NetSuite Continues to Grind Away

Posted Feb 5th 2010 12:20PM by Tom Taulli
Filed under: Earnings Reports

The enterprise resource planning (ERP) software industry is mostly dominated by major players, such as Microsoft (MSFT) and SAP (SAP). However, because of the expense and complexity of the offerings, the recession has been tough. It's easy for companies to put off spending on ERP.

But there is one player in the space that continues to grow: NetSuite (N). In the latest quarter, the company posted revenues of $42.96 million, up from $41.40 million in the same period a year ago.

A big help for NetSuite is that its platform is based on cloud-computing (that is, the software is delivered via the Internet). What's more, the offering is comprehensive, including customer relationship management (CRM) and e-commerce capabilities.

While NetSuite has traditionally focused on smaller companies, the company has actually been going up-market. In fact, the average selling price for the software has increased 10% to $38,000 since Q4 of 2008. Then again, the company is getting lots of traction from its One World system, which is geared for multinational subsidiaries.

True, SAP and Microsoft have been making some attempts at providing a cloud solution, but the process has been slow. And yes, this will ultimately be to the benefit of NetSuite. Actually, the company is already finding ways to pick off customers from its rivals.

However, the process will take time and NetSuite also sustained a loss for the latest quarter ($6.54 million), with the stock price off 16% in today's trading. But taking the long-view, the company certainly looks well-positioned for the changes in the business software market.

Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

Tags: cloud computing, CRM, earnings, ERP, inthenews, Microsoft, MSFT, NetSuite, SAP