Siebel's Profits Fall 17 Percent, Sees Growth In 2002

Shares of the No. 1 vendor of software to automate selling and customer service activities climbed, to $35.73, in extended trade on Instinet following the company's issuance of its results and outlook. The stock had finished the regular Nasdaq session $2.18 higher, at $34.80, on renewed optimism that software sales would begin ticking up by year end.

San Mateo, Calif.-based Siebel posted net income of $65.9 million, or 13 cents per diluted share, compared with $79.5 million, or 15 cents, a year ago. The year-earlier results included a nonrecurring charge stemming from two acquisitions.

The results hit the high end of Wall Street analysts' range of forecasts and handily beat their consensus estimate for earnings of 9 cents, as compiled by tracking firm Thomson Financial/First Call.

Total revenue fell, to $481.4 million from $581.6 million, last year, but came in ahead of analysts' average estimate of $440.3 million.

Software license revenues- a key measure of performance and future growth--fell, to $250.2 million from $365.2 million last year, in line with the company's earlier forecast.

Business Returns to Normal

"It looks like a stellar quarter for the company," says Edgar Bierdeman, analyst at Moors and Cabot. "It bodes well for other software companies and the demand picture in general."

Bierdeman also says the company's balance sheet got stronger in every key area.

During a conference call with analysts, the company's CEO Tom Siebel said, "2001 was a challenging year for all of us. The good news is that 2001 is over.'

He said Siebel saw business normalize in November and December, but adds that sales are still much less robust than during the go-go years prior to the current recession.

"If somebody said they were going to do business with us, they did it," Siebel said. "Our market now looks pretty healthy."

Siebel says the company expects to earn 12 cents a share in the current first quarter and 55 cents this year. He had side-stepped questions regarding the company's earnings forecast during a conference call with analysts.

That new earnings guidance is higher than analysts' current average forecast for a first-quarter profit of 9 cents and 2002 earnings of 48 cents.

In 2001, the software shop Siebel founded had earnings of 15 cents a share in the first quarter and ended the year with a 49-cent profit.

Siebel says he also expects first-quarter license revenue to be about the same as the fourth quarter's $250.2 million. For the year, he forecast license revenue growth of 15 percent from the $1.07 billion the company reported in 2001.

January to Be a 'Very Good Month'

"I think January is going to be a very good month," says Siebel, who notes that the company already had struck a big deal with automotive giant General Motors in the first quarter.

Siebel dismissed rivals Oracle, SAP and PeopleSoft, each of which is making an aggressive push into the CRM space that Siebel owns.

Oracle, the company's largest competitor, has 5 percent of the overall CRM market and SAP has the No. 2 spot with 4 percent market share, Siebel says.

"Oracle remains a nonissue," he says.

He adds that some 80 unprofitable, venture-funded CRM companies disappeared or became irrelevant during 2001.

Vinnie Muscolino, who co-manages the DLB Technology Fund in Boston, says Siebel is facing tougher rivals than ever.

"The competitive landscape is different because three years ago it was just Siebel and a bunch of small start-ups that were going public," Muscolino says.

Now, he adds, it's Siebel against a trio of large, established software vendors.

Siebel's stock is trading about 22 percent higher year-to-date but almost 56 percent lower than a year ago.

So far this year, PeopleSoft shares are trading 12 percent lower and Oracle's stock is up about 19 percent.

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