VeriSign is selling most of its NSI domain business.

Under the deal with Pivotal Private Equity, a private investments firm, VeriSign gets $60 million in cash and a $40 million debt note in return for 85% of Network Solutions Inc (NSI). The deal is a far cry from the $21 billion in shares VeriSign said it would pay for NSI back in 2000.

VeriSign has of late been heavily investing in its image as a provider of critical infrastructure and security services. Owning what amounted to a low-margin webmasters’ store clearly does not fit into that picture.

But NSI has not severed all its ties to VeriSign, due to the 15% its former parent will still own. It seems unlikely, for instance, that NSI will immediately start selling web server certificates from one of VeriSign’s competitors, which often sell cheaper.

VeriSign has had a strict Chinese Wall rule in place between its registry and registrar divisions since it signed a deal with the Internet Corp for Assigned Names and Numbers in 2001 that forgave its previous obligation to sell off NSI.

Under this policy, the company was forbidden from using its registry advantage to give preferential treatment to the registrar. Assuming the Chinese Wall was adhered to, the spin-off should have a minimal effect on either company.

It may, however, give NSI the flexibility to do things as a private firm it was not able to as a public one – such as reduce its pricing. NSI has been bleeding customers for the last two years as it comes under extreme pricing pressure from rivals.

However, this churn had been slowing recently. In the second quarter, its customer renewal rate was 56%, up from 54% in the first quarter. NSI delivered $59 million revenue, or 22% of VeriSign’s total, in the second quarter.

According to VeriSign spokesperson Tom Galvin, there were other bidders at the table. He declined to disclose their names. It’s worth noting, however, that its largest rival, Register.com [RCOM], said in August it was in talks about a large-scale merger.

This article is based on material originally published by Computerwire