NetSuite plans IPO to raise $96 million

Ellison-backed SaaS vendor competes with Oracle

Hosted business software provider NetSuite hopes to raise US$75 million (NZ$95.8 million) in an initial public offering.

The company, started in 1998 by two former Oracle executives, plans to use the money for working capital, to pay the balance of a line of credit and possibly to acquire other businesses or technologies, the company said in a filing made last week with the US Securities and Exchange Commission.

NetSuite, which targets its hosted CRM and ERP software at small and medium-sized businesses, hasn’t yet turned a profit. It reported revenue of US$67.2 million and a net loss of US$23.4 million for 2006.

The company competes with giants such as, Microsoft, SAP and Intuit. NetSuite also competes with Oracle, even though Oracle’s founder and CEO Larry Ellison controls about 74%of NetSuite, individually and through his family members and an investment entity.

NetSuite notes that Ellison will continue to have control over most matters that require shareholder approval, such as the appointment of the majority of directors of the company and potential acquisitions.

His interests could differ from other shareholders, NetSuite notes.

The SEC filing includes a long list of other risks to NetSuite’s business in the future, including the likelihood of increased competition as more companies will probably enter the hosted software business.

NetSuite will have to continue to convince medium-sized businesses to use hosted applications rather than buy software outright and it will have to upsell to those customers in order to grow the business, it says in the filing.

NetSuite’s success in the future also is dependent on companies that it relies on, including Oracle, which supplies database software that NetSuite uses, as well as telecommunications operators that deliver the service to end customers, the filing says.

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Tags managementnetsuiteIPO

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