Siebel Systems Airs 2Q Struggles, Restructures

With confusion swirling around the enterprise applications space caused by
Oracle and PeopleSoft’s
battle for the No. 2 slot, Siebel Systems showed that it felt the reverberations caused by that conflict
Tuesday by announcing a 67 percent drop in second-quarter earnings and the
termination of about 490 employees.


The San Mateo, Calif. based software maker also vowed to restructure by
consolidating facilities and moving some operations overseas. The news does
not come as much of a surprise as the vendor said earlier this month that it
anticipated lowered revenues due to the chilly economic and sector climate.


Siebel’s net income was $9.8 million, or $0.02 per share, compared with
earnings of $29.8 million, or six cents a share from 2Q 2002. Revenues for
the second quarter of 2003 were $333.3 million. New license sales were
$109.9 million, with $223.4 million in sales from maintenance, consulting
and other services. Siebel had reported new license revenues of $170.1
million a year earlier.


Siebel anticipates the restructuring plan will help the company achieve a 15
percent operating margin at current revenue levels. The company expects to
end the third quarter with approximately 5,000 employees. The plan is
expected to achieve quarterly savings of nearly $30 million by the fourth
quarter of 2003 and nearly $40 million by the second half of 2004.


Siebel Chief Executive Officer Thomas Siebel attributed some of his
company’s struggles to Oracle Corp.’s hostile takeover attempt of PeopleSoft
in a conference call.


Echoing PeopleSoft CEO and President Craig Conway’s comments of a week ago,
Siebel said the turmoil led to a purchasing freeze, with customers looking
to defer purchases until issues in the space are settled.


More broadly, the enterprise applications space is mature and has been ripe
for acquisitions of late. While PeopleSoft’s successful bid for Denver’s
J.D. Edwards was widely publicized for having triggered
Oracle’s hostile maneuver, there have been other acquisitions. Dutch
applications provider Baan was purchased by SSA Global Technologies just
yesterday and Toronto-based Geac snapped up Comshare earlier this month.


In fact, Siebel itself has been mentioned as a possible takeover target,
leaving German giant SAP as the only company safe from predators or other
suitors.

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