Siebel Feels Effects of Slowing Economy

Up until yesterday, Siebel Systems Inc., the market-leading CRM software vendor, had been nearly immune from the slowing economy.

Although the company was finding it harder to close deals, it continued to report revenue and earnings increases. But that all changed yesterday when San Mateo, Calif., company reported a fall-off in both revenue and earnings for the third quarter ended Sept. 30.

Siebels revenues were down 14 percent from the same period a year ago, to $428.5 million, while net income fell even more precipitously, to $35.2 million, from $67.5 million in the year-ago period, a 48 percent decline.

Perhaps even more significantly, license revenues fell to just $193.5 million from $308.8 million in the year-ago period. The company made up for part of that shortfall with a 25 percent increase in services and maintenance revenue, to $235 million.

Siebel CEO Tom Siebel assigned some of the blame for the sluggish quarter to the Sept. 11 terrorist attacks, which he said created an environment for selling software and other technologies that has been has been "as difficult as any in the history in the information technology industry."

The attacks were expected to make it difficult for many software companies to close deals at the end of the quarter as business travel was reduced and companies became wary of investing in new technologies because of the more uncertain economic outlook.

In addition, Siebel is facing much more competition in the CRM space than ever before, mainly from the likes of PeopleSoft Inc., Oracle Corp. and SAP AG.

Siebel late last month announced its new Internet-architected Siebel 7 suite, which is due to ship next month and should give the company a healthy bounce in license revenues starting this quarter. Tom Siebel told analysts yesterday he was comfortable with their published estimates of license revenue between $225 million to $300 million in the fourth quarter.