Siebel Earnings Slump Stirs Rumors of Oracle Buyout

 
 
By John Pallatto  |  Posted 2005-04-29 Email Print this article Print
 
 
 
 
 
 
 

Opinion: Internet rumors suggest that CRM software producer Siebel Systems, stung by a poor first-quarter earnings report, is talking with Oracle about a buyout. But why would Oracle want to buy Siebel?

It didnt take long after Siebel Systems reported painfully poor quarterly earnings before the rumors started that the CRM software company was going to become the latest target in Oracles relentless buying spree. News reports circulating on the Web on Friday indicated that Oracle and Siebel were actively talking about making a deal. For the record, neither company would comment on those reports. On face value, reports that Siebel would be willing to talk about a buyout with Oracle are plausible. Siebel has been struggling to return to consistent growth since its sales and earnings got whacked by the 2001 IT recession.
The company fought through 13 straight quarters of declining revenue until it finally reported sales uptick in the 2004 fourth quarter only. But the good news didnt last long because Siebel reported another sharp drop in revenue this week.
Read more here about Siebels disappointing first-quarter earnings. The poor results cost Siebel CEO Michael Lawrie his job less than a year after he took the helm. The appointment of Siebel board member George Shaheen as the new CEO rather than hiring another professional business manager from outside the company might suggest that the board gave Shaheen a mandate to seek a deal with Oracle or another suitor.
Lawrie had been a successful business-turnaround specialist at IBM. The Siebel board may have concluded that if Lawrie couldnt succeed, then maybe nobody could. Thus they may have decided it was time to shop the company around. This is not the first time rumors have circulated that Siebel was ripe for a buyout. Whether or not Oracle does in fact intend to buy Siebel, both Siebels recent market weakening and Oracles appetite for acquisition lend credence to the rumors. "Oracles clear strategy is domination at all costs, at least at this point in time," said Phil Fersht, an analyst at the Yankee Group. "It wouldnt surprise me if there were discussions" taking place between Oracle and Siebel, he said, although he guessed that a final sales price would be significantly less than the $5 billion figure now being bandied about. What kind of a partnership would Oracle and Siebel make? An interesting one that would create major tension among SAP, IBM, Oracle and Microsoft. Oracle, already a strong player in CRM, would acquire in Siebel a large customer base, with it being a top-tier CRM vendor. Founded by corporate chairman Tom Siebel, a man whom many credit with creating the entire concept of CRM, the company is known for advanced analytics and performance management, which would be a jewel in Oracles CRM crown. "They really led the whole philosophy of CRM in the late 90s, at the turn of the century," when executives at the highest lever were focusing on increased profitability, Fersht said. "They had a solution that got attention at the board level, as opposed to ERP [enterprise resource planning], which was about increasing efficiencies." Next Page: How much CRM is enough?



 
 
 
 
John Pallatto John Pallatto is eWEEK.com's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.
 
 
 
 
 
 
 

Submit a Comment

Loading Comments...

 
Manage your Newsletters: Login   Register My Newsletters























 
 
 
 
 
 
 
 
 
 
 
Rocket Fuel