New Siebel CEO Shares Game Plan for Growth

George Shaheen says Siebel will cut jobs, manage more efficiently and pursue new market opportunities in order to get back on track.

In a meeting that was often testy, Siebel Systems Inc.s leaders told investors and analysts Thursday that the company would focus on cutting costs, managing more efficiently and going after new market opportunities in an effort to right itself.

At the meeting in New York, George Shaheen, the new chief executive of the San Mateo, Calif., company, said he hoped to reach operating margins of 15 percent in the near- to midterm and more than 20 percent in the longer term.

"Were going to manage ourselves differently, were going to renew our partnerships and alliances and were going to take cost out of this organization," Shaheen said.

One element of the companys cost-cutting strategy will involve reducing the Siebel work force, although company officials did not say by how much.

Shaheen said Siebel has to "level set" its cost base to reach the 15 percent margins he is targeting. "Were going for [revenues of] $400 million a quarter. That way well get to the 15 to 20 percent margins," he said.

"The revenue targets are attainable, albeit a stretch," Shaheen said. "I dont think I can get to profit in the near term—two quarters or so."

Meanwhile, Shaheen said that although Siebel is a leader in the $6 billion packaged CRM (customer relationship management) market and the $500 million hosted CRM market, the company is aiming for growth by attacking what he called the custom CRM market, which represents about a $24 billion opportunity, and the overall customer-facing and business analytics solutions market, which represents a $100 billion opportunity.

/zimages/5/28571.gifClick here to read more about Shaheens appointment as CEO.

To seize on the new market opportunities, Siebel will this summer release a new component assembly technology, code-named Nexus, said David Schmaier, executive vice president of Siebel. Nexus is being developed in conjunction with Microsoft Corp., IBM and BEA Systems Inc., Schmaier said. The technology is based on .Net and on J2EE (Java 2 Platform, Enterprise Edition) application servers and is a component assembly platform for building out service-oriented architectures, company officials said.

Ed Abbo, chief technology officer at Siebel, said Nexus will feature hundreds of pre-built business processes for sales, service and marketing, and it also will feature embedded analytics and come with baked in integration with Microsoft Office, Outlook and SharePoint.

Additionally, Schmaier said Siebel has "co-located" engineers at Microsoft, IBM and BEA to develop the technology, and that Siebel, IBM and Microsoft plan to spend about $250 million between the three companies to develop the technology.

Moreover, while Shaheen said Siebel would build "world-class" components of its own, he said he expects that "integrators will build components as well, and that will be good for us. This is going to be a new dynamic where its not how many bodies you bring, but what technology you bring in your tool kit."

Meanwhile, investors and analysts hit Siebel hard on the $2.2 billion cash "horde" the company is holding onto, rather than using it for other purposes.

Ken Goldman, Siebels senior vice president of finance and administration, and the companys chief financial officer, said, "We think there are ways we can leverage the cash." He noted that the company could "leverage cash for customer credibility" and as a strategic operating and acquisition asset to drive further growth.

Next page: Acquisition rumors fly.