UPDATE 2-NetSuite Inc IPO raises $161 mln, well above range

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NEW YORK, Dec 19 (Reuters) - NetSuite Inc, a software company controlled by Oracle ORCL.O Chief Executive Larry Ellison, on Wednesday raised $161 million with an initial public offering that priced well above expectations.

About 6.2 million shares sold for $26 apiece, according to an underwriter.

That price was double the low end of an initial forecast range of $13 to $16, and $4 a share higher than the top of the final forecast of $19 to $22 on Wednesday.

Underwriters, led by Credit Suisse and W.R. Hambrecht as co-manager, have the option to purchase an additional 930,000 shares to cover overallotments.

If the “greenshoe” option is exercised, NetSuite will have raised about $185 million. Its market capitalization is about $1.5 billion, based on its IPO price. About 10 percent of the company’s outstanding shares are being floated in the public offering.


NetSuite, which will remain majority-owned by Ellison after the offering, plans to use the proceeds to pay down a line of credit from an Ellison-controlled company, which had a balance of $8 million as of Sept. 30, and for capital expenditures, including a second data center.

Between NetSuite’s lofty offering price, and Oracle posting a 35 percent surge in quarterly earnings on Wednesday, it was a good pay day for billionaire Ellison. Oracle shares surged 6.5 percent after it reported earnings.

Ellison, the fourth-richest American based on Forbes 2006 list, invested $100 million in NetSuite in 1998, backing the then fledgling venture of former Oracle executive Evan Goldberg, who is now the company’s chief technology officer.

Post-offering, Ellison will either directly or through family trusts own about 55 percent of NetSuite. At $26 a share, his NetSuite stake is worth roughly $852 million.

Ellison, who is also Oracle’s largest shareholder, has put his directly owned NetSuite stake into a “lockbox” company, effectively stripping him of voting powers, and thereby reducing concerns that his ownership of two software companies could create a conflict of interest.

“Because Oracle has done well, it adds a little bit of cachet to Netsuite, because Ellison is in both,” said Francis Gaskins, president of research firm

Gaskins added that the high offering price is also a likely indication that investors are bullish on NetSuite’s next quarterly results.

NetSuite, which has yet to turn a profit, last month posted a narrower third-quarter loss of $1.8 million versus $9.2 million a year ago, as revenue rose to $28 million from $18 million.

NetSuite's high offering price also coincides with other software makers, including Oracle and NetSuite rival CRM.N, posting strong results.

However, at $26 per share investors paid a premium to own shares in the company, Gaskins said. Based on NetSuite’s offering price, the company has book value of 23.7 versus Salesforce’s 17.7, for example.

In November, Salesforce posted a quarterly profit of $6.5 million compared with $339,000 in the year-ago period. The shares have also surged more than 30 percent since the beginning of the year.

San Mateo, California-based NetSuite, which targets its Web-based software products at small and mid-sized businesses, is expected to begin trading its shares on the New York Stock Exchange under the symbol "N" N.N on Thursday. (Reporting by Lilla Zuill, editing by Phil Berlowitz, Richard Chang, Gary Hill)