UPDATED 09:22 EDT / APRIL 29 2011

Netsuite Beats Views, Forecast Mixed

Netsuite (ticker symbol N) is a company based in San Mateo, California, which came public late in 2007 as the stock market was peaking before the crash of 2008-2009. The majority owner/investor is Larry Ellison of Oracle (ticker ORCL) who seemed to see at the time a demand for Oracle type software availability through the cloud as a complement to or substitute for Oracle’s traditional legacy type business model.

NetSuite Inc., together with its subsidiaries, provides an on-demand integrated business management application suite to businesses and divisions of companies worldwide. The company offers NetSuite, a suite of applications that provide accounting/enterprise resource planning, customer relationship management, and e-commerce functions. It also provides industry-specific editions of its service for wholesale/distribution, services, and software companies. In addition, NetSuite Inc. sells additional on-demand application modules to obtain additional functionality required for specific business needs. The company also offers NetSuite business operating system, a technology platform that allows customers, partners, and developers to tailor and extend its suite to meet specific company, vertical, and industry requirements for personalization, business processes, and practices. Further, it offers customer support and professional services related to its suite. The company delivers its suite over the Internet as a subscription service using the software-as-a-service model, as well as through relationships with channel partners. NetSuite Inc. offers its products and services to companies operating in various industries, including distribution and wholesale; professional, consulting, and other services; computer software; e-commerce and retail; manufacturing; computer and information technology services; telecommunications services; financial services; healthcare services; and education. The company was founded in 1998 and is headquartered in San Mateo, California.

The company has released its’ financial results for the first quarter of 2011. The on-demand ERP vendor on Thursday reported a first quarter net loss of $7.7 million, or 12 cents a share, on revenue of $53.4 million, up 21 percent from a year ago (statement). Non-GAAP earnings were $1.9 million, or 3 cents a share. Wall Street was looking for earnings of 3 cents a share on revenue of $52.9 million.

As for the outlook, NetSuite projected second quarter earnings of 2 cents a share on revenue of $55 million to $56 million. Wall Street was looking for earnings of 4 cents a share. For 2011 as a whole, NetSuite projected earnings of 13 cents a share to 15 cents a share on revenue of $228 million to $230 million. Wall Street was expecting earnings of 18 cents a share on revenue of $227.7 million.

Why the mixed outlook? International expenses have hurt NetSuite’s operations abroad. NetSuite said expenses will be higher throughout the year as it funds international units but lacks revenue contribution currently. The issue is that NetSuite expenses overseas are denominated in strong currencies, which are then translated to the U.S. dollar, which is weak.

CEO Zach Nelson has stated that channel partnerships as well as larger enterprises looking at NetSuite as an ERP option were driving bookings. “CIOs are loathe to throw out legacy ERP, but they are looking for a way to roll out cloud technologies,” said Nelson. Under two-tier ERP, legacy ERP systems stay, but NetSuite is layered on top of it.

The stock price, which has nearly tripled off of its’ 52 week low, is responding favorably today to the report despite the mixed outlook, currently trading at $34.00, up more than 13% from yesterday’s close of $ 30.10


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