After warning of earnings shortfalls for the second quarter, Siebel Systems Inc. yesterday announced its quarterly tally, which fell far below analyst expectations. The CRM sector leader also says it will be forced to slash more than 1,100 jobs and close facilities.
Revenues for the second quarter of 2002 were $405.6 million, compared to $549.7 million for the second quarter of 2001, a decrease of approximately 26 percent. Net income was $29.8 million, or $0.06 per share, compared with net income of $76.6 million, or $0.15 per share for the second quarter of 2001, representing a decrease of 61 percent and 60 percent, respectively. Thomson Financial First Call estimates were 9 cents per share.
Though it missed the mark widely, the news wasn't exactly unexpected. "Most of the CRM vendor comments seem to be along the lines of bad to worse from the first quarter to the second quarter," said Jonathan Geurkink, a software analyst at Wells Fargo Securities, based in Seattle.
Revenues from license fees for the second quarter of 2002 were $170.1 million, compared to $286.8 million for the second quarter of 2001. Revenues from maintenance, consulting, and other services were $235.5 million, compared to $262.9 million for the same period in 2001.
The Company's cash, cash equivalents, and short-term investments were $2.0 billion on June 30, an increase of $128 million, or 7 percent, from March 31, 2002.
The numbers were bad enough to prompt some decisive action. In an attempt to boost the company's revenue generated per employee up to $260,000 per year on an annualized basis, Siebel will lay off more than 1,100 people in the third quarter, slashing its second quarter headcount down from 7,164 to 6,000 employees in the third quarter. The layoffs bring the employee headcount back down to Siebel's mid-2000 level.
"[Last year], we made the decision to keep these people on. Instead [of laying them off], we eliminated bonuses and merit increases to keep people in anticipation of an upturn of first half of this year. That upturn did not happen. In hindsight we should have reduced our headcount at the end of the second quarter of last year," says Tom Siebel, CEO and founder.
The company plans on paring down operational redundancies, as well with facility closures. The combined charges for the cost of severance packages and facility closures is estimated to be $225 to $250 million, says Paul Wahl, COO of Siebel.
"We would have liked to have done better but overall it's okay given a tough environment," Wahl says.
Tom Siebel says problems are industry-wide and are not expected to improve anytime soon. "Technology vendors are not really making any significant sales. Companies are not spending, deals are smaller, decision processes are longer, forecast and deals continue to move out of quarters, and customers are consistently deferring capital expenditure to conserve cash as they wait for business to improve," Siebel laments. He says the economic situation is further weakened with the crisis in corporate confidence, geopolitical risks, and terrorism. "There's just not a lot of business being done in information technology. We're in a spending environment that's tougher than we thought. We don't see any reason why it should get better in Q3 and Q4."
Siebel shares hit a low of $9.35 in daily trading and closed at $9.62, the lowest level seen since May 1999.
David Myron also writes for Line56.com