Deal: VeriSign buys GeoTrust

In VeriSign's latest flexing of the checkbook, they have acquired GeoTrust for $125 million in cash. I don't really do market share numbers, but it would seem that this deal would give VeriSign a virtual monopoly on the SSL certificate business. But GeoTrust claimed to be the second largest certificate authority and they are being bought by the first. Sure Entrust and CyberTrust are still in the business, but no one else of note.

But does it matter? Is VeriSign all of a sudden going to start turning the screws on customers and raising prices, which is where anti-trust would be an issue? I don't think so. The switching costs on SSL certs are virtually nil. I mean if you have 10,000 of them, then it may be a bit of a problem - but short of that, I don't see VeriSign doing anything on the pricing front. Status quo is good. You just want the customer to renew every year and keep milking that SSL cash cow.

I'd be surprised if they even changed the branding. I still see the "Protected by Thawte" seal every now and again, even though VeriSign bought them like 6 years ago. Again, why mess with anything? It's not like those web seals cost a lot to maintain.

So why do the deal? It's all about scale. GeoTrust has 100,000 customers representing who knows how many certificates and those can be plugged directly into VeriSign's infrastructure. They can gain operational efficiencies from the deal and continue to control that market. For GeoTrust, this is a way to get liquidity. Do you go out and raise money to get another 3-4 points of market share? Nah, not worth the effort. Take the money and run.

VeriSign thinks the deal will be accretive in 2007, so there you see the power of integrating the infrastructures. VeriSign has additional data center capacity, so if they can drive more revenue through - it flows right to the bottom line. Nice. 

Customers don't really care either. It's business as usual on that front. Your cert is your cert is your cert. But in all likelihood it's been issued by VeriSign.