NetSuite targets Salesforce clients with discounts

By Jim Finkle

BOSTON (Reuters) - Business software maker NetSuite Inc announced on Wednesday an aggressive plan to wrest customers from Salesforce.com Inc, offering 50 percent discounts to businesses that switch over from its rival.

For now, the discounts are only targeted at Salesforce.com, whose Web-based customer relationship management software is designed for sales staffs.

But NetSuite, which is majority-owned by Oracle Corp founder and billionaire Larry Ellison, also sells other types of software, including accounting programs, and said it may use the same strategy on other competitors.

"We are probably going to be launching similar salvos at some of our other competitors," said Chief Marketing Officer David Downing. "In a bad economy, pricing plays a bigger role in decision-making."

Shares of Salesforce fell over 9 percent and NetSuite fell over 8 percent amid a broad market downturn, with analysts expressing concern about the impact of lower prices on margins of both companies. The tech-laden Nasdaq was down nearly 5 percent and the S&P Software Industry Index down 7 percent.

Worries about Salesforce's sales outlook were ignited last week, after the company's chief financial officer, Graham Smith, told investors that he expected "much more aggressive pricing" from rivals.

Since then, Salesforce shares have lost more than a quarter of their value, versus a 12 percent drop in the S&P software index.

Salesforce.com spokesman Bruce Francis declined comment.