NetSuite (N)

According to their amended S1 filing, the company plans on spending between $10 and $15 million on capital expenditure including a second data center facility in 2008. The company will most likely take an earnings hit on account of these expenditures as well as for expensing options that are exercised by management and employees. Investors in Salesforce.com are well aware of this situation as option exercises are one of the reasons why Salesforce.com tends to post tiny net income numbers. NetSuite's target audience of small businesses is likely to hurt the most during an economic downturn and are likely to postpone plans to implement ERP solutions.

NetSuite derives 18% of their revenue from international sales and one of the key areas the company plans to focus on is expanding their international sales. Selling in different countries requires localizing the software not only to the language of the target country but also customizing it to local laws and accounting standards. With a core application that is far from satisfactory, I believe the company needs to focus its resources on building a rock solid foundation instead of spreading itself thin by taking on the complexity of international sales.

Moreover, NetSuite CEO Zach Nelson said "we have by far the best development team on the planet". As a customer I am very happy to hear that they have an outstanding team but when you look at the issues that are brought up over and over again by customers in the internal NetSuite forums, I have to say that the company really needs to focus on QA, support and development. Despite purchasing their Gold Support (they refused to sell the product without this support), our experience with NetSuite support has been downright terrible