In a surprising move announced Wednesday, Michael Lawrie has been replaced as CEO of Siebel Systems Inc. by longtime Siebel board member George Shaheen.
Lawrie submitted his resignation at the request of the board, according to Siebel chairman Tom Siebel, whom Lawrie had replaced as CEO last May.
“After a comprehensive review of the companys operations and performance, the board determined that a change was necessary, and the board and Mike mutually agreed that Mike would step down as CEO,” Siebel said during a conference call with financial analysts Wednesday.
Lawrie could not be reached for comment.
Siebel said Lawrie was replaced strictly because of the companys poor performance. Siebel Systems announced last week that it would miss analysts consensus revenue estimates for the first quarter of this year by about $37 million and post a loss of between $7 and $9 million.
“Its all about performance,” Siebel said. “When the board evaluated the operations and performance of the company over the past year, its all about improved and acceptable performance; thats the only issue.”
Siebel said Lawrie was judged on the performance of Siebel Systems since he became CEO, not just on the most recent quarter. In the fourth quarter of last year, Siebel under Lawrie broke a string of 13 consecutive quarters of falling revenues. In the third quarter of last year, the company reversed a long-term trend of falling license revenue. But those gains were apparently short-lived.
“If you look at the companys results over the last four quarters, in general they did not meet investors expectations and did not meet internal expectations,” Siebel said. “The board did a very thorough review of all operations and performance and thought it was in the best interest of shareholders and the company to make a change.”
Shaheen, 60, has been a member of Siebels board of directors since 1995. He was CEO of Andersen Consulting, now Accenture, for 10 years, guiding that company from $1 billion to more than $8 billion in revenues in that time.
“In George Shaheen, the board has identified the perfect leader for this company. Hes a proven leader, a man with drive, a man with a commitment to excellence,” Siebel said.
While Siebel lauded Shaheens performance at Andersen Consulting, he made no reference to Shaheens more recent and checkered experience as a CEO, at now defunct Internet grocery delivery service Webvan.
Shaheen left Andersen Consulting to head up Webvan in October 1999. He left Webvan in April 2001 with the companys stock trading at pennies a share and more than $600 million in accumulated deficits.
Shaheen later came under fire for repaying a $6.7 million loan he had received from Webvan—to pay taxes on company stock options he received as part of his compensation package—by returning the shares he had bought, then worth just $150,000. He was also widely criticized for receiving a termination package from Webvan that would pay him $375,000 a year for life after he left the company. Shaheens salary as Webvan CEO was just $500,000.
Plagued by poor service staggering capital expenditures to build out its delivery network, and what many analysts regarded as a poorly managed acquisition of rival HomeGrocer, which Shaheen engineered and oversaw, Webvan closed its doors just three months after Shaheen departed, burning up to $1 billion in cash by some estimates.
Siebel stressed that Shaheens appointment as CEO was not an interim position.
“George has stepped up to leadership to deliver consistent performance and improve the results of the company in the short term, medium term and long term,” Siebel said.
Shaheen, however, gave few specifics on how he would do that.
“Well keep improving and delivering on the promise of value to our customers and the marketplace,” he said. “We need to size our infrastructure and related costs to our business and continue to ensure that our product development strategy is aligned to the ever-changing needs of our customers.”
In fact, Shaheen restated many tenets that Lawrie frequently stated, especially that Siebels success was tied to its customers success, that the company was well-positioned to compete in the $100 billion market for customer-facing applications, and that the company wouldnt ship software until it was ready to ship.
“I believe that the key role I have going forward is to deliver on the promise of customer value,” he said. “If we do that and make the customer feel like theyre getting value on products and services, that is the best fuel for performance results.”
Shaheen gave few specifics on what he would do differently from Lawrie to deliver those results. Some analysts on the call grew impatient with Shaheen and pointed out to him that the companys stock price had steadily dropped since the call began.
“In the future, were going to pay a lot of attention to operating performance, but Im not going to comment on what happened or didnt happen in past,” Shaheen said.
He also gave no specifics on what Siebel would do with its $2.2 billion cash horde, beyond saying that the cash was a “real asset” and that the company had “many options.”
“As it relates to the utilization of our cash position, thats a board-level decision,” Shaheen said.
Shaheen did mention during the call that Siebel had to increase its license revenue. Lawrie had often seemed more concerned with increasing the companys services revenues, though Siebel said he wasnt aware of any “disagreements” in strategy Lawrie had had with the Siebel board.
“Were in a very strong position with our products and in customer loyalty and support, its not like weve fallen off the charts,” Shaheen said. “I just think we can do better. Thats what we intend to do.”
He again, however, gave little guidance on what he might do differently than Lawrie.
“I can only speak for my own abilities and how I intend to approach things,” he said. “I have stayed close to the tech community through various board positions; I probably have gotten closer to Siebel because Ive had the time to do it. I understand the business and the company, I understand what its going to take to do a better job and Im going to go after it aggressively. Im confident in my ability, so well see what happens.”
Marc Benioff, CEO of Siebel rival Salesforce.com Inc., predicted last August that Lawrie would not be able to turn Siebel around, though at the same time he said he had great respect for Lawries abilities as an executive. But the problems with Siebels business model were too intractable for Lawrie to solve, Benioff said at the time.
Wednesday, he stuck to that line.
“I dont think there is a tougher job in this business right now than trying to turn that company into a success,” Benioff said in San Francisco.