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There was no mention on the s-1 of their independent sales channel (partner, resellers). Very important I would say. Considering it probably accounts for 30-40% of new license sales (as opposed to subscription re-signs and services offered by Netsuite). I have never liked this non-disclosure - which means they have something to hide.

I would also like to see what their burn rate is - ie. people who dont renew. I would guess its around 50% - which means the company is relying too much on increasing pricing versus growing new sales.

And the sales expenses. Come on guys - you cannot sell ERP systems using tele-sales - at least for long.

Patty Purser

What is a book runner?

Jason Wood

Hi Chip...not for lack of trying. Remember, NetSuite very much positions itself as providing CRM functionality, too, which is certainly within Oracle's wheelhouse. And while traction of its E-Business Suite Special Edition never got off the ground, NetSuite and J.D. Edwards overlap in many ways, too.

Chip Schooler

Oracle as a competitor… I didn’t think Oracle had a mid range product like SAP’s Business One. Did I miss something?

Jason Wood

Jeffrey -- You may be right. As with any security, there are too many factors to simply talk about a hard and fast rule. Investors have been clamoring for more SaaS plays, so I don't think Ellison's majority ownership will be a problem out of the gates. But longer term, it might all things being equal.

Andy -- I think you bring up an excellent point. It would've been a potentially disruptive situation had Oracle acquired NetSuite in a private transaction, people would be left to wonder if he sold NetSuite at a discount to fair market value and, in turn, gave himself a big cash dividend. By letting the market set a value, it's easier for Oracle to justify the acquisition if the time comes.

Mark -- Lawson is certainly a worthwhile comp, no question.

Mark Crofton

Hey Jason,
I would have thought of Lawson as a competitor as well. A company solidly aimed at the mid-market ERP space.

Also, I agree that NS is a likely Oracle acquisition target. They have a white space at the bottom end of their offering. This is somewhat filled by JDE and, perhaps Accelerators, and used to be filled by E Business Suite Special Edition (which was discontinued).



Thanks for that analysis. I fail to see how Larry can run/partially own two companies that are such direct competitors. And, in fact, I don't think he will for long. NetSuite fills an SMB gap for Oracle, and as soon as a valuation is set for NS, I think Oracle will then be in a position to buy it. The problem to date has been fixing an objective value; an IPO process solves that problem.

Jeffrey Walker

Excellent analysis. I know financial types often ignore this but I am curious what differentiates the product and how good is it? I have my doubts. Second, I don't think there will be any discount on the Ellison control factor simply because the IPO software market needs success stories regardless of good or mediocre product. The market appetite is too strong. Data supports your concern, but intuitively I'll bet otherwise. Although I avoid IPOs like sharp sticks in the eye. Thanks Jason -- Jeffrey

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