NetSuite Reports Q3 Sales Growth Despite Jittery Market


"Everybody just froze their wallets," CEO Zach Nelson said during a conference call with Wall Street analysts Monday. On Sept. 29 the House voted to reject a $700 billion plan to rescue the financial industry. Both the House and Senate later approved the bill.

Nelson said sales bookings resumed in October, the first month of the fourth quarter, and were "better than anticipated" throughout the month. NetSuite is projecting sales for the current quarter to reach $41 million to $42 million, up from $31.7 million in last year's fourth quarter.

Nelson said he is "cautiously optimistic" about the current quarter. But CFO Jim McGeever said the company isn't providing forecasts for sales in 2009 given the uncertain economy. NetSuite joins a number of IT vendors that aren't offering sales and earnings predictions for 2009.

NetSuite, San Mateo, Calif., reported a loss of $6.2 million in the quarter compared with a loss of $1.8 million in the same period one year earlier. Some of the loss was due to currency fluctuations, while expenses related to stock-based compensation and amortization of intangible assets also took their toll.

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"Our booking numbers were good, but they were obviously impacted by the market jitters experienced in the latter part of September," Nelson said of the quarter. He said NetSuite signed up 330 new customers during the quarter, in keeping with the 300 to 400 new customers the company, on average, gets each quarter. But Nelson noted that average sales price or size of the typical customer contract has been growing.

McGeever also said days for outstanding billings, a measure of how long customers take to pay their bills, also increased during the quarter. The CFO said that was likely due to the credit crunch that has made financing purchases more difficult.

NetSuite also increased sales through third-party channel partners, including an OEM deal with The Brennan Group, a software hosting service and solution provider in Australia. But, Nelson said, "It remains unclear how the channel will evolve to play a role in the distribution of cloud-computing solutions." He said traditional channels are evolving and new channels are emerging.

NetSuite, which sells Software-as-a-Service ERP and CRM applications, is readying a program to offer SAP customers deep discounts to switch to NetSuite. That effort is modeled after a similar program NetSuite has for customers.