NetSuite IncN

Morningstar Rating

Stock Research and Analysis

by Sunit Gogia

NetSuite's business of delivering enterprise software over the Internet is well aligned with a secular shift in the software consumption model, but the firm lacks a competitive advantage and will struggle to create shareholder value.

NetSuite provides Read more

Bulls Say

NetSuite is well positioned to gain market share as cash-strapped IT departments demand cheaper enterprise software applications.

Average annual revenue per customer has risen from about $500 in 2002 to about $25,000 in 2008 as the firm has successfully added functionality and increased the price of its service.

Customer-retention rates should increase as the company has been culling small, less-sticky customers that account for less than $10,000 each in annual revenue. Read more

Bears Say

New customer growth has been anemic--NetSuite's customer base has expanded only slightly from about 6,000 customers at the end of 2002 to 6,600 customers at the end of 2008.

The firm has failed to turn an operating profit in its more than 10 years of existence.

Multi-tenant-hosted software is limited in its customizability, and NetSuite will find it hard to profitably address the diverse needs of SMB customers.

The SaaS model for the midmarket segment has attracted the attention of SAP, which is targeting its Business ByDesign service squarely at NetSuite's target market.

Large customers concerned about security and availability will not accept the SaaS model for their mission-critical ERP applications, rendering that market out of reach for NetSuite. Read more

Strategy

NetSuite's vision is to provide growing and midsize companies an integrated, online business application for ERP, CRM and e-commerce. The company is trying to turn profitable by targeting larger customers Read more

Management

Zach Nelson has been CEO of Netsuite since 2003 and was vice president of marketing at Oracle in the mid-1990s. Founder Evan Goldberg serves as chief technology officer and has been the chairman of NetSuite since 2003. Nelson and Goldberg own 3% and Read more

Profile

NetSuite provides an integrated suite of business software applications to more than 6,600 customers worldwide in a subscription model. The firm generates the majority of Read more

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