Siebel Slumps In First Quarter

Siebel Systems

Overall revenue of $477.8 million fell 20 percent from $598.8 million in the year-ago period, said Siebel CFO Ken Goldman. License revenue was flat sequentially compared with the fourth quarter and fell 27 percent year over year. The earnings of 12 cents per share met consensus estimates by Thomson Financial/First call.

Company Chairman and CEO Tom Siebel called the results "solid in an economic climate that was a lot worse than anyone expected" and maintained that the market for CRM products remains robust.

While analysts attribute at least part of Siebel's woes to increasing competition from Oracle, PeopleSoft, SAP, Salesforce.com and others, Siebel put the blame squarely on the unwillingness of those who hold purse strings to spend money.

The potentially fast-growing market for CRM in small and midsize enterprises is up for grabs, analysts said. "These companies want something that is simple and easy to use . . . without a million bells and whistles," said Kevin Scott, senior analyst at research firm AMR. Companies such as Salesforce.com, San Francisco, are seeing traction there, said Scott and others.

But Siebel attributed problems to the economy itself, not to the competitive picture.

"The fact of the matter is when we got into March, our customers consistently deferred capital spending until later in the year. We saw over 50 deals worth $1 million or more forecast [to close this quarter move out of the quarter and into the summer. . . . . They did not close because decision makers are holding onto their money. I don't blame them. . . . We're doing that too. If that hadn't happened, this wouldn't have been a solid quarter but a spectacular quarter," Siebel told analysts on a call late Wednesday.

According to new research from Morgan Stanley, CRM as a category is indeed a top priority among CIOs surveyed, moving to eight from 13 in terms of priority spending.

In the light of the Siebel news, Morgan Stanley analyst lowered guidance on the stock, citing company statements that the purchase pipeline is longer than it was last quarter. Analyst Charles Phillips wrote that he anticipates flat license revenue for the second quarter. Morgan Stanley still predicts a 4 percent falloff in license revenue for the full fiscal year.