NetSuite: Short-Term Short Idea, Long-Term Long

While analyzing potential
Enterprise
Resource Planning [ERP] solutions for a client, CleanFish,
last year, I came across NetSuite as a contender that
offered accounting, sales force automation, inventory
management and CRM capabilities in a single integrated
hosted solution. <!--more-->A single solution that can address
the needs of a growing organization without having to
spend millions or install infrastructure is music to
the ears of any CTO who has worked with disparate systems
before and has had to make them talk to each other.
After considering industry specific solutions as well
as NetSuite's competitor Salesforce.com (CRM),
we finally decided to sign up with NetSuite. A few weeks
after we started implementation, I wrote a detailed
blog entry titled NetSuite:
Another Hot Tech IPO? about the company and why
I was excited by the IPO months before it actually came
out.

However by the time the
actual IPO took place in December, interest in the company
was so high that they revised their dutch auction IPO
price upwards twice from the original range of $13 to
$16 all the way up to $19 to $22 and the auction finally
closed at $26 per share. This gave the company a valuation
of over $1.5 billion, much higher than the $750 million
valuation I mentioned in my blog entry and a P/S of
13 based on my 2007 revenue estimates of $115.35 (actual
2007 revenue came in at $108.5 million). Investor enthusiasm
for NetSuite was unabated and the IPO opened at $26
per share and closed its first day of trading at $35
per share. After rising to an intraday peak of $45.98
the following day, the stock began a slow and steady
decline. Our experience with NetSuite has gone down
a similar downward slope over the last few months.