NetSuite: An Open IPO Worth Investigating

Dec.11.07 | About: NetSuite Inc. (N)

WR Hambrecht sent me an email about an Open IPO, and lead me to read its prospectus. NetSuite is a new kind of software company co-founded by Larry Ellison, the founder and chairman of Oracle (NASDAQ:ORCL). By new, I mean that it provides “software as service,” in contrast to the traditional software companies such as Microsoft (NASDAQ:MSFT), where a consumer buys a product, installs it, does some customization, and (possibly) runs updates, among other things. The following is a quote from its prospectus:

NetSuite is a leading vendor of on-demand, integrated business management application suites for small and medium-sized businesses. We provide a comprehensive suite of enterprise resource planning, or ERP, customer relationship management, or CRM, and e-commerce capabilities that enables customers to manage their critical back-office, front-office and web operations in a single application… We deliver our suite over the Internet as a subscription service using the software-as-a-service or on-demand model. Our revenue has grown from $17.7 million in 2004 to $67.2 million in 2006. For the nine months ended September 30, 2007, we had revenue of $76.8 million. As of September 30, 2007, we had over 5,400 active customers

Personally, I have been losing money in my WR Hambrecht account, thanks to the XFML (XFML), and GSIT (NASDAQ:GSIT)(which I bought at market open on its IPO day) IPOs. It appears to me since Google (NASDAQ:GOOG), there are not many good open IPOs (MorningStar (NASDAQ:MORN) is one). Interactive Brokers (NASDAQ:IBKR) did not turn out to be as strong as I expected. But, I am thinking about bidding a few shares onNetSuite for the sake of Larry, and the proposed ticker 'N.'

Here is an interesting article from ZDNet's Dan Farber which explains software as service, and compares two leading providers, SalesForce and NetSuite. You can find its profile and view an online roadshow at IPOhome. For the sake of comparison, and we all like to comparison shop, here is SalesForce's (NYSE:CRM) prospectus from more than 3 years ago.

The following picture explains what NetSuite does: