Siebel Gains Momentum in Q4

Siebel Systems announced results for the fourth quarter ended December 31, 2003: They were well above the range of management guidance presented this past October, and were in line with preliminary financial results presented January 5. Total revenues for the fourth quarter of 2003 were $366.7 million. Revenues from license fees were $150.3 million. Revenues from maintenance, consulting, and other services were $216.5 million. Net income for fourth-quarter 2003 was $41.5 million; which is good news for shareholders compared to the $38 million loss reported in the previous fourth quarter. Revenue for the year dropped from $1.63 billion in 2002 to $1.35 billion, an 18 percent slip. However, net loss dropped from nearly $36 million in 2002 to just over $3 million in 2003. In a conference call company CEO Tom Siebel was cautiously optimistic about the company's future performance. And although the company has been touting its hosted CRM model, Siebel says that hosted offerings should account for just 10 to 15 percent of revenues going forward. "If it turns out we're wrong and it's bigger, than that's OK too," Siebel says. Siebel also says that the company will continue is aggressive acquisition strategy throughout 2004, but will be cautious as to which firms it buys: "We will not enter a market unless we are sure we can attain a 50 percent market share." Patrick Walravens, a financial analyst with JMP Securities, says he thinks it will be tough for Siebel to keep up its promising numbers. "We have an uneasy feeling Siebel is struggling to replace SFA as its growth engine," he says. "The high end of that market is mostly saturated already. We do not think Siebel will rise to that level of dominance in the new markets it is targeting, such as analytics, integration, hosted CRM, and incentive compensation." Sheryl Kingstone, CRM program manager at the Yankee Group, says Siebel can take advantage of the momentum. "Siebel has taken a big hit over the past few years as being expensive and difficult to use, but they are still the leaders in CRM," she says. "Our research shows that budget dollars for CRM has increased on average 20 percent for 2004. If they can change their brand perception and demonstrate lower total-cost-of-ownership with the newer releases, then they will keep their leadership position." To achieve this Siebel will need to substantially beat estimates in the first quarter as it did in the fourth. Previous management guidance provided on October 15, 2003, had been for total revenues for the fourth quarter of 2003 to be in the range of $335 million to $355 million, license revenues to be in the range of $120 million to $140 million. Preliminary financial results provided on January 5, 2004, had been for total revenues for the fourth quarter of 2003 to be approximately $365 million, license revenues to be approximately $150 million, and earnings-per-share to be approximately eight cents.