NetSuite CEO Zach Nelson has brilliantly wiggled out of a tough spot. His company was on a collision course with Oracle, the tech giant run by Larry Ellison, Nelson's ex-boss and the original backer of NetSuite.
Under Ellison, Oracle has gone head first into cloud computing, including launching online versions of its Oracle Fusion apps, its flagship financial, enterprise resource planning, and human resources apps.
But wait! That was supposed to be the role of NetSuite, a company Ellison backed at its founding in 1998.
So Nelson and Ellison today announced a good plan to more or less divide the market—and conquer their enemies.
Oracle's Fusion apps will be for large enterprise deals. NetSuite will go after the midsized market and deals involving smaller business units of large enterprises, going head-to-head with Microsoft and SAP.
New software unveiled today will let subsidiaries using NetSuite easily integrate with headquarters running Oracle installations, so it doesn't have to be an either-or choice.
"If Oracle and NetSuite are [at] the same table, one of us in wrong deal," Nelson told Business Insider. Together, they can focus on their joint enemy, SAP, which Nelson says is trying to grab more midmarket share with its big push into cloud.
Ellison was well-motivated to agree. He and his family actually still own more than 50 percent of NetSuite. Those shares are locked in a "nonvoting trust," Nelson said, meaning they vote in proportion to how other shareholders vote. Ellison can, however, still vote on changes of leadership, perhaps the most important question shareholders tackle.
"Oracle wanted him to basically have those shares locked up to avoid any appearance of conflict of interest," Nelson says.
NetSuite shares have more than doubled from a low of $25.32 a year ago. With shares trading above $60 today, NetSuite has a $4.4 billion market cap. Ellison's stake is worth a sizeable $2 billion-plus.
Granted, Ellison, one of the world's richest men, is worth about $38 billion. But why push NetSuite off a cliff if there's a better way?
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