In response to a shake-up in the internet domain-name registry business, Melbourne IT will unveil a revised revenue and earnings forecast with significant cost cuts and new revenue streams.
A dramatic slowdown in domain name registrations in generic top level domains (gTLD), such as .com, .net, and .org, experienced during the second half of 2000, affected Melbourne IT's earnings and resulted in staff cuts.
"The slowing of domain-name registrations experienced mid-year has resulted in a mis-match between revenue and costs in the registry business. Melbourne IT has cut staff in that business by 30 per cent," said Melbourne IT's new CEO, Adrian Kloeden, in an announcement to the ASX.
Kloeden promises to bring new focus to Melbourne IT: "With the flurry of activity earlier this year in the gTLD market, Melbourne IT lost some of its focus. I have reintroduced that focus."
The newest feather in Melbourne IT's cap is the right to operate a registry for the newest business-focused internet suffix, .biz, recently awarded by ICANN, the global regulator of domain names, to Melbourne IT's joint venture NeuLevel. This is expected to bring in significant revenue for Melbourne IT.
Melbourne IT and NeuStar, the joint-venture partners of NeuLevel, believe that of the seven new suffixes approved, .biz is "the most lucrative coming out of the ICANN awards".
"We believe the registry operation will provide significant growth potential for the business. It will be positioned to take advantage of new registry opportunities as they arise," said Kloeden.
The rising concern in the issue of brand protection for companies is another revenue opportunity for Melbourne IT's registry business. "With the brand protection issue becoming a very strong component for companies needing to register domain names, you can see a whole blossoming of a new area of activity for us, in assisting the protection of brand names," said Kloeden.
"Businesses that have a brand name will need to register those in the .biz environment and also register those in the country code environment as well."
Kloeden used the metaphor of a wave to describe business opportunities. "We have waves of opportunity that come through. You build a wave, it has a peak and then it plateaus. In the domain-name business the wave plateaus with an annuity of income, so for example in .com.au we have 210,000 names that have to be renewed every couple of years, so you establish an annuity stream that goes into the future."
Kloeden is confident that the emerging suffixes will encourage a new surge in the registry business and expects a rush for .biz names to boost revenues when the new domain goes live mid next year.
".biz will complement the .com space, which is substantial, and it will also generate further opportunities. Once we build the registry infrastructure, we'll also be able to use it as a platform for other domain-name spaces," said Kloeden.
Domain-name registrations dramatically dropped in price earlier this year due to the increase in competitors in the market. Prices have now stabilised, but Melbourne IT is trying to gain a competitive advantage. "Prices are eroded as more players enter the market. Our job is to be there early in the life cycle. We've demonstrated we can do that," Kloeden said.
Melbourne IT depended on Internet Names Worldwide (INWW), its internet names registry business unit, for 72 per cent of its revenue in 1999. Since the mid-year slowdown, Melbourne IT's reliance on traditional gTLDs has become less pronounced.
The product offering of INWW has become more diverse with the introduction of multilingual domain names for Chinese, Japanese and Korean character sets and domain-name portfolio management services.
Apart from INWW, Melbourne IT also has three other operating units: ASAC, a joint venture with Ericsson that develops software for mobile e-commerce and for the registration business; a technology incubator business; and NeuLevel.
"We expect the registry business to continue to grow with the introduction of new TLDs, continuing renewals of existing names and opportunities in country codes, corporate domain services and multilingual domains. However, the registry business's earnings share will be diluted as ASAC gathers momentum and the .biz registry and the incubator business get underway," Kloeden said.
ICANN agreed to seven new TLDs with registry operators. The others were .info, .name, .pro, .coop, .aero and .museum.