Second-quarter financial reports from CRM software developers, including leaders such as Siebel Systems Inc., E.piphany Inc. and Kana Software Inc., have been almost universally bad.
But users of customer relationship management software said they expect developers to spring back from financial setbacks with enhanced solutions that bring a quicker return on investment.
Siebel, of San Mateo, Calif., reported revenues of $405.6 million in the second quarter ended June 30, down from $560 million in the same period a year ago. Net income also fell year-to-year to $30 million last quarter from $77 million in the same quarter last year. The company has seen revenues and earnings fall from year-ago levels for four straight quarters.
Like his counterparts at other CRM developers, Siebel Chairman and CEO Tom Siebel said the IT spending environment in the second quarter was tougher than in the first quarter. Siebel said that the first half of the year fell way below the companys expectations and that the situation would likely get worse before it got better in the second half of the year.
"The fact is, the market did not turn up, and it doesnt look like its going to turn up in the short term," said Siebel during a conference call with analysts.
In response, the company will cut more than 1,100 jobs, or 15 percent of its work force, and close facilities this quarter. Most of the employee reductions, about 40 to 45 percent, officials said, would come from sales and marketing. Twenty-five percent more would come from the companys services business, with the rest coming from research and development and general administration.
Although E.piphany and Kana have not announced job cuts, they, too, saw lower revenues. E.piphany, also of San Mateo, saw second-quarter revenues fall to $19.4 million from $32 million in the same period last year. The companys net loss was $26 million. Kanas revenue fall was not as precipitous as E.piphanys, as second-quarter revenues fell from $23.6 million to $17.2 million year-to-year. The Menlo Park, Calif., companys bottom line took it on the chin, though, as it registered an $85.7 million net loss, up from $69.8 million in last years second quarter.
Analysts see strong demand for CRM software, and some customers arent put off by the job cuts. Dave Wessinger, CIO of Wescom Solutions Inc. and a Siebel Mid-Market Edition customer, said he is glad to see Siebel get its finances in order.
"They probably ramped up, and at this point, there is no need to carry that kind of overhead," said Wessinger, in Mississauga, Ontario. With Siebels cost cutting, "there is an opportunity for them to do better financially and hopefully pass that on to me," he said.
Wessinger sees room for improvement. "The majority of small businesses arent getting what they need out of the box" from Siebel, he said. Forrester Research Inc. analyst Bruce Temkin said he believes increasing pressure on CRM developers will push them to create more solutions for vertical industries and packages that provide ROI faster. "Well see more of a move toward value, and well see pay-for-performance pricing," said Temkin, in Cambridge, Mass.