NetSuite, an on-demand applications company controlled by Oracle's Larry Ellison, has filed for an auction-style initial public offering, according to a Monday filing with the US Securities and Exchange Commission.
The company, which hopes to raise $75m (£37m) based on its registration filing fee, is currently controlled by Tako Ventures, a wholly owned subsidiary of Lawrence Investments that is owned by Larry Ellison, Oracle founder and chief executive.
Ellison affiliates and family members, which hold a 74 percent stake in the company, are expected to retain control of the company post-IPO, raising questions about whether that control would dampen investor enthusiasm.
Under Ellison's controlling interest, a future buyout of the company could be nixed, even if NetSuite's management and other investors deem it in their best interest. Also, a controlling interest of 50 percent or more makes NetSuite exempt from having to adhere to certain corporate governance standards imposed by Nasdaq and the New York Stock Exchange.
Nonetheless, the timing may be good for an IPO.
The second quarter has been one of the biggest for IPOs since 2004, based on number of offerings, said Matt Toole, an analyst at Thomson Financial. Of the 26 public offerings in the second quarter, 13 were tech-related.
NetSuite provides hosted customer relationship management (CRM) software and is viewed as a competitor to Salesforce.com. It also offers software for enterprise resource planning (ERP) software and e-commerce.
Last year, the company generated $67.2m (£33.3m) in revenue, up 84.6 percent from the previous year. In the quarter ended 31 March, the company raised $23.2m in revenue, up 71.8 percent, according to company's SEC filing.
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But the company has suffered a history of losses, running into the red to the tune of $23.4m (£11.6m) last year. And in the March quarter, it sustained a net loss of $3.7m (£1.8m). NetSuite has accumulated a deficit of $193m (£95m), as of the March quarter, according to the filing.
NetSuite, which has yet to set the number of shares it will sell or the price range for those shares, plans to use the proceeds not only to create working capital, but also to repay the outstanding balance on its $20m (£10m) secured line of credit with Ellison's Tako Ventures. As of March, NetSuite owed Tako $7.5m (£3.7m) on the line of credit.
NetSuite and Oracle have managed to do a few deals as well. In 2005, NetSuite signed a $2.5m (£1.2m) deal for a perpetual licence for some of Oracle's software and services. And last year, NetSuite, in an arm's-length deal, provided $542,000 (£268,757) of software to sailboat-racing syndicate Oracle Racing, in exchange for marketing and promotion as an official supplier.
Talkback
It seems that Netsuite is having hard time going public. This is the second attempt..
Recently Zach Nelson told the Wall Street Journal that it is hard for Netsuite to make and keep customers happy at an affordable price. It must be all this competition from startup rivals such as Salesboom.com.
After all, the more companies on the short list of customers, the more expensive it is to keep them happy at the right price.
Here is what Zach Nelson told the Journal:
(September 19, 2007): “even with free trials, it takes two months and three to five product demonstrations to close a sale. He was quoted as saying, “It isn’t easy to figure out how to acquire customers and keep them happy at a low enough cost that you still earn healthy margins.”
Or is Zach just saying this to explain the high churn rate they are having before they go public?