NetSuite: Channel Cheers, Wall Street Jeers
Call it a classic disconnect. On the upside, NetSuite, the SaaS ERP provider, continues to gain momentum with channel partners and cloud integrators. But on the downside, Wall Street isn’t impressed with NetSuite’s profit forecast.
For its Q4 ended December 31, 2010, revenues were $52.1 million, up 21 percent from Q4 2009. Also, Q4 2010 produced a $6.4 million net loss — essentially flat with Q4 2009. During an earnings call with financial analysts, CEO Zach Nelson said channel sales represented 67 percent of NetSuite’s new business bookings in 2010. Impressive.
But here’s the problem: Wall Street is concerned about NetSuite’s 2011 profit forecast. As a result, NetSuite shares dropped about 5 percent in after-market trading this evening, according to Reuters.
Wall Street’s concern about NetSuite arrives amid a potential cloud stock bubble. Our own Talkin’ Cloud Stock Index rose about 50 percent in 2010, and the index is up another 3.61 percent from Jan. 1 through Jan. 28 in 2011.
The recent cloud stock rally involves Verizon Communications buying Terremark Worldwide for Infrastructure as a Service (IaaS) capabilities, and Time Warner Cable buying NaviSite for a SMB cloud and managed services. The Wall Street Journal speculated this week that Savvis and Rackspace — two other Talkin’ Cloud Stock Index members — could also be cloud takeover targets, though both companies say they’re not up for sale.
Still, cloud stock enthusiasm could cool off a bit following today’s NetSuite earnings projections. Also, some venture capitalists say we’re in a cloud bubble, which could trigger a shakeout among weaker companies in the months ahead.
Sticking to the Plan
Either way, NetSuite seems to be accelerating its channel strategy. VP of Channel Sales Craig West recently told TalkinCloud that NetSuite’s channel partners continue to win business away from Microsoft and SAP (see FastChat Video, left).
Next up, NetSuite is preparing the NetSuite SuiteWorld conference (May 8-12, San Francisco). The event is designed for customers, partners and developers. And I suspect West will arrive armed with some new channel incentives to help cloud integrators and VARs mount more attacks against Microsoft and SAP.
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