little, stake their claim, and hope for the best. And some of the early birds who managed to register popular generic words like Business.com and Autos.com did walk away with millions.
With starry-eyed hopefuls willing to scoop up the names left behind, stock investors turned to domain registration sites like Register.com (NASDAQ:RCOM) and Network Solutions, which was eventually acquired by VeriSign (NASDAQ:VRSN).
Surely, the dot-com speculators would pony up their annual registrations fees to keep their hoarded domains current. Well, it didn't quite turn out that way. The woman in Boise who had registered a hundred misspellings of Amazon.com (NASDAQ:AMZN) simply gave up. The college student in Austin who believed his inflated domain appraisals found that his best name was worth all of $14.99 on eBay (NASDAQ:EBAY) and moved on to a fresh pursuit.
Investors gave up too. Things got so bad that Register.com was once worth less than the cash on its balance sheet. It's actually not far from that today. Back in September, the company used more than half of its cash in a self-tender offer to repurchase 43% of its outstanding stock. Today the company has $90.2 million in cash and 23.5 million shares -- or $3.84 a share. The stock closed at $4.69 yesterday before hurdling past the $5 mark in after-hours trading.
Why did this cash cow jump over the penny-stock moon? Well, while the registration business continues to fade, the company did manage a third-quarter profit. Register.com earned $0.06 a share on essentially flat revenues of $25.8 million. Over the past year, the company's domain registration business has fallen from 93% to 86% of total revenues.
Yes, speculation has cooled. Nowadays only half of the domains registered at Register.com are renewed. However, the company is starting to capitalize on those users who plan on actually building sites on their acquired names. That's far more tangible than any cyperspace gold rush. Real people spending real money. For Register.com, that's real good news.
