IPL: NSI files two more stock registration statements over the

[Dave Farber <farber () cis upenn edu>]

From: John Gilmore <gnu () toad com>


See http://edgar.sec.gov/edaux/formlynx.htm, enter
"Network Solutions" into the second form-fill-in box,
and press "Submit Choices" further down the page.


Their August 27 S-1 form is almost a megabyte.
Their August 28 S-1 form is about 500K.


It shows that they are getting closer to trying to fleece the public
by selling them stock in a company whose monopoly is about to
disappear and whose claim to intellectual property is dim to
nonexistent.  Oh, and 98% of the voting control of the company --
AFTER the stock sale -- will be by beltway bandit SAIC, which will
elect all the directors.  SAIC bought the company for 36c/share and
wants to sell a tiny fraction of the company to the public for
$15/share.  SAIC is also negotiating non-arms-length contracts with
Network Solutions, which will be completed before the public offering,
with the apparent intent to shift costs into Network Solutions while
shifting profits into SAIC.  Network Solutions has been unable to make
money while charging $50/year per domain and demanding two years'
payment in advance; they show continuous losses until the last three
quarters.  (Their history is as a cost-plus-bonus contractor to the
government, where the incentive is to increase costs.)  All this and
more is buried in their filing with the government, including such
gems as:


    With the commercialization of the Internet, the role, if any, that the
    NSF will play in the Internet and the legal authority underlying its
    role are at present unclear. Withdrawal of or challenges to the NSF's
    sponsorship or authorization of the Company's activities could create
    a public perception or result in a finding that the Company lacks
    authority to continue in its role as registrar or to charge fees for
    its domain name registration services. The impact, if any, of any such
    public perception or finding is unknown but could materially and
    adversely affect the Company's business, financial condition and
    results of operations.


There's also this:


    In addition, the Company recently received written direction from the
    NSF not to take any action to create additional TLDs or to add any new
    TLDs to the Internet root servers until further guidance is provided
    by the NSF.


And:


    The Company has recently agreed with the NSF to provide registrations
    in the .gov and .edu TLDs free of charge from April 1, 1997 through
    March 31, 1998.


And:


    The Company intends to use the proceeds of this offering for payment
    of a $10,000,000 dividend to SAIC and for working capital and other
    general corporate purposes, ...


And:


    Separately, in July 1997, an entity which offers competing
    registration services using other TLDs exploited a security
    vulnerability in a third-party Internet software to temporarily
    redirect traffic intended for the Company's website. The Company is
    working with CERT (Computer Emergency Response Team) from Carnegie
    Mellon University to address this problem.


They forgot to mention that the "third party Internet software" is the
software that runs the domain name system...whose reliable operation
they are trying to sell.


        John