NetSuite Closes IPO at and#3626 per Share

NetSuite's IPO pulls in over $185 million, much more than expected.

On-demand enterprise resource planning vendor NetSuite said Dec. 26 that it has closed its initial public offering. The much-vaunted IPO, launched Dec. 10, has raised $185.4 million in the sale of 6.2 million shares at $26 each—a take that far exceeds the company's initial expectations.

NetSuite officials said in a Dec. 6 statement that they expected shares to price out at between $13 and $16 each during the IPO to raise a total of about $80.9 million. The company is majority-owned by Oracle CEO Larry Ellison and his family, which owned about 74 percent of NetSuite prior to the IPO, a percentage that is expected to drop down to about 66 percent post-IPO.

NetSuite officials said the company will use the proceeds from the offering to repay the $8 million balance on a secured line of credit with the company's controlling shareholder, Tako Ventures, a company controlled by Ellison. They also plan to use the extra cash from the IPO to make some acquisitions.

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Though Ellison put his shares of NetSuite in a "lock box" to negate any undue influence on NetSuite's board decisions in the future, Oracle and NetSuite have a long history. NetSuite began as the small business arm of Oracle, the world's second-largest business applications developer behind SAP. Early on in 2000 NetSuite licensed the Oracle brand for its Oracle Small Business Suite and both companies sold the software for the next four years.

Click here to read more about NetSuite's IPO.

In 2004 the two companies began distancing themselves from one another—NetSuite changed its name from NetLedger to NetSuite and stopped developing and marketing Oracle's small and midsize business software. The next year Oracle acquired Siebel Systems, one of NetSuite's main competitors in the on-demand CRM (customer relationship management) sector.

Meanwhile, the on-demand market has exploded. Salesforce.com, the uncontested on-demand leader at this point, has been a publicly traded company since 2004 and is set to reach a $1 billion run rate in 2008. At the same time, software giant SAP released its own brand of on-demand ERP software, Business ByDesign, and Microsoft is expected to release its version of on-demand CRM software by year's end.

NetSuite's entrance into the public market has long been in the making. As early as September 2006, eWEEK began receiving tips from purported NetSuite employees that the company was planning an IPO, as did other media outlets. The company finally filed with the Securities & Exchange Commission this past summer.

Though NetSuite's revenue has been on the rise during the last couple of years, the company has yet to claim a profit. In the first three quarters of 2007, NetSuite's revenue rose 63 percent to $76.8 million, compared with the same year-ago period. Losses so far this year have been $20.6 million, down from $26.9 million in the same period last year.

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