"Companies will be chasing the latest fad if they care about what investors are buying." Bruce Lupatkin, portfolio manager of North Bay Technology Partners.

SAN FRANCISCO (CBS.MW) - In the not-too-distant past, the notion of 'what could be' was given a significant premium. Concepts were paid for upfront and uncertainty equated to opportunity.

FRONT PAGE NEWS Global Crossing files for bankruptcy Dow, Nasdaq end on an upswing Bush to focus on war, economy Toys 'R' Us shares jump after job cuts Data getting better, but still not positive Sign up to receive FREE e-newsletters:   Get the latest news 24 hours a day from our 100-person news team.

And then concepts blew away on the napkins they were written on and uncertainty transformed into a liability.

Throughout 2001, cancelled projects left a pile of half-baked ideas deserted, like half-constructed baseball field that stands empty, waiting for players and then the fans.

Now in January 2002, there is no mad dash to dust off and resurrect the five- or 10-year plans, much less throw around blueprints for new grandiose design schemes. Talk of what could be six months from now still seems premature, as MarketWatch's Thom Calandra said about WebMethods'(WEBM: news, chart, profile) prediction last week that it would return to profitability by June.

The market still gives little credence to any outlook beyond a day or week. And that mentality is especially true among investors in VeriSign (VRSN: news, chart, profile), whose future is still, for the most part, being sketched out on whiteboards.

"Investors need to see it to believe," said Stephan Mahedy, an analyst at Salomon Smith Barney, referring to the overall market sentiment across the tech industry.

Share prices of handheld device makers, like Handspring (HAND: news, chart, profile) and to some extent Research In Motion (RIMM: news, chart, profile), are benefiting from product roll-outs that are relatively imminent.

VeriSign's field of dreams

But VeriSign needs an imminent product to offset the declining sales in its domain registration business. Its stock price has eroded as some investors believe there is a high probability this time next year the company will come back and say, 'Oops, remember those 28 million domain names we thought we could count on? Well, they weren't as active as we thought and um, they didn't renew.'

To cope, VeriSign has tapped other areas of growth through acquisitions. It was a strategy that once was applauded. But now this activity too has some investors wary out of concerns for the accounting issues that can arise from heavy acquisitions. Think RSA Securities (RSAS: news, chart, profile) last week, Enron last fall or Critical Path (CPTH: news, chart, profile) one year ago.

"There might be a body buried in this story," said Trent Greene, a hedge fund manager of Tampa, Fl.-based Capital Advance Investment Management. A declining core business coupled with an acquisitive strategy raises a red flag for Greene, however farfetched and unfounded his concern may be. It's an overhanging concern nonetheless that will keep him safely on the sidelines or selling.

Yet with its $1.3 billion acquisition of Illimunet last fall, VeriSign may have no choice but to continue to acquire technologies as it advances its migration into a new opportunity: the convergence of the old phone and new (Internet protocol-based) networks.

VeriSign bought Illuminet, which brought just "marginal technical innovations," Darren Johnston, principal and founder of Intellectual Capital Associates, a small research outfit based in San Mateo, Calif. wielding around a mega-research report on VeriSign and the convergence of the two networks.

In order for VeriSign -- a company better known for its financial prowess rather than its technological expertise -- to put up a barrier to entry, and to capitalize on its Illuminet acquisition, it will have to buy up more pieces over the next six months, said Johnston. "It would be a mistake to slow down."

Translation: The new market opportunity is big enough that it's worth VeriSign's time and money to continue building that field of dreams in hopes the stadium fills up.

Now, the idea of the combined networks has a logical and futuristic allure that intrigues. But the whole convergence challenge is akin to creating a blended baseball and kickball field. It's the same layout, and it's the same idea of hitting some ball and running around the bases. The challenge is trying to play both games at the same time.

To that end, it's hard to tell what type of hybrid network will attract the players (customers), much less fans (investors), both of whom have had developed indigestion over the past few years due to new technologies.

Even VeriSign's CEO Stratton Sclavos told investors at the Bank of America Securities conference on Monday, that we've gone through the era of "stuffing the customer." As he puts it: "We watched them; we let them." Now, it's time to let them eat slow and peacefully.

