One day after it broke the dot-com mold and actually declared a profit in the fourth quarter of 2000, the company saw its stock rating downgraded by Legg Mason, the investment bank that co-managed Register.com's IPO.

Citing the company's lowered revenue outlook for the second straight quarter and its weak 2 percent share of the market for multi-lingual registrations, Legg Mason's Todd Weller said it was difficult to maintain a strong buy rating on the stock and dropped it a notch to buy.

As Silicon Alley watchers recall, Legg Mason acted as a co-manager for Register.com's IPO last March, an offering which exploded to $116 per share within weeks. Since then, the stock has nose-dived by more than 90 percent. Executive departures have done little to coddle investor interest.

After all, with the demand to buy domain names no longer the frenzy it was, Register.com finds itself struggling to maintain its share of a shrinking market.

But all is not gloomy for the six-year-old company. Once the Internet Corporation for Assigned Names and Numbers (ICANN) clears up some minor contractual snags before rolling out new Top Level Domains (TLDs), Register.com could cash in on the land grab.

It is wasting no time preparing for its opportunity.

In partnership with U.K-based Virtual Internet, Register.com will be taking a cut of the fees for the ".pro" extension. As part of the Afilias registrar consortium, the company will also handle the ".info" TLD.

"We are very excited about the future," says Register.com CEO Richard Forman. "Once the new contracts are negotiated between ICANN and the registries, we're set to go."

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He's not kidding. While it waits for domain names to go live, Register.com has set up a mechanism to allow potential registrants to "express interest" in the new TLDs, giving them first dibs once they become available.

"We are guaranteeing that once that name is available, we'll get it for them," Forman says.

Although ICANN has publicly discouraged registrars from jumping the gun by pre-registering, Foreman says the approach is within bounds.

"We are taking indications of interest. We want to make sure our customers get a fair chance to register the domains they want. We are going to reserve the names for them. In terms of guarantees, this is what we're saying: If we can register it, they'll get it."

COMPETITION

Forman says the pricing structure for the new domains would be in the $35.00 range, the same as prices for annual registrations of the existing ".com", ".net and ".org" suffixes, part of the company's strategy of avoiding price-based competition. But it is an approach that could backfire as more registrars enter the market. ICANN has accredited more than 60 registrars and is reviewing more than 100 applications. In addition, the New.net gambit from incubator Idealab! seeks to unveil new TLDs outside of ICANN's and could further dent Register.com's estimated 15 percent share of the registration market. New domain registrations with Register.com have been slipping the past two quarters.

The company argues that it doesn't have to compete for new revenues on price because of its range of offerings to keep customers coming back: registration services, easy domain name maintenance, Web hosting and e-mail, for example. Register.com also gives its customers access to other countries' domains, including the .TV (Tuvalu) and the .WS (Western Samoa) suffixes which are being cleverly marketed as "featured extensions," in addition top level domain access.

Robert Green, a technology analyst at financial research site Briefing.com likes the long-term outlook for Register.com because of its move to diversify its revenues.

Green remains "neutral to positive" on Register.com. "It is one of the few Internet companies that has actually made it to the land of profits without hitting 'stock-bottom' and without running out of cash."

Register.com's customers represent a stream of money, not a single sale, says Green. "Of all the Internet companies, Register.com is probably best positioned to survive. They have enough cash, they have reached profitability, they have carved out a niche for themselves successfully."

But it's the size of that niche that has analysts questioning the company's fundamentals. Register.com only took in 2.7 percent of the more than 800,000 multi-lingual domains registered during the fourth quarter. It also has room to improve on its 15 percent of the existing TLD market.

AFTERNIC

Last year, Register.com acquired domain reseller and auctioneer Afternic for about $48 million in cash and stock, a whopping price tag for a company with about $500,000 in cash and $2 million in debt.

But Forman defends the pricey acquisition, insisting it was "a very valuable addition" to the company's services and strategy.

"That was a very wise purchase because we were bidding against a lot of companies to buy Afternic. We felt that having a secondary market application to bolt on to our business model was important. The technology gives speculators a vehicle in that secondary market and when you look at Afternic has done to date, it far exceeds the value," he says.

"We acted big and bold to pick up the biggest secondary domain name broker in the world."

Given the potential size of a secondary market for domain names on the Internet, and the looming land grab by other registrars, the Afternic buy could turn out to be the break Register.com is looking for.