Siebel management attributed the shortfall to difficulty closing deals during the final part of the quarter, ending June 30. Large deals in particular were down substantially for the enterprise-application vendor. Siebel closed 15 deals worth more than $1 million in the second quarter versus 29 such deals in the first quarter.
Financial analysts appeared stunned by the dramatic disparity between earlier guidance and Siebel's current expectations.
"The size of the license revenue misses were extraordinary, suggesting that new business literally fell off a cliff in June," wrote Smith Barney analyst Tom Berquist in a report.
"Although we cut license revenue last week at quarter close, we were still shocked by the magnitude of the license miss," Merrill Lynch analyst Jason Maynard wrote in his "Server & Enterprise Software" update.
And John Torrey, an analyst with Adams, Harkness & Hill, worried in a report that Siebel's other efforts, such as hosted CRM, business analytics, and data and application integration, "do not seem to be picking up the slack in the core CRM business."
Siebel's shares fell as much as $1.24, or nearly 13.5%, by early afternoon.
Siebel's results--combined with a spate of negative earnings announcements from companies such as BMC Software, Informatica, Micromuse, PeopleSoft, Sybase, Veritas, and webMethods--has some analysts questioning whether there actually is a recovery in application software.
Berquist, for example, wondered if he'd focused too much on positive macroeconomic trends, CIO surveys, systems-integrator hiring, and government data on capital expenditures when predicting applications as the big winners in the enterprise market.
"While it is still possible that this data is a leading indicator of better purchasing cycles, we are more worried about ... other factors reducing the strength and duration of the software recovery," he wrote.
Charles Di Bona of Sanford Bernstein Research has for months suggested that businesses are more intent on buying infrastructure software than applications. Di Bona used Siebel's latest numbers to reaffirm that view in Thursday's Bernstein Research Call newsletter, saying Siebel's announcement is "another data point supporting our thesis that we are currently in the midst of an infrastructure-focused spending cycle."