Additionally, VeriSign's Sclavos said the company would be less acquisitive this year. A capital expense budget of some $130 million off of a $1.5 billion revenue projection is earmarked for building out the current infrastructure.  See VeriSign's Sclavos view on convergence.

So, why the urgency to continue making acquisitions, especially during a tech-spending slowdown, I asked Johnston.

For one, VeriSign faces the risk of losing AT&T (T: news, chart, profile), one of Illuminet's major customers, said Johnston. AT&T foreshadowed last year that it would be moving its business onto its own network, he said.

So, at the conference, where Sclavos gave the luncheon keynote speech Monday, I asked how he'd secure this business. He told me that a new multiyear deal has been signed.

Throwback to first-mover days

But besides AT&T, there are other companies vying for that first-mover advantage in this new converging world. Translation: Being quick, being early and being first is key.

Others agree. "VeriSign has to develop prior to demand and declare which technology leads the way," said Mike Shor, Assistant Professor of Economics at Owen Graduate School of Management at Vanderbilt University.

There are many examples that show that the winning technology in the marketplace isn't always the more superior one. For instance, the Qwerty keyboard layout became the standard even though it's "insanely inferior," said Shor. The layout, first invented in 1860, was constructed to make typing harder and slower in order to ensure the tiny hammers would not lock with each other. Of course, with today's keyboards we don't have that problem, but everyone's used to the layout.

In the same vein, VeriSign should do what it has to do to define the future.

Competition forming

Look no further than NeuStar, said Johnston. Neustar is a spinout from Lockheed Martin responsible for administering the North American numbering plan for registering phone numbers. The plan, invented by AT&T in 1947, essentially sets a specific phone's location on the network.

Twelve-year-old ABS Capital Partners, with $1.4 billion of assets under management, participated in a $53 million NeuStar placement on Jan. 16, 2001.

Meanwhile, other companies are also making strides. For instance, Telcordia, the former Bell Core, generates about $1.6 billion in revenue annually. Telcordia is the dominant player of network intelligence for voice networks. It's the VeriSign of the telephone world. It also has ties with government and carriers, making VeriSign's adoption of its IP-enabled directory products unlikely by phone companies and inter-exchange carriers.

Just one month ago, GTCR Golder Rauner (see Web site) bought TSI Telecom Services from Verizon for about $800 million. TSI provides wireless call processing and operates one of the largest independent SS7 networks. The SS7 network could be thought of as the route map of the phone network. It's a network that is offered by VeriSign's Illuminet. GTCR is a privately-held investment firm based in Chicago known for rolling up investments in a particular industry. Johnston expects the company to use its TSI acquisition to further its position in the SS7 market as well as buy its way into the broader network intelligence and routing application sectors.

NetNumber supports so-called "Enum registration." Essentially, it's a key first step to interoperability of the Internet and voice networks. VeriSign has a stake in this company.

Ultra DNS operates on a relational database. Translation: it's robust and multi-protocol. It received funding from New Enterprise Associates, Vantage Point Venture Partners, and Reuters Venture Capital.

SS8 Networks just received $68 million in funding round led by Warburg Pincus and existing investors in November 2001. SS8 Networks, which focused on IP-based network products just merged with a unit of ADC Telecommunications, focusing on functionalities, like voice messaging, for carriers. The two together will develop the new products bridging the two networks. Johnston also highlights privately-held Dynamic Soft as another small company with technology that's a piece of the puzzle for any company, such as VeriSign, interested in offering the products that might get initial traction.

In conclusion, the convergence of traditional voice and newer data networks is imminent. the question is whose rules of order survive. According to Johnston, VeriSign should define the rules going forward or face the potential of another firm usurping its first-mover advantage.

This outlook does run counter to the current mentality. First-mover was the old way. The new conservative world has arisen since the bubble burst, due to the many examples of money not well spent on technology that's ended up wasting away on the shelves. The new conservatism is here because of the many corporate tombstones that fill the cemetery of the first-mover, big spenders.

It is a gamble, admitted Prof. Shor. "But it's worth it."

Indeed, it is a gamble. A field of dreams usually is.

This column is available in e-newsletter format. Click here to subscribe.