NetSuite Expects No Growth From Resellers
NetSuite offered Wall Street guidance on its 2008 projected
results on the 15th, and
revenue growth is expected to be 41-44%, totaling $153 million to $156 million.
It’s part of the fun in finance to figure out why that kind of growth
would result in a stock falling 10% on the news.
Well, NetSuite grew 61.5% in 2007, so it’s a slow down, and because
NetSuite anticipates losing a penny or two each quarter.
But why the lowered rate of growth? Chief Executive Zach Nelson said NetSuite didn’t hire enough sales people to get new deals done, which doesn’t speak well of top management. There is, however, another factor in this. Reports have it that resellers are bumping up against NetSuite’s direct sales organization. Now, anytime there is an in-house sale operation and resellers of the same product or service, there is going to be a clash over territories, established accounts and prospective customers. But NetSuite’s problem seems to be beyond the usual trouble.
For example, “Consulting Insights” recently reported on some real unhappiness with NetSuite at Skyytek.com, the biggest NetSuite reseller and a company that won NetSuite’s “Partner of the Year” award in 2007.
Analysts can talk all they want about multiples and stocks
that get ahead of themselves, but that is only part of the picture here.
NetSuite has clearly annoyed its biggest reseller,.
That kind of friction can and does affect sales.
In fact in the conference call with analysts, Nelson said he didn’t
expect any growth in revenue from resellers.
Now, if you aren’t hiring enough people to sell a product that the market clearly wants, the last thing you want to do is get your resellers mad at you. That friction is not a secret on Wall Street, and when the revenue forecast shows a decline partially caused by that friction, a 10% drop in a single day isn’t surprising.
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