NetSuite Credits Channel Partners With Driving 2011 Growth

New business channel sales of NetSuite's ERP, CRM and e-commerce cloud applications grew 50 percent in 2011, company executives said Thursday.

News of the increased channel sales came as the company reported robust growth for its fiscal fourth quarter and for all of 2011.

"While some traditional enterprise companies saw a slowdown in their Q4 business, that was not the case with NetSuite," said Zach Nelson, NetSuite CEO, in a conference call with financial analysts Thursday. "Q4 showed the benefit of being the disruptor, rather than a disruptee, as we continue to take market share from traditional mid-market and enterprise vendors."

"All in all, NetSuite's quarter and fiscal year financial results were spectacular," Nelson said.

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For the fourth quarter ended Dec. 31 NetSuite reported revenue of $64.1 million, up 23 percent from $52.1 million in the same period one year earlier. The company reported a net loss of $7.6 million for the quarter, compared to a net loss of $6.4 million in the fourth quarter of 2010.

For all of fiscal 2011 NetSuite reported revenue of $236.3 million, up 22 percent from $193.1 million in fiscal 2010. The company reported a net loss of $32.0 million for the year, compared to a net loss of $27.5 million in the prior year.

Nelson attributed much of the company's sales growth to its channel partners, which he said have been "really stepping up" their sales efforts and increasing their service capabilities.

"The channel business has been extremely strong. It's really been booming," Nelson said. "For the year, new channel business grew more than 50 percent over 2010."

He went on to say that NetSuite's channel business grew 150 percent during the 2009-2011 period. Engaging in some competitive hyperbole, he said the growth reflected "the on-going migration of mid-market VARs from dead product lines like Sage and Microsoft Dynamics Great Plains and Microsoft Dynamics Navision, to cloud NetSuite."

Nelson noted that solution providers have been as impacted by the move to Software-as-a-Service as businesses. "It really is a fundamental change," he said. "The exciting thing is, and what you're seeing happen in the channel, is [solution providers] have really begun to change their business model and NetSuite has been a huge beneficiary of that."

The average selling price of NetSuite's deals increased 45 percent in 2011, Nelson said, and in the fourth quarter the company inked 43 percent more deals valued at more than $100,000 than in the same period one year earlier. The quarter even included a $1 million deal won through a partnership with systems integrator Accenture.

NetSuite now has more than 12,000 companies and subsidiaries actively using the company's applications.

For fiscal 2012 NetSuite is forecasting total revenue between $295 million and $300 million, said CFO Ron Gill in the conference call. That would represent growth of 25 to 27 percent over fiscal 2011.

Nelson also hinted that NetSuite would be making announcements about its vertical industry strategy at the company's SuiteWorld conference in May. He said the company would "markedly" increase the size of its development organization to meet the needs of small, midsize and enterprise customers.