NetSuite's initial public offering raised US$185.4 million, close to double the amount the company originally forecast the IPO would generate and a positive sign for the market of hosted, software-as-a-service business applications.

NetSuite, a provider of hosted applications for small and midsize organizations, sold 6.2 million shares of common stock at $26 per share via auction and its underwriters acted on their option to buy an additional 930,000 shares, the company said Wednesday.

The $185.4 million is a gross amount from which underwriting discounts and expenses will be deducted, the company said. Moreover, 365,000 of the shares bought by the underwriters were owned by stockholders like NetSuite's CEO and chief technology officer,

so the proceeds from those shares -- about $9.5 million -- won't go to the company.

In the final IPO prospectus, NetSuite had estimated that, if the underwriters exercised their option in full -- as they did -- NetSuite's IPO net proceeds would be approximately $161.9 million.

NetSuite initially set a range of $13 to $16 per share for its IPO but subsequently raised it and eventually set the price at $26 per share on Thursday of last week, the day when the stock started trading on the New York Stock Exchange under the "N" symbol.

At midmorning Wednesday, the stock was trading at $34.85, down about 10 percent from its previous close. Its highest point so far is $45.98.

Incorporated in 1998, NetSuite sells ERP (enterprise resource planning), CRM (customer relationship management) and e-commerce applications on a hosted, subscription-based model, in which customers access the software via the Internet and don't need to install it on their premises.

This software-as-a-service model, championed by companies like Salesforce.com and Google, is considered a significant threat to the traditional approach from vendors like Microsoft of having customers implement software on their own PCs and servers.

As of Sept. 30 of this year, NetSuite had over 5,400 active customers, according to its IPO prospectus. In 2006, the company had revenue of $67.2 million and a net loss of $35.7 million. In the first nine months of this year, it generated $76.8 million in revenue and racked up a net loss of $20.6 million, according to the prospectus.

The IDG News Service is a Network World affiliate.