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VeriSign: How to Get Big and Stay Fast

The CEO of this Silicon Valley powerhouse explains how and why his company is still hiring talented people and signing on new clients during an industrywide slowdown.

Stratton Sclavos joined VeriSign Inc. in 1995 when it had just four employees. Today the Mountain View, California Internet-services company has nearly 3,000 employees and is expected to report nearly $1 billion of revenue for 2001. It has been solidly profitable on an operating basis throughout the past year, beating Wall Street estimates.

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Here, CEO Stratton Sclavos explains how and why his company is still hiring talented people and signing on new clients during an industrywide slowdown.

In this economy, people are delaying buying decisions for all sorts of reasons. So how do you win new customers?

We always start with the same fundamental question: Are we relevant, and are we necessary? VeriSign offers services that we believe you will turn off last — just before you shut the doors forever. That’s important. You want to focus on things that absolutely have to be there.

We handle 6 billion domain-name lookups per day. That’s more than all the phone networks in the United States handle. It’s more than the travel-reservation systems and Visa handle — combined. Sure, 2001 has been a really bad technology year. But the domain-name lookups that we’ve done — a corollary to how many people are using the Internet — have gone from 2.5 billion to nearly 6 billion per day.

You’ve got more than $1 billion in cash. Is that a competitive advantage? Does that let you think about doing acquisitions at bargain prices?

It’s so bizarre. All of us were way overvalued two years ago. And right now, a lot of us are way undervalued. A year ago, we might have valued something at $1, only to be told by the potential seller that it was worth $10. Now we can buy the same things for 10 cents.

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This is going to be one of those areas where you can really differentiate yourself. We’ve swung to a buyer’s market. We’ll probably pick up a dozen companies this year at less than $20 million, all told. Eighteen months ago, we would have spent close to $1 billion to do the same. It’s just a phenomenally different time.

Frankly, there are good companies, good technologies, and good customer bases that have no other choice than to sell right now. The venture capitalists have decided to stop funding companies, and the public markets are not receptive. It’s a good time to be flush with cash and have a good currency on the stock side as well.

How hard can you squeeze on an acquisition to get the price down before you’re being just plain cruel?

I think you pass by “cruel” about day one of the discussion. The honest answer is always the same: You’ve got to keep the people who did well, the important people. And you need to make a bid that is attached to earnings and to figure out how to make it grow. Beyond that, the rules are gone.

You’re doing some selective hiring. What caliber of résumés are you seeing these days — especially compared with the people who were available two years ago?

We’re hiring better people now than we did in 1995 and 1996, when we started the company. I don’t mean any disrespect to the great set of folks we hired back then. But 18 months ago, we were telling our boards that we couldn’t hire enough good engineers. We were losing people to the dotcom startups. Right now, if your company can present a lower-risk environment with a bit of an entrepreneurial upside, you are in the catbird seat.

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When it comes to engineers, salespeople, and operations specialists, we’re seeing résumés we could not get 12 months ago. We’ll put a great team on the field in 2002. A lot of those people will be new folks who have been with the company for less than 12 months.

How do you keep internal morale strong at a time when many stock prices are being hammered?

Start by reminding your employees why they are there: to build a great company. It’s not about this week’s stock price, last year’s stock price, or next year’s stock price. Be one of the top five technology companies in the world — execute well — and the market will take care of itself. Sometimes, you just need to isolate the employees from the investors. The investing community is in the worst psychological mind frame I’ve ever seen, and it’s ridiculous.

What opportunities are you seeing in the Internet-security market? Has that become a big growth area since the terrorist attacks of September 11?

Since September 11, we’ve had every three-letter agency visit our shop. Half of them just want to understand how Internet security works. Obviously, part of our technology is security. So they want to know how they can use our technologies around things like their proposed government site.

The other half have been visiting to understand whether the stuff we run is physically secure. Domain-name services are now thought to be critical Internet infrastructure components that they don’t want to see lost in future attacks.

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When you have a tragedy like this, everyone says, Oh that’s great for the security companies. The visibility around security, both physical and technical, is much, much higher than it was just a few months ago. But I don’t think those dollars are going to flow until the first half of 2002.

George Anders (ganders@fastcompany.com) is a Fast Company senior editor. Visit VeriSign Inc. on the Web.

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