siebelobserver

The Daily Deal Reports Oracle in Talks with Siebel

In a copyrighted story, The Daily Deal Reporter Kate Gibson reports that a source at Oracle revealed to her that Siebel and Oracle are in high level discussions about a possible acquisition. She estimates purchase price to be around $5 billion. If true, this would mean Siebel shares would be worth about $10 a share to Oracle. In trading before the market, shares jumped up from yesterday's $8.59 close to $9.03.

Record Number of Users + Poor License Resuts = Deflation

One of the highlights of the Q1 earnings announcement was that a record number of users - over 290,000 - went live this quarter. According to its own estimates, Siebel Systems has 3.2 million total live CRM users, more than the rest of the industry combined. How does that reconcile with disappointing software license revenues of only $75 million? One word, deflation.

Siebel CFO Feels Pressure from Investors

Operator: Our next question comes from the line of Larry Robbins with Glenview Capital.

Larry Robbins: On the newest prior CapEx guidance I think given in the 25 to $30 million range. We did 3 million in CapEx in the first quarter. Should we still be thinking about 25 million plus of CapEx for this year or is that likely to come down?

Ken Goldman We actually did closer to 8 because we have about 4 million of leases, capitalized leases, I believe. I think we're going to run about 7 million. Frankly, I keep on really trying to squash as much as I can because of obviously the expense so my sense for the year by quarter is it will be in the 5 to 8 or 9 million per quarter give or take so I think there's nothing -- I think our original guidance for the year, my sense is 30 million for the year is about right, give or take.

Larry Robbins Okay. And given the fact that we have I guess 90 million of annualized depreciation and only 30 million of annualized capital expenditures at the high end --.

Ken Goldman: Wait, wait, wait, wait. Depreciation on capital equipment is 13.6, 13.5 million. So it's more like 52 million.

Larry Robbins: Then what's the other 8 million of amortization in the depreciation and amortization line?

Terry Lee: Amortization related to --.

Ken Goldman: Not R&D.

Terry Lee: It's intangible --

Ken Goldman: Intangible is what I meant to say.

Larry Robbins: Okay. So is there a scenario by which we would envision that the Company would not be free cash flow positive? In other words, we have a $60 million cushion between D&A and CapEx. I guess we'd have to lose $60 million on an operating basis in order for us to burn cash. Given --

Ken Goldman: I'm not sure -- I said -- are you looking at all amortization, as opposed to -- I mean, let's say it this way. We run this company for cash and so I expect to be cash flow positive each quarter.

Larry Robbins: Okay. And obviously I'm not talking about like the seasonal adjustments of when bonuses get paid et cetera, I asked a question before and you were nice to take it but as long as we have time I'm going to ask it again. Can you please provide me what the argument is to maintain a $2 billion plus cash balance on a company that never burns cash?

Ken Goldman: I think I said my piece and, you know, I'm not going to add to what I just said already.

Larry Robbins: Well, but there's a very big implicit cost to wait, and I think that shareholders have been asking these questions for a long period of time, and I think that the Company has made public commentary for a long period of time that the Board is studying the issue. And, you know, it is beyond us to think about what exactly the board could be studying. In the business that is free cash flow positive even during difficult times, in a business which has market leadership, right, and in a business where you can right-size your cost structure to the demand environment it seems as though 85 to 90% of your existing cash balance is what normal people would consider to be excess cash that could be utilized productively. I think you yourself made the commentary in the public conference call that you would have to look at acquisitions very, very critically in the medium term given how internally focused you're going to be on your customers, your sales force and right-sizing your cost structure, and so as we look at it, whether a company's cash is utilized to fund capital expenditures and research for growth in the future to fund acquisitions or that that actually should be returned to shareholders. If we listen to your public commentary if we look at your guidance the first two really fall off in which case we end up with this massive excess cash and we simply don't understand what takes so long given the fact that for nine months we've been hearing public commentary from the Company that they're studying the issue, at what point in time would the Board like to share with the shareholders what it is that we're studying? It's shocking.

Ken Goldman: You can ask the question 25 times and I'll give you the same answer 25 times. We're a public company. You have every right to ask the question, you have every right to buy the stock, sell the stock. Right now the way we believe we can add value is by improving performance. That is the only fundamental way we will improve the stock price, and if you think you can use your cash that you have invested in our company more wisely that's certainly your prerogative.

Larry Robbins: I believe that on behalf of the shareholders our cash includes the $2.2 billion that is currently sitting on the Company's balance sheet. So on behalf of all shareholders I think that we have the right to discuss that. Is there any return on capital special inclusive of the cash that is utilized for management bonuses or performance targets?

Ken Goldman: I'm not going to continue on. That cash was there when you bought into the Company so you know it was there when you bought your stock and I have nothing more to say.

Larry Robbins: Could you comment?

Ken Goldman: I have nothing more to say. No.

Operator: Ladies and gentlemen there are no further questions at this time.

Ken Goldman: I'll take other questions but I'm not going to answer the same question 20 different times.

Operator: There are no other questions at this time.

