Siebel Stock Tumbles On Rumors Of Bond Sale

Siebel Systems stock fell $1.01, or 3.17 percent, to close at $30.89 on the Nasdaq. Earlier, the stock fell as low as $28.71. The stock has risen 9.5 percent so far this year.

Siebel ended last year with $1.66 billion in cash and short-term investments, adding $510 million in the fourth quarter alone, raising some questions as to why the company would need the additional money from the sale of a convertible bond.

"The stock sold off due to the following rumors. They may be issuing a convertible bond offering and the chief financial officer has resigned. Another rumor was that the stock is down because there may be accounting issues similar to alleged accounting problems at Computer Associates," said Ali Saadat, options specialist with Letco LMM on the Pacific Exchange.

Siebel spokeswoman Stacey Wueste said she had spoken with the company's chief financial officer, Kenneth Goldman, who told her that he had no plans to leave San Mateo, California-based Siebel. She declined to comment on the rumors of the convertible bond sale.

"It's completely false speculation and he has no plans to resign," Wueste said.

Robertson Stephens analyst Eric Upin said he had heard the rumor of Goldman's departure, and discounted it.

"In talking with people we've known at the company for years and talking directly to their IR (Investor Relations) department, the company adamantly denies it," Upin said. "Our call is that it is unlikely that this guy is getting pushed out. He's quite established and an important figure there."

Convertible bonds can be traded in for stock and can dilute the value of existing shareholders' stakes in the company's stock. Siebel, at the end of 2001, had 519 million shares outstanding on a fully diluted basis, assuming all options outstanding had been exercised.

"Could Siebel do a convert, yes," Upin said. "Do they need the cash, no."

Turnover was brisk on Siebel options, especially in the at- the-money March 30 puts and calls, traders said on two U.S. options exchanges. An at-the-money option is when the stock price is at the options strike price.

An American-style put option gives its buyer the right to take a short position in the underlying stock at the strike price at any time until expiration. A call conveys to its buyer a similar right, but to purchase the underlying stock.

"We have seen the stock have a pretty dramatic move downward during the past few days. We are seeing a larger buyer of March 30 calls, which suggests that the customer believes that the stock has reached a bottom and will go above $30," Saadat said.

Siebel shares have declined 5.6 percent since Friday's close.

A trader on the Chicago Board Options Exchange cited no reason for the brisk option activity on Siebel.

But he noted active buying in the March 30 puts, possibly as a hedge or speculation that the stock may go below $30.

Stock owners sometimes buy puts or sell calls to protect against a move lower in the stock price.

By mid-afternoon, about 27,777 calls and 16,938 puts changed hands combined across the five U.S. options exchanges, according to Track Data, a privately-owned company that provides real-time market data for options and securities.

That turnover exceeded the average daily options volume during the last 22 trading sessions of 16,393 contracts, Track Data figures showed.

(with additional reporting by Doris Frankel in Chicago)

REUTERS

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