Ellison's NetSuite Headed for IPO

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Investors and analysts will watch NetSuite closely for clues on the role Ellison will play, and whether his control of an Oracle competitor (both sell accounting software and sales management software) poses a conflict of interest. "As long as Larry Ellison has a controlling stake, the company is going to do whatever Ellison wants, even if other investors don't like the strategy," says Ritter, the University of Florida finance professor. Oracle declined to comment.

Lots of IPO Company

Several years ago, Oracle licensed its name to NetSuite for use in its products, but the arrangement fell apart after NetSuite beat Oracle on some key deals. In January, NetSuite auditor Deloitte & Touche recused itself from auditing the company's books because it was also Oracle's accounting firm. NetSuite's auditor is now KPMG International.

Assuming the IPO goes off as planned, NetSuite shares will debut in a public market that has been warming to debuts of tech issues (see BusinessWeek.com, 1/8/07, "The Return of the Tech IPO"). During the first half of 2007, the 17 tech firms that went public raised $2.4 billion, according to market researcher Dow Jones VentureOne. By comparison, 20 tech-industry IPOs raised $1.95 billion during all of 2006. The pipeline is filling up, too. EMC (EMC) unit VMware filed its S-1 in April. Open-source software company MySQL could file later in 2007 (see BusinessWeek.com, 6/26/07, "The Worth of Open Source? Open Question"). And social-networking site LinkedIn has hired a chief financial officer and other executives in preparation for a public offering down the road.

"You're seeing a higher-quality company getting ready to go public on the tech market now," says Eric Gebaide, managing director at investment bank Innovation Advisors. NetSuite is finally poised to join those ranks, if it can navigate the shoals of an unconventional offering and keep Ellison's critics at bay.

Ricadela is a writer for BusinessWeek.com in Silicon Valley.