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Siebel Systems Airs 2Q Struggles, Restructures

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Posted July 23, 2003 By Clint Boulton     Feedback

As the enterprise applications market roils in turmoil, Siebel Systems restructures, cuts 490 jobs and moves some operations overseas.

With confusion swirling around the enterprise applications space caused by Oracle and PeopleSoft's battle for the No. 2 slot, Siebel Systems showed that it felt the reverberations caused by that conflict Tuesday by announcing a 67 percent drop in second-quarter earnings and the termination of about 490 employees.

The San Mateo, Calif. based software maker also vowed to restructure by consolidating facilities and moving some operations overseas. The news does not come as much of a surprise as the vendor said earlier this month that it anticipated lowered revenues due to the chilly economic and sector climate.

Siebel's net income was $9.8 million, or $0.02 per share, compared with earnings of $29.8 million, or six cents a share from 2Q 2002. Revenues for the second quarter of 2003 were $333.3 million. New license sales were $109.9 million, with $223.4 million in sales from maintenance, consulting and other services. Siebel had