other senior executives as the San Diego defense conglomerate went on something of an acquisition binge—targeting small IT companies and government contractors. From 1990 through 1995, SAIC was acquiring six to nine such companies a year.
In 1992, the NSF sought competitive bids for a private contractor to register and manage Internet domain names under a “cooperative agreement.” The foundation selected Network Solutions Inc (NSI), which was among just five bidders that responded to the NSF solicitation. Daniels recalls: “It was a $1.5 million fixed-price contract for NSI to run the Internet domain name business. They had no idea—none of us did—what was going to happen with domain names in the next three years.”
Yet Daniels says he sensed something big was about to happen. He says he had seen Steve Case, who was one of his friends in Northern Virginia’s technology community, turn a company in Arlington called Quantum Computer Services into America Online. He began making regular business trips to meet with other technology leaders in Silicon Valley. “I just had the sense that these guys in Silicon Valley were going to push into the Internet,” Daniels says.
At SAIC, Daniels continued to meet with Emmit McHenry, Network Solutions’ president and CEO, and sought to acquire the little company based in Herndon, VA, on behalf of SAIC. “I probably made five or six offers from ’94 to March of ”95, when they finally agreed,” Daniels recalls. “So we bought Network Solutions. The idea was to build up the networking business they got, build up their networking technology capabilities in government contracting, and then I was going to take a look at this domain name business they had.”
The timing of SAIC’s buyout was lucky indeed. As Daniels puts it, “Nobody really understood that NSI basically had an exclusive contract to sell dot-com, dot-net, and dot-org to every human being on the planet… But people just didn’t see it. They just didn’t understand what the potential was.”
On the other hand, Daniels says, “If we had not come in and purchased Network Solutions, nobody knows what would have happened.” The orders for Internet domain names that began flooding in during the Internet boom years “required financial, technical, and management capability that they did not have.”
Exactly how SAIC helped to scale up NSI’s operations, then turn it into one of the most profitable monopolies in the history of the Internet, are the subjects of my full Q&A with Beyster and Daniels—so watch this space tomorrow.
[Update July 30, 2009: Part 2 of this story is now online here.]
