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    Siebel Reverses Revenue Decline

    By
    Dennis Callaghan
    -
    January 27, 2005
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      For the first time in more than four years, Siebel Systems Inc. saw quarterly revenues climb on a year-over-year basis in fourth-quarter 2004 earnings reported Thursday.

      For the period ended Dec. 31, Siebel reported total revenues of $392.4 million, up from $366.7 million in the same period a year ago. Siebels revenues had declined on a year-over-year basis for 13 straight quarters prior to the last quarter.

      License revenue for the companys CRM (customer relationship management) and analytics software jumped as well, from $150.3 million in the fourth quarter of 2003 to $160.9 million in the fourth quarter last year. The revenue climb helped Siebel increase net income from $40.7 million to $53.8 million.

      For all of 2004, Siebels revenues fell slightly from $1.35 billion to $1.34 billion, though license revenue was up year to year from $482.3 million to $487.1 million. Net income for the year climbed to $110.7 million after a $5.2 million net loss in 2003.

      Siebel CEO Mike Lawrie said the companys performance in the fourth quarter exceeded its own predictions as well as consensus Wall Street expectations.

      “Most importantly, it marks a return to year-over-year growth for the first time since 2001,” Lawrie said during the quarterly earnings call with analysts. “Certainly we have a lot of work left to do, but I sort of view this as another data point in the continuing quest to improve the fundamental performance of our business.

      “We did a lot of good things, but theres plenty of things we need to continue working on.”

      Siebel reported 37 deals over $1 million in the quarter and three over $5 million. Two of those deals were in the companys EMEA (Europe, Middle East and Africa) division.

      The company closed 423 transactions in the quarter with a $380 million average deal size. Of those, 52 percent were new customers.

      “Im pleased with the number of transactions and the number of deals over a million dollars,” Lawrie said. “We had greater breadth in our business and much less dependency on very large deals.”

      Siebel reported a 90 percent renewal rate in the quarter and a 28 percent increase in contract value for its Siebel CRM OnDemand hosted service, defined as subscribers times term of deal.

      Breaking down license revenue, Siebel reported $26 million in sales force automation, $58 million in service applications and $9 million in marketing automation. Customer and business analytics software meanwhile accounted for $36 million in license revenue.

      “Im really pleased with the growth in analytics,” Lawrie said. “This business is really taking off and is something well continue to invest in.”

      Siebel CRM OnDemand accounted for $9.7 million in revenue for the quarter, and $26.1 million for the year, the first full year for the hosted service. Siebel reported 28,024 total subscribers to the hosted service at year end.

      “We basically started the business last year, so Im pleased with what we did,” Lawrie said. “We did roughly what Salesforce.com did in their first year.

      “This is the year weve got to see that growth continue to accelerate. Now were starting with a bigger number.”

      Lawrie said Siebel CRM OnDemand is adding to Siebels user base, with existing customers buying into Siebels hybrid deployment model and extending Siebel CRM OnDemand to new departments for which they hadnt licensed Siebels on-premise software.

      “We were worried about cannibalization, but it has not happened. Instead, weve expanded the market,” he said.

      /zimages/2/28571.gifClick here to read about Siebels Edocs buyout.

      Despite the successful quarter, Lawrie hinted that many changes are in store at Siebel. In the fourth quarter, he revamped the companys Asia-Pacific division, installing new country managers in Japan, China and Australia, as well as in Great Britain, France and Germany in the EMEA group.

      “We had growth in Asia-Pacific, but it was well below where we need to be,” Lawrie said. “The U.S. was OK, but Im not happy with our U.S. performance. We need to do more work and make adjustments to that business as we go forward.”

      Lawrie is strengthening the management teams of key verticals, like financial services, as well.

      “We continue to—as weve always done—to revitalize the leadership team,” he said. “Weve done a lot, but theres more to do, so well continue on that front.”

      Lawrie said the companys sales force automation and field service businesses need to improve as well.

      “In sales force automation and field service automation, I think we lagged behind,” Lawrie said. “We have good products and theyre good markets; its an execution issue. So, well take some actions there as we go forward.”

      Siebel reported almost 900 customers upgrading or in the process of upgrading to version 7.7 of the companys namesake technology and more than 3,500 implementations completed or in progress on version 7.x. The company deployed 149,000 new users in the quarter for a total of 2.9 million.

      “We are really committed to continuing to invest in growth, and were beginning to see early signs that some of those investments are getting traction,” Lawrie said.

      /zimages/2/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

      Dennis Callaghan

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