NetSuite's $161 Million Share Sale Signals Technology Optimism

2007-12-20 00:26 (New York)

By Elizabeth Hester and Rochelle Garner

Dec. 20 (Bloomberg) -- NetSuite Inc., the software maker majority-owned by Oracle Corp.'s Larry Ellison, raised more than expected in an initial public offering yesterday, suggesting that investor demand for technology stocks hasn't waned. The company raised $161.2 million, selling 6.2 million shares for $26 each. That topped the projected range of as much as $22. The original price target was as low as $13. NetSuite's software, designed for smaller companies, handles accounting, inventory management and sales tasks over the Internet. Small-business spending on that type of software will outpace corporate purchases through at least 2010, NetSuite said this week, citing research firm Gartner Inc.

``People are optimistic about the sector,'' said Francis Gaskins, president of IPODesktop.com Inc. in Marina del Rey, California. NetSuite has ``almost doubled the price in the last two weeks.''

Founded in 1998 as NetLedger Inc. by former Oracle Vice President Evan Goldberg, NetSuite was among the first to sell software as an online service for a monthly fee. Zach Nelson, NetSuite's chief executive officer, also used to work for Oracle, the world's third-biggest software maker. Goldberg now serves as NetSuite's technology chief.

More than 5,400 customers use NetSuite's Internet-based software, targeted at businesses with 1,000 or fewer employees. The company competes with Microsoft Corp. and Sage Group Plc, Britain's largest maker of accounting software.

Increased Range

NetSuite, based in San Mateo, California, will use the IPO proceeds to pay off the rest of an $8 million debt to Ellison's holding company, Tako Ventures LLC, and for capital spending and operating costs. The company boosted the price range of the IPO three times. NetSuite had originally planned to raise as much as $75 million.

The offering took the form of an Internet auction, similar to Google Inc.'s IPO in 2004. Investors submitted bids, indicating the number of shares they wanted and the price they were willing to pay.

NetSuite used the approach to give individuals as much of a chance to buy shares as institutional investors. Typically, the banks managing an IPO place shares with clients.

The offering comes near the end of the biggest year for U.S. IPOs since 2000. U.S. software offerings raised more than $2.5 billion, compared with $836 million in 2006, according to Bloomberg data.

Ellison's `Lockbox'

To assure investors that he won't wield too much influence over NetSuite, Ellison put his stake -- about 61 percent of outstanding stock -- into a ``lockbox'' company. He will still be able to vote on management changes, sales of assets or the liquidation of NetSuite, the company said.

Credit Suisse Group and WR Hambrecht & Co. managed the sale of the shares. They can sell an extra 930,000 shares if there's enough demand.

NetSuite will trade on the New York Stock Exchange under the ticker ``N.'' It's the third single-letter symbol adopted this year.

Genpact Ltd., an outsourcing company spun off by General Electric Co., went public in August with the symbol ``G.'' Macy's Inc. adopted the symbol ``M'' when changing its name from Federated Department Stores Inc.

--Editor: Nick Turner