NetSuite IPO: Shares hit double the forecast price

Colin Barker ZDNet.co.uk

Published: 20 Dec 2007 16:53 GMT

The first public auction of shares in CRM company NetSuite closed on Wednesday evening at a price of $26 (£13) a share — double the original forecasts.

NetSuite announced its intention in July to go public with an IPO. At the time, Oracle's chief executive Larry Ellison, the majority shareholder of NetSuite, said the company was expecting to raise $75m (£38m) from the transaction. At the close of proceedings on Wednesday, NetSuite had raised $161m. About 6.2 million shares were sold.

Ellison will remain the majority owner of NetSuite, according to Reuters. Also Oracle's largest shareholder, Ellison has put his NetSuite stake into what is known as a "lockbox" company, "effectively stripping him of voting powers, and thereby reducing concerns that his ownership of two software companies could create a conflict of interest", wrote the news agency.

The success of NetSuite's IPO appears to reflect buoyancy in both the software-as-a-service (SaaS) and CRM markets.

On Wednesday, Oracle said it had increased profits by 35 percent this quarter.

And, in November, on-demand CRM vendor Salesforce.com posted a quarterly profit of $6.5m, considerably higher than the $339,000 it posted a year ago. Its share price has surged more than 30 percent since the beginning of the year. NetSuite and Salesforce.com are the two best-known on-demand CRM vendors.

In September, enterprise resource planning (ERP) vendor SAP announced that it was extending its own CRM offering for mid-market businesses with the introduction of a new product, Business ByDesign, which it hopes will compete successfully with the offerings of Salesforce.com, NetSuite and Oracle. Business ByDesign will offer a range of SaaS applications, from financials to procurement to CRM software, for a monthly cost of $149 per user.

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According to analyst firm IDC, software companies are targeting faster-growing emerging countries, as well as SMEs, to offset slower US corporate spending growth. The analyst firm also said software companies will need to make acquisitions to exploit those growing sectors.

Frank Gens, IDC's senior vice president of research, said that internet giant Google could strengthen its position in the SME market with an acquisition of Salesforce.com or Intuit, a US accountancy software company, because both companies sell strong web-based business applications. "Google wants a beachhead into the small, medium-sized business market," said Gens, who expects SMEs to increase spending by eight to 10 percent next year.

Gartner, a competing analyst firm, said in September it expected steady growth in the CRM sector for the foreseeable future. It said growth would be around $1bn each year between now and 2011. The company said the market for CRM software is set to exceed $7.4bn this year, a growth of 14 percent on 2006.