Siebel Systems Reports Q1 2005 Results

Siebel Systems (Nasdaq: SEBL) announced final financial results for the first quarter. Total revenues were $299 million. License revenues were $75 million. Maintenance revenues were $123 million. Services and other revenues were $101 million. Applying GAAP rules, the operating loss was $21.9 million or minus 1 cents a share. Excluding an acquisition related charge of $11 million the company would have earned 1 cent a share.

The company generated $43 million of cash in the quarter, which was offset by $93 million paid in cash for edocs, resulting in a net $50 million reduction in cash from the end of 2004.

“The shortfall in our license business is disappointing and we are taking immediate steps to improve our operating and financial performance,” said George T. Shaheen, CEO of Siebel Systems. "Q1 has been a call to action."

"I fully expect net head count to go down in the second quarter as we rationalize," said Chief Financial Officer Kenneth Goldman

Siebel did not announce plans for a stock buyback, as some investors are demanding, but management said it was considering just such a move, although it had not hired an investment bank to advise it though such a transaction.

In the first quarter Siebel Systems concluded new software licensing agreements with 72 customers and additional software licensing agreements with more than 172 existing customers. The list includes Amylin Pharmaceuticals, Banco de Chile , Banco de Credito e Inversiones, Blue Cross Blue Shield of Florida, Centers for Medicare and Medicaid Services, COVANCE Inc., Echostar Satellite Corporation, Fastweb SPA, Mercury Interactive Corporation, Penton Learning Systems, PROXISERVE,, Robert Bosch, SITA (EGN BV), SITA France, SKF Data Service AB, Symrise GmbH & Co. KG, Nuon NV and Verizon Wireless.

In the first quarter of 2005, Siebel CRM OnDemand Total Contract Value (TCV) grew approximately 245% over the first quarter of 2004 to $10.6 million and total subscribers increased approximately 18% over the fourth quarter of 2004 to approximately 33,000. Siebel Systems also introduced Siebel CRM OnDemand Release 7.

Siebel Releases Siebel 7.8

Siebel Systems has released version 7.8 of its flagship product. The new release features advanced order management and embedded analytics capabilities.

Avec les memes choices avec les plus change

First let me admit to a personal basis. I met Mike Lawrie and found him every bit as authentic in person as he was on stage. People who know him better than me unfailingly voice respect for his professionalism, realism, and determination to make an impact. So the news that the Siebel Systems Board of Directors had accepted his resignation was as big a surprise to me as it was to the company’s customers, partners, employees, and investors. Not sitting on the board, I was not privy to their deliberations. Yet as a long time observer of the company my view is “avec les memes choices avec les plus change” (the more things change the more they remain the same).

Certainly in George Shaheen, Siebel Systems has found an executive with equal or greater gifts. Many in the investment and analyst communities have focused on Shaheen's unimpressive board memberships, the fact that he has not “worked” in five years but mostly have faulted him for serving as CEO and Chairman of Webvan, the ill fated on-line grocery. Yet Shaheen is an executive who has dealt with unusually difficult situations in his business career. Few now recall how bitter the warfare was between auditors and consultants within the old Arthur Andersen In retrospect, Shaheen lead the consultants in absolutely correct direction. If the consulting business had remained a part of the old Andersen, it would have been swept away in the Enron scandal along with, billions of dollars in wealth and thousands of jobs.

WebVan was a very different story. Capitalized at over $1 billion, the company ambitiously tired to solve the biggest challenge in e-commerce, the last mile problem. Instead it became one of the highest profile failures of the dot.com era. Life tells me that bad experiences teach you more than good ones. That being said I find it difficult to imagine that Shaheen would have accepted the position as CEO without seeing a clear path to success. This should be an encouraging sign for those who’s living depend on the company.

Yet both Lawrie’s and Shaheen’s hand are tied. The course of action available to both men is not all that different and in the end it is the market that will determine what happens to the company.

Concord's eHealth Suite Validated

The integration between Concord's eHealth Suite and Siebel Version 7.7 has been successfully validated by Siebel Systems. The product maps business processes to the IT infrastructure, and measures end-user experience, and manages the applications, systems and networks. The eHealth Suite had already completed validation on both Siebel 7 and Siebel 7.5. With this latest validation, joint customers have move end-to-end visibility of their Siebel investment and more management tools.

"Concord can tie together networks, systems, and applications with the user experience," said Tom Casey, Product Marketing Manager APM Products, for Concord Communications. "This allows users to catch application service problems before they impact the business."

Concord's eHealth Suite for Siebel 7.7 also includes complementary management capabilities for Microsoft Exchange servers, Computer Telephony Integration, and other IP telephony applications. By proactively detecting problems before they impact end-users or quickly identifying the root cause once problems arise, companies can improve the performance and availability of their business service.

Concord Communications, Inc. (NASDAQ: CCRD) is a Strategic Software Partner in the Siebel Alliance and was recently acquired by Computer Associates (NYSE: CA).

