NetSuite Reports Q3 Sales Growth, Declares Victory Over SAP

It was supposed to be NetSuite's third-quarter earnings announcement Thursday. But, it turned into more of a victory lap following archrival SAP's disclosure this week of its plans to scale back development of its competing Business ByDesign cloud software.

"What they once positioned as their 'NetSuite killer' is itself being killed off," NetSuite CEO Zach Nelson crowed during an earnings call with financial analysts. "SAP admitted that after seven years and billions of Euros of investment in Business ByDesign, they are de-committing from that cloud-based product." Later in the call, Nelson referred to the SAP product as "a spectacular failure."

Earlier this week, SAP executives acknowledged the company is scaling back the development of Business ByDesign and focusing sales of the cloud ERP applications on professional services companies. SAP will instead concentrate its research and development resources on building an ERP platform based on its HANA in-memory database.

Wednesday NetSuite launched what it called the "SAP Business ByDesign Sunset Migration Program" under which the company is offering Business ByDesign customers one free year subscription to NetSuite's cloud applications and free data migration to speed the transition.

NetSuite reported revenue of $106.9 million for its third quarter ended Sept. 30, up 34 percent from $79.8 million in the same period one year ago. The company reported a net loss of $16.8 million compared to a net loss of $8.0 million one year earlier. Cash flow from operations was $14.6 in the quarter, down from $15.2 million in the third quarter last year.

During the quarter, the company added more than 320 new customers, Nelson said. While many were midsize companies, some were larger, multinational enterprises, reflecting NetSuite's efforts to expand upmarket sales of its NetSuite OneWorld applications. "So while SAP failed to deliver in the mid-market, we're having amazing success moving into their core enterprise space," Nelson said.

This week NetSuite announced a deal to acquire TribeHR in a move that adds human capital management applications to NetSuite's product lineup. "We plan to be the No. 1 provider of HCM to midsize companies as we are with our cloud ERP offerings," Nelson said.

NetSuite recorded growth in orders in North America, Asia-Pacific, and Europe, the Middle East and Africa (EMEA) during the quarter, Nelson said. "And our channel partners' bookings continue to grow at a rapid pace," he said.

NetSuite is also having success in recruiting new solution providers to its NetSuite Solution Provider Program, including channel partners who work with competitors Microsoft, Sage and SAP.

Thursday the company said recent additions to the program included Sabre Solutions, a La Mesa, Calif.-based solution provider that works with Sage; The TM Group, a Farmington Hills, Mich.-based solution provider that works with Microsoft's Dynamics applications; and ADN Corp., a Guatemala City, Guatemala-based company that also sells SAP applications in Central America and the Caribbean.

NetSuite expects revenue for all of fiscal 2013 ending Dec. 31 to be in the range of $410 million to $411 million. For fiscal 2014, the company is forecasting revenue in the range of $525 million to $530 million.

PUBLISHED OCT. 24, 2013