The Untold Story of SAIC, Network Solutions, and the Rise of the Web—Part 2

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selling our services were put into building a secure facility in Herndon, VA, to be sure that no one could attack the server farms containing all the domain names for everyone around the world. In addition, we decided to spend our money building a backup facility in case something happened to the primary facility. That was built somewhere in Southern Virginia, I believe. There are other backups in the system protecting the data—other nodes have complete routing information. SAIC had to spend over a million dollars to build the secure facilities.

X: Was there any connection in SAIC’s purchase of Network Solutions with other acquisitions at the time? In other words, was it part of a broader Internet strategy?

JRB: Yes. I believe we continued to acquire smaller network companies, such as the company that Daniels ran, which really started us thinking along this line.

MD: Yes, at SAIC we did begin to focus on networking businesses, and built talent and acquired clients in both the federal and commercial space. We saw this as big growth business in both sectors.

X: Why did SAIC decide to do the partial IPO in 1997? Did that turn out to be a smart thing to do? SAIC sold 3.3 million common shares, or a 21 percent-stake in Network Solutions, raising more than $59 million. SAIC retained almost 12 million shares of the stock, which carried preferential rights that basically preserved 96 percent control of the company.

JRB: The value of NSI was becoming so great that we wanted to take some of the profits we had made off the table in case of difficulties later on. Yes—it was a good idea.

X: Which was a bigger headache? The financial issues associated with Network Solutions or the operational issues?

JRB: The financial issues were never a problem because NSI was unbelievably profitable. The operations were a headache because SAIC’s ownership of NSI rubbed a lot of people in the Internet community the wrong way. They felt the government should run … Next Page »

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Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at or call (619) 669-8788 Follow @bvbigelow

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  • Joe

    Ugh…..VeriSign! Overpriced SSL certs.

  • Lee

    Great article!

    What was Mr McHenry thinking! He had the oyster in his hands. I know he did well in the sale of NSI but if he just could have hung on for a few more years. Was he forced to sell? As soon as SAIC took control of the domain industry it became an ever growing monopolistic mountain of hundred dollar bills. I have to think that Mr. McHenry knew what was going to happen but was not allowed to put prices on each registration. Anyone know?