Analyst: NetSuite IPO should find success

Hosted enterprise software vendor NetSuite has revealed details of its IPO plans.

NetSuite's decision to hold an auction-style initial public offering later this month will probably pay off, one analyst judged on Friday.

"I expect a very good amount of demand and I do expect it to price above US$16. The only caveat is, the [IPO] market is quite poor right now," said Scott Sweet, managing director of IPOBoutique.com.

The hosted business software vendor plans to sell 6.2 million shares of common stock for an expected US$13 to US$16 each through the auction, which would raise a maximum of US$99.2 million. The Wall Street Journal has reported that the auction will take place December 21. A NetSuite spokeswoman could not immediately be reached Friday to confirm that date.

NetSuite's stock will be traded on the New York Stock Exchange under the single-letter symbol "N."

The company, which targets small- to midsized businesses, is following the lead of Google in conducting an online, auction-style IPO, which is meant to attract a wide range of investor types.

Under the auction's rules, individuals who have an account with Credit Suisse Securities, W.R. Hambrecht & Co. or ETrade Securities can submit bids, according to the SEC filing regarding the plan.

NetSuite posted a net loss of US$35.7 million in 2006, and in 2007 has so far lost US$20.6 million for the nine months ended September 30. Also, its accumulated deficit stood at US$241.6 million as of September 30, NetSuite said.

However, its revenue is on a general upswing, growing from US$17.7 million in 2004 to US$67.2 million in 2006. That trend continued this year, as the company took in US$76.8 million for the nine-month period ended September 30. NetSuite said it had 5,400 customers as of that date.

"Bottom line, their losses are coming down, but they still need some work," Sweet said. "If their losses were going up, that would probably turn off many technology investors."

He also remarked on NetSuite's decision to hold the auction so close to Christmas: "Talk about pushing it. It's getting real close."

NetSuite said it plans to use the proceeds to pay off an $8 million balance on a line of credit with Tako Ventures, an entity controlled by Oracle CEO Larry Ellison, a major investor in NetSuite.

"We may also use a portion of the proceeds from the offering to acquire other businesses, products or technologies. We do not, however, have agreements or commitments for any specific acquisitions at this time," the statement added.

The IPO stands to further enrich Ellison, who controls about 60 percent of NetSuite's outstanding stock, or some 31.9 million shares. He is planning to move those shares into a "lockbox" limited-liability company, in order to "effectively eliminate" his voting control and to avoid potential conflicts of interest, NetSuite said in the filing.

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