Siebel 2Q Sales Won't Meet Expectations

The CRM application vendor warned that a shortfall in software license sales will reduce expected revenue and earnings for the quarter.

Rick Whiting, Contributor

July 8, 2005

2 Min Read

Siebel Systems Inc. is once again disappointing its investors. The customer-relationship-management software vendor reports that financial results for its second quarter ended June 30 will come in below analysts' expectations.

Siebel said it expects total revenue for the quarter to be in the range of $312 million to $314 million. That's at the low end of the company's own guidance of $310 million to $330 million and below the analyst consensus estimate of $319.2 million. In last year's second quarter, Siebel reported total sales of just over $301 million.

The company also indicated that earnings would fall below its earlier guidance of 3 to 4 cents per share.

Perhaps more significant, Siebel said it expects to report license revenue of $78 million--down 18% from one year ago and significantly below the company's earlier guidance of license revenue of $90 million to $100 million. License revenue is a key metric of a software vendor's growth.

In April, Siebel disappointed investors when it disclosed that sales and earnings for its first quarter, hit by lackluster license sales, would fall below expectations. Soon after, CEO Mike Lawrie was replaced by George Shaheen.

The company expects maintenance revenue for the second quarter to be approximately $123 million and services and other revenue to be around $111 million to $113 million. Total contract value for Siebel CRM OnDemand, the company's hosted offering, is expected to be approximately $20 million.

While the results mean sequential growth in all revenue categories for the company, Shaheen said in a statement that the vendor "underperformed against our license revenue and profitability goals." He said that while Siebel had a sufficient number of deals in the sales pipeline to meet the company's earlier guidance, some major deals, particularly in the public sector, were delayed in the last days of the quarter and failed to close.

In a report issued Friday, the Maxim Group analyst firm said that Siebel's heightened focus on the small and midsize business market "could have again led to management taking its eyes off the 'big-deal ball.'" The report also noted that Siebel is trying to complete in the crowded market for analysis software.

Siebel said it has adopted a restructuring plan to cut costs that would result in $75 million in charges for the quarter. While the company did not provide details about layoffs, it said the charges would include $6 million for employee severance and $62 million relating to the consolidation of leased assets and the sale or write-off of fixed assets.

Siebel will report final results for the quarter on July 26.

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