Business "Much More Predictable" In Past Two Months, NetSuite Says

Sales of its online business software froze in the last two days of September, NetSuite chief financial officer Jim McGeever told the UBS Global Technology and Services Conference Wednesday. But, in the last two months, the flow of deals for its "software as a service" suite has become "much more predictable.

Sales of its online business software froze in the last two days of September, NetSuite chief financial officer Jim McGeever told the UBS Global Technology and Services Conference Wednesday. But, in the last two months, the flow of deals for its "software as a service" suite has become "much more predictable."

"What has happened in October and so far in November is that when people said they were going to buy, they actually bought," McGeever said.

Going by the boards have been deals with small customers, who spend less than $10,000 a year with the company, he said. The deals with big customers, aka "elephants," are getting done. Elephants who didn't complete deals at the end of September, will complete them before the year ends, he said. "We don't expect to lose any of them,'' he said.

NetSuite got its start by selling to very small businesses. In 2002, the average ticket was $447 per customer. Now, sales growth comes entirely from customers spending more than $10,000 a year. The biggest growth area: Customers spending more than $100,000. "The larger deals seem relatively strong,'' he said.

That's still a far smaller deal than those made by Germany's SAP AG, which has built its business selling enterprise planning and other business software to large corporations. Those deals can be measured in millions or even hundreds of millions of dollars.

In comparison, McGeever said NetSuite had managed to successfully woo an "autonomous division" of a multibillion dollar German company that is installing SAP's R3 software. Where the $100 million a year unit had been spending 3% of its revenue with SAP, it now would spend one-tenth of one percent with NetSuite.

NetSuite's stock, which hit $35.50 on its first day of trading last December, fell to less than $8 a share Wednesday.

So far, the company has not made a profit at selling its suite of online software for customer relationship management, resource planning and other business tasks to small- and mid-sized businesses. In the quarter ended September 30. the company reported a loss of $6.2 million on $40.4 million in revenue.

"We do expect to be profitable at some point in 2009,'' McGeever said.