Melbourne IT said it expects a boost to business from defensive domain registering and other activity associated with new global top-level domains expected to go live later this year.
Melbourne IT reported revenue and profit declines in full-year 2012 results announced today. Compared to full-year 2011 results, revenue fell 5 per cent to $170.6 million, while earnings before interest and tax (EBIT) dropped 21 per cent to $15 million and net profit after tax (NPAT) sank 16 per cent to $11.4 million.
On a conference call with media, Melbourne IT CEO Theo Hnarakis said ICANN's release of new gTLDs would generate a “huge dividend” and contribute to a turnaround for the company in 2013.
The gTLDs, which are new ‘dot word’ domains in the style of .com or .org, are expected to appear in the second half of this year. About 1900 new gTLDs were ranked in December.
Some of the domains will likely spur significant revenue from defensive registrations, Hnarakis said.
“We have 3800 corporate customers, many of which are very defensively oriented in protecting their brand,” he said. “When these new extensions are launched, they naturally register that domain name to ensure nobody else can secure that name.”
When the .xxx domain was launched in 2011, Melbourne IT had $2 million in sales in defensive registrations for the extension, the CEO said. The year before, the company had almost $1.5 million in revenue from the launch of the .co extension, he said.
Of the 150 gTLDs Melbourne IT applied for on behalf of customers, 75 per cent of the brands have said they will use the domains, and 110 of them have committed to five-year registry contracts, Hnarakis added.
Melbourne IT expects to charge $20,000 to $30,000 per name, he said. But some could generate “hundreds of thousands of dollars of revenue per brand” as they become live and start generating second-level registrations, he said.
In addition, Melbourne IT expects a “spike in infringements,” increasing the “amount of brand protection work we do,” he said.
Besides revenue created by gTLDs, Hnarakis said a strategic review, new hires and a business “transformation” project would result in “return to growth” in the future.
Melbourne IT plans to finish its transformation project in late 2013. Hnarakis said the project “will allow the business to realise cost savings, streamline processes and launch new products.”
Meanwhile, an ongoing strategic review started in November 2012 is looking at “possibilities of unlocking value for shareholders and delivering more focused investments, execution and operations for customers and staff,” he said.
In addition, Hnarakis pointed to “key hires in our Digital Brand Services (DBS) and SMB Solutions businesses, with the latter formed by the merger of our SMB and Global Partner Solutions divisions to improve service delivery and realise operational efficiencies.”
While the loss of Microsoft as a customer in the first half of 2012 stung, Hnarakis said Melbourne IT “hasn’t just sat on our hands, accepting our fate.”
“We have been working with some very large industry-leading players, in particular in international markets, that could not just fill that gap but more than outperform the gap left by Microsoft, going forward.”
And Hnarakis said he expects to receive more business from the retail industry in the future, especially after the sector faced technical problems during the recent Click Frenzy sale.
Any retailer who “sees ecommerce as a significant saviour for [its] business will start engaging companies like ours to assist them to cope with the additional traffic and challenges they need to face as they build their marketing campaigns around the online digital world,” he said.
Hnarakis noted that its EBIT and NPAT results were affected by a non-cash impairment charge of $2 million of the ForTheRecord division’s carrying value following a review by the board. Not including the impairment, EBIT was down 10 per cent from 2011 and NPAT was flat with 2011 levels.
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