i have been trying to get my head around NSR. They seem to be in a sweet spot of some kind with phone number portability. I could be wrong, but it isnt as easy as some people think and NSR is the "clearing house" that takes care of the back office so when someone switches from cingular to verizon, its seemless and neither company wants to deal, so NSR steps in and they receive a fee for each transaction. My calculations tell me that they make $.26 per transaction. They saw 34% growth last Q in # portability revenues. Any idea what the profitability of that business is? they raised guidance but only in line with the additional revenues from UltraDNS and the amount that they beat on the Q, so not much juice there. Their share count has been increasing each Q (I guess to be expected with a recent IPO). 71.11mm shares at year end, 77.7mm on this Q, and their guidance is based on 78.2mm shares for YE 2006. I'm feel like I am talking myself out of this name, I mean it seems as though # portability has been around for a couple years, so the "low hanging fruit" probably already has been picked, BUT growth will most likely continue to be good, but is NSR a pick at 40x 2006 estimates of .91 ????? But then I apply that year end 2006 share count of 78.8mm shares to 2005 earnings, I guess to normalize it, I get a 2005 eps (.76 reported) of .69 then its trading more in line with its growth rate. Then the question is, is management sandbagging or are they over aggressive???
Your thoughts are "close" but not really accurate. It's not only the cellular portability but also all the land line numbers. Portability doesn't simply mean from Carrier-X to Carrier-Y, It also applies when businesses migrate from their current provide (Say AT&T to Qwest). An independent house HAD to be set up to execute those functions that was independent of the carriers. That independent house is NueStar. So, your observation that Cingular or Verizon not wanting to "mess" with it isn't accurate. In fact... they CAN'T mess with it legally, they have NO OPTION. They MUST use Nuestar (as must ALL other providers). Just think of all those BUSINESSES going from traditional telephone systems to VoIP. There is a LOT of number portability issues there as well.
Surveillance of domestic telephone call records from millions of Americans may put a strain on the White House press staff and the confirmation of CIA director nominee Gen. Michael Hayden, but not necessarily for a fast-growth technology company that handles law-enforcement requests for customer calling.
NeuStar (nyse: NSR - news - people ), a Sterling, Va.-based company that raised $605 million in a June 2005 initial public offering, holds the exclusive contract through 2011 to keep electronic records of nearly 200 million phone numbers in North America. AT&T (nyse: T - news - people ), Verizon (nyse: VZ - news - people ), and BellSouth (nyse: BLS - news - people )--the three companies at the core of the domestic eavesdropping saga involving the National Security Agency--are all customers of NeuStar.
Verisign, the communications company that manages the Internet's dot-com and dot-net domain name suffixes, also assists Internet companies with information requests from law enforcement agencies.
Large international telecom companies, frequently the target of requests by the NSA, for customer data, can call on NeuStar for crucial information, such as identifying which local network a phone call originates from--a simple task made difficult by the de-regulation of phone service. Every time the company dips into its registry of phone numbers, it collects an estimated $1 fee.
"We cannot confirm or deny any activities related to national security," says Michael Warren, vice president of fiduciary services at NeuStar. "We have access to customer billing systems, but we will not respond to any request made without a lawful demand." The majority of surveillance demands the company receives come from the FBI.
However dicey for politicians, this line of business bodes well for NeuStar’s shareholders. Last Friday, the company reported a 46% increase in first-quarter net income equaling $18.3 million, while revenue surged 32% to $76.2 million. A pair of stock analysts revised their price targets upward for shares, which have already risen to $36 from $28 over the past eight weeks. With net margins of 21%, this niche is nothing to sneeze at, true. But at current levels, the trailing 12-month price-to-earnings multiple is at twice the overall market average, according to Morningstar.
Is Wall Street slurping on a surveillance play? Hard to say based on comments from Jeffrey Ganek, chief executive at NeuStar.
Ganek tells Forbes.com that he doesn't think the data his company provides is "relevant to NSA surveillance activities," but adds, "we do provide the directory of routing information that telecommunications service providers use, and we also help [them] perform the administrative and operations processes required of them in response to subpoenas and court orders."
vladmir - IMHO this is just a re-hash of what most of us on this forum already know and talked about in some of the very first posts on this board (by me). I guess the news brings it to light again. So, yes, it "could" be considered a National Security play with positive upside. But, today's trader's are pretty much joe-blows who don't always REALLY understand the underlying fundementals of a stock. Almost looks like the public got wind of national security and sold this stock without takig into account what the business truly was. It is true that the FBI makes request to NSR to obtain information for the LEGAL tracing requests but what was in the news is the ILLEGAL tracking that the "all powerfull idiot, Mr. Bush" seems to feel he is entitled too. Getting a little tired of how he claims that "EVERYTHING" is justifible simply by associating it (VERY loosely in this case) with terrorist activities. When in fact, 20 million Amercians aren't ALL terrorist (yet he tries to treat us all as if we were). The public outrage at his abuse of power should probably get him impeached (IHMO) but whether this sees any additional traction in the media is irrelevant to NSR's business as the collection of those numbers doesn't generate any revenue for NSR (unfortauntely)