Finally, it begins.
After months of hand-wringing, would-be on-demand software star NetSuite is finally in the process of going public. A Dutch auction of the firm's 6.2 million offered shares began Monday and is expected to fetch between $13 and $16 a share, resulting in at least $77 million in fresh capital after accounting for fees.
But that's a conservative estimate. NetSuite could take in $95 million or more if wide-eyed investors view the company, which aims to duplicate the functionality of an entire enterprise resource planning (ERP) system as an on-demand service, as the next salesforce.com
I have my doubts.
That's not a knock on NetSuite, per se. My read of the software is that it's uncommonly good. Good enough, in fact, to be accessible via the Safari browser on Apple's iPhone long before Steve Jobs called for third-party developers to write software for the iconic communicator.
Trouble is, ERP providers such as SAP
And it's not like on-demand firms outside of salesforce.com have made it big. Neither RightNow Technologies
Nor is NetSuite. But is the stock cheap? Nope. With a projected market cap between $773.6 million and $952.2 million, NetSuite investors will be acquiring each dollar of the firm's unprofitable revenue for at least $8.03 and as much as $9.89. The latter is roughly in line with what salesforce.com -- a far bigger and more proven entity -- charges.
Therein lies the danger. NetSuite could be the next salesforce.com. But it could also be priced as if it already is.
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Fool contributor Tim Beyers owned shares of Oracle at the time of publication. Find Tim's portfolio here and his latest blog commentary here. Microsoft is an Inside Value recommendation. The Motley Fool's disclosure policy hosted its annual Christmas party last night. Note to whoever brought the fruitcake: Don't ask to be invited next year.