Siebel Still Dragged Down by Economy

Siebel Systems Inc.s business continues to sputter in the slowing economy as first-quarter license revenues were less than half of what they were in the same period the previous year.

Siebel, the acknowledged market leader in customer relationship management software, saw software license revenues, the heart of its business, plummet to $112.1 million from $246 million in last years first quarter. That drop-off brought overall first-quarter sales down to $332.8 million from $477.8 million in the same period last year.

The San Mateo, Calif., company did return to profitability in the quarter after two straight quarters of losses brought on by restructuring charges. But its net income of $4.6 million was paltry compared with last years $64.6 million first-quarter profit.

Siebel Systems Chairman and CEO Tom Siebel said the company saw "significant economic deterioration all around the world" throughout the quarter. Still, he said, the company was on target to meet or exceed its forecasts in the quarter until several large deals fell through in the final week of March.

Siebel blamed the deals collapse on outside factors such as continuing economic uncertainty, war in Iraq and the SARS outbreak. He declined to comment on whether or not the deals would close in the second quarter, though he said the companys license revenues in this quarter would be in the $120 million to $140 million range.

"Clearly, our biggest competitor in the quarter was the economy," Siebel said.

As he has for the last seven quarters when Siebels revenue has fallen on a year-to-year basis, Siebel said the company is consolidating market share and is well-positioned to the grow when the economy rebounds.

"If the economy expands … then Siebel Systems will grow significantly," he said. "If not, then Siebel Systems will not grow significantly."

To continue to rein in expenses, Siebel will cut approximately 250 jobs, or 5 percent of its workforce, this quarter, Chief Financial Officer Ken Goldman said. Those employees scored in the bottom 5 percent in employee evaluations, employees that the company culls every six months, Goldman explained. However, they will not be replaced this time around as they normally are, he said.

The company added more than 160 new customers in the quarter, with the average deal size at $282,000. It increased its cash position during the quarter by $59.2 million.