10-K Watch: Verisign's Call/Put Options on its JV With News Corp on Jamba; Sells Services Business

Verisign, which sold off a 51 percent stake in Jamba/Jamster to News Corp in early 2007, has released some more details on developments since, in its 10-K, filed last week with SEC:

-- On investing more in Jamba over 2007: "Fox paid VeriSign (NSDQ: VRSN) approximately $192.4 million in cash for the divestiture of 51% of its ownership interest in Jamba and VeriSign paid Fox approximately $4.9 million in cash for its contribution of Fox Mobile Entertainment assets. The Company recognized a gain of approximately $68.2 million upon the divestiture of its majority ownership interest in Jamba and recorded its interests in the joint ventures as investments in unconsolidated entities in accordance with the equity method. As of December 31, 2007, the Company had a balance of $109.8 million in investments in unconsolidated entities related to the joint ventures...During the third quarter, the Company invested an additional amount of $17.2 million pursuant to capital calls approved by the board of managers of the ventures, and recorded the amount as investments in unconsolidated entities. The purpose of the capital calls was to fund the ongoing business and working capital needs of the joint ventures. Under the terms of the joint venture agreements, the Company has agreed to invest an additional amount of approximately $15.6 million in the two joint ventures. In 2007, the Company provided a working capital loan of $15.0 million under a promissory note to the joint ventures. This loan is outstanding as of December 31, 2007, and is included in Other assets."

-- On various rights on the remaining stake it holds: In connection with the joint ventures, VeriSign and Fox entered into various put and call agreements. VeriSign has the option to sell ("the put") all of its interests in the joint ventures to Fox at particular times within five years of the date of the agreements at prices determined pursuant to the terms of the put and call agreements. Fox has the option to purchase ("the call") all of VeriSign's interests in the joint ventures at particular times within five years of the date of the agreements at a price determined pursuant to the put and call agreements. The Company calculated the initial fair value of its written call options to be $10.9 million using the Black-Scholes option-pricing model. The Company has recorded the fair value of the call options within other long-term liabilities, and marks-to-market the call options at each reporting period. For the year ended December 31, 2007, the Company recorded an unrealized gain of $10.9 million, on joint venture call options within Other income, net.

-- Selling off its Jamba services business: In September 2007, we sold our wholly-owned Jamba Service GmbH subsidiary ("Jamba Service"), which marketed insurance and extended service warranties to consumers for mobile electronic equipment and products, for approximately $12.8 million in cash and recorded a net gain of $1.4 million. Jamba Service operations were recorded through August 31, 2007. Jamba Service was part of the Communications Services Group segment.