NetSuite Reports 23 Percent Q3 Growth, Cites Expanding Channel Sales


New business sales of NetSuite's cloud applications through the company's partner channel have grown 50 percent in 2011, even as the company expands its direct sales force to target bigger customers.

"Partners have played a major role in our success in both the mid- and enterprise markets," CEO Zach Nelson said during a conference call to discuss the company's third-quarter financial results Thursday. "And we continue to invest in partners as well."

For the third quarter ended Sept. 30 NetSuite reported revenue of $61 million, up 23 percent from $49.7 million in the same period one year ago. Net loss for the quarter was $6.9 million, down slightly from the $7 million one year earlier.

Subscription and support revenue in the quarter reached $51.3 million, up more than 22 percent from $41.8 million in Q3 2010. Professional services and other revenue also grew 22 percent to $9.6 million from $7.9 million last year.

Nelson, responding to an analyst's question, said NetSuite's direct sales and channel sales are both growing. He said new business sales through the channel have grown 50 percent in the first three quarters of the year. NetSuite is also attracting more ISV partners who are using the company's SuiteCloud platform.

But NetSuite is also taking aim at bigger potential customers – Nelson said the number of customer wins worth more than $100,000 is up 125 percent. To that end Nelson said a big part of the company's strategy is to build an enterprise sales organization.

The CEO said the average value of customer contracts for all NetSuite products, around $35,000 last year, is now in the "high forties." The average selling price of deals involving NetSuite's OneWorld software, which targets bigger, multi-national businesses, is more than $100,000.

While NetSuite's income is growing on an absolute basis, Nelson said, the company continues to show a net loss each quarter. When asked about balancing growth with profitability, Nelson said the company is more focused on investing in current growth opportunities.

For the current fiscal quarter NetSuite expects to record revenue between $63 and $63.5 million. For all of fiscal 2011 the company expects revenue between $235.2 million and $235.7 million.

The company is predicting that sales in 2012 will reach between $290 million and $300 million. "We feel confident about the year ahead," Nelson said.