NEW YORK - Billionaire Larry Ellison's majority stake in software maker NetSuite is driving interest in its initial public offering, despite potential conflicts of interest created by the Oracle Corpchief's involvement.

San Mateo, California-based NetSuite filed in July to sell shares to the public on Nasdaq in a bid to raise up to $75 million in an auction-format IPO.

The company posted an 85 percent surge in revenue to $67 million in 2006 and was a pioneer in the rapidly growing market for "on demand" software, although it has yet to turn a profit.

NetSuite's products are accessed via Web browsers and hosted on servers maintained by the company, a burgeoning area that software companies are increasingly looking to exploit.

Ellison, co-founder of Oracle, controls about 74 percent of NetSuite through an affiliate company and family trusts and will still hold a majority stake after the IPO, according to a filing with the U.S. Securities and Exchange Commission.

The business maverick, who is Oracle's largest shareholder with a roughly 25 percent stake, has poured millions of dollars into NetSuite, raising concerns his involvement in the newer software concern could be at odds with his role at Oracle, which NetSuite calls "a potential competitor of ours."

NetSuite's target audience is small and mid-size businesses, while Oracle goes after Fortune 5000 corporations, who are generally buying installed, not "on demand", software.

"You wonder when there is a potential corporate opportunity that turns into a personal opportunity. It is a perpetual problem," said Patrick McGurn, special counsel for Institutional Shareholder Services, which provides proxy advice to institutional shareholders, such as mutual funds.

In this case, however, it may be of greater concern to Oracle than to those weighing an investment in NetSuite, McGurn said.

"From an Oracle shareholder or the Oracle board's perspective, I think you have to be incredibly worried about potential conflicts. These are two businesses that may be directly competing against each other...," he said.

Oracle declined to comment.

READY TO FLY

Investors appear prepared to bury any conflict of interest concerns in the interest of getting a piece of NetSuite.

"There is no question that that is the deal commanding the most interest on the street right now," said Scott Sweet, managing director of research firm IPOboutique.com. "It is software and it has connections with Larry Ellison. It is a nice story."

Ellison, who ranked the fourth-wealthiest American according to Forbes 2006 list, has amassed a fortune worth about $19.5 billion, largely through his stake in Oracle, a company he co-founded three decades ago.

Oracle investors have also done well. Taking into account stock splits, a $10,000 investment in Oracle's 1986 IPO would now be worth about $4.4 million.

Even the recent market turbulence has not put much of a dent in the stock, which is up 14 percent so far this year.

"People will look at (NetSuite) and say 'gosh he's made a lot of money for investors' and has been a real leading light in the technology arena. The very fact that he does own so much (NetSuite) stock will be positive," said Linda Killian, a portfolio manager of IPO Plus FUND, a mutual fund advised by Renaissance Capital.

TECH BUZZ

NetSuite's IPO plans come on the wings of software-maker VMWare Inc'sblockbuster offering last month and a rising number of successful U.S. tech offerings in recent months, factors that IPOboutique's Sweet said are increasing the buzz around NetSuite's offering.

In the second quarter, 18 technology firms raised more than $4 billion through IPOs in the United States, according to a recent survey by accounting giant PricewaterhouseCoopers.

"Both top line and bottom line are growing at phenomenal rates. It won't be long for NetSuite, based on projections, to go profitable," Sweet added. "It will be exceptionally well received, especially after VMWare's debut."

VMWare, a company whose products are used to help manage data centers and control technology, has been the best performing 2007 IPO, having seen its shares gain about 134 percent since its Aug. 13 offering.

NetSuite's closest competitor, Salesforce.com Inc saw its revenue grow about 60 percent to $497 million in the year ended Jan. 31, 2007, and recorded profit of $481,000 for the same period.

(Additional reporting by Jim Finkle)

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