Siebel to Cut 1,100 Jobs

Siebel scales down business in wake of falling earnings and revenues.

Siebel Systems Inc. will eliminate more than 1,100 jobs, about 15 percent of its workforce, this quarter as it scales down its business in the wake of falling earnings and revenues, company officials said Wednesday.

Siebel reported revenues of $405.6 million in the second quarter, ended June 30, down from $560.2 million in the same period a year ago. License revenues tumbled from $286.8 million in last years second quarter to $170.1 million this year.

Siebels net income also fell year-to-year from $76.6 million to $29.8 million, well below analysts consensus estimates. The San Mateo, Calif.-based customer relationship management software developer has seen revenues and earnings fall from year-ago levels for four straight quarters now.

Siebel chairman and CEO Tom Siebel said the IT spending environment in the second quarter was tougher than the first quarter. He 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 Wednesday afternoon.

"The market is very, very weak. The economy globally is very, very weak."

In response, the company will cut employee headcount and close facilities this quarter, which will require it to take a $225 million charge against earnings.

About 40 to 45 percent of employee reductions will come from sales and marketing, with an additional 25 percent from the companys services business, and the rest coming from research and development and general administration.

In all, Siebel is expected to reduce headcount to 6,000 from 7,164 at the end of June. About 70 percent of those cuts will be in North America, officials said. The company shed 148 jobs during the second quarter.

Siebel said the company should have made the cuts after last years second quarter but thought that the economy would rebound. Siebel said the economic recovery forecast by Federal Reserve chairman Alan Greenspan doesnt seem to apply to his customers.

"As much as Id like to think were immune to this, were not," he said.

While Siebel said both high-end and mid-market deals were affected, the problem seems particularly acute at the high end. The company closed just three deals of $5 million or more in the quarter after closing 12 such deals in the first quarter. It still managed to close 51 deals of more than $1 million, down from 53 last quarter.

Still, Siebel said optimistically his company gained market share in the quarter and continued to dismiss competitive threats from other vendors.

"The competitive dynamics in CRM really are not that significant," he said.

"Were extremely well-positioned to take advantage of the market opportunities that are out there," continued Siebel, noting that CRM remained a top spending priority at most companies, and that the market remained largely untapped.

"Were growing faster than the rest of the market and faster than our competitors."

Siebel added 60 new customers in the quarter, which accounted for 57 percent of the companys revenue. Company officials also said that about 60 customers were live on Siebel 7, the latest version of the companys product, which became available last November. An additional 700 out of the companys 3,500 customers are currently in the process of upgrading to Siebel 7, officials said.