Siebel and Microsoft Cooperative Technical Support

Successful Siebel implementations and higher customer satisfaction is the primary goal of the alliance between Microsoft and Siebel. Cooperative Technical Support was established to ensure that both companies work more closely together to resolve customer service requests. Microsoft has cooperative support managers and product engineering consultants working full-time at Siebel Systems headquarters in San Mateo, CA.

Joint customers can log a request or issue through either Microsoft or Siebel Technical Support via their respective call centers, an email, or a Web service request. Both companies have processes in place for cross-escalation and each company considers one another’s high severity cases to be their own high severity cases. For more information on cooperative support can be found here:

Tony Kontzer's InfoWeek Blog - Siebel Is Making Me Crazy

If you juxtaposed the surprise firing of Siebel CEO Mike Lawrie against the cover story I wrote about Siebel a couple of weeks ago, you might come away with the impression that I--and thus InformationWeek--was duped. It would be a fair conclusion, I guess, but I want to explain why it may not be an accurate one.

I won't argue that Siebel was in perfect health when I met with Lawrie last month. There were still plenty of questions about the company. How could it fight a two-front war against SAP and Oracle on the enterprise side, and with Salesforce.com on the small- and midsize-business side? How long could it go without offering something truly innovative to the marketplace? How was it going to keep the peace with integration partners if it was going to be so aggressive about taking on more of the service aspect of deployments itself? Why wasn't it doing more with the $2 billion-plus in cash it was sitting on? To what extent would founder Tom Siebel remain an unpredictable wild card in the background? Why did it take so much work to get Lawrie to sit down with me?

But my impression of Lawrie--one that's shared by analysts and customers I've talked with over the past couple of days--was of a very level-headed man who intended to get Siebel on the right path and who appeared to be increasingly comfortable and confident in his new role. And why not? He'd become the face of Siebel, and he was doing an effective job of remaining focused on the customer-centric strategy he outlined at the company's user conference last fall.

What I didn't know was that Siebel was on the verge of pre-announcing a disastrous first quarter. Did Wall Street suspect this, or were the analysts surprised by the numbers? What were the analysts saying behind closed doors leading up to the announcement? I also didn't suspect that Siebel's board members would be impatient enough to believe that they'd seen all they needed to after Lawrie's first 11 months on the job.

It seems that the board may have panicked in the face of the earnings warning and made Lawrie the undeserving fall guy. Word from sources close to Siebel is that Lawrie was completely in the dark, and that as recently as the beginning of the week, he had no inkling that the ax was about to fall. Word also is that Lawrie's declarations of late that he was getting advice from Tom Siebel, and that he took some of it and left some of it, wasn't sitting well with the Siebel founder, who may have been looking for an excuse to step back into control of the company by hiring one of his longtime board confidants. Enter George Shaheen. Perhaps this was a knee-jerk reaction.

Yes, Shaheen had a great run at Andersen Consulting (now Accenture). Yes, he's been on the Siebel board for years, and thus should bring a modicum of knowledge about the business to his new role. But he also was the man in charge during Webvan's spectacular dot-bomb flameout, and, as Patricia Seybold Group suggested in a research note following the leadership change, he's never run a software company before, and his appointment signals that Siebel could be on the block. Of Siebel's efforts to adjust its strategy to changing market conditions, the note proclaimed, "it's too little, too late." Yet, another analyst I spoke with, Joshua Greenbaum of Enterprise Applications Consulting, doesn't foresee anyone having an interest in acquiring Siebel, and suggests that the company's only chance is to use its cash to make some key acquisitions itself.

The bottom line is, I now have no idea where this company is headed at this juncture. And it doesn't appear that Tom Siebel or George Shaheen have any idea, either, which is why analysts who were on a conference call this week to learn about the change were so frustrated. Maybe that revised road map will start to reveal itself at the company's European user conference next week--but I doubt it. In the meantime, I'd be interested to know what all this unrest at Siebel means for you, the InformationWeek readership.

Posted by Tony Kontzer on Apr 14, 2005 at 11:55 PM

Integrated Database Archiving Available

The Archive for Servers Siebel Edition is in general release and has been validated for version 7.5 Princeton Softech announced.

"Compliance is pulling customers one direction and economics is pulling them in another," said James Lee, Vice President Product Management at Princeton Softech. "IT teams are scrambling to manage the business requirements, comply with regulations, while coming in at budget or under budget. Database archiving provides a solution that enables customers to improve application performance and availability, meet data retention requirements, while reducing the total cost of operations."

The Archive for Servers Siebel Edition enables joint customers to employ a tiered data storage architecture that matches the business value of the data to the appropriate storage media. Archived data can be stored on a variety of low-cost storage media: on-line, near line or offline, as well as on WORM (“Write Once, Read Many”) devices to support compliance initiatives.

The product archives data that is rarely accessed to improve Siebel application performance and reducing the total cost of ownership (TCO). The integrated solution allows users to maintain access to current and archived customer data, while improving application performance

“Sibel customers are increasingly realizing they need an effective database archiving solution,” said Craig Crawford, senior director, Siebel Alliances."

Princeton Softech's products are used by more than 2,100 of the world's largest companies across industries in more than 30 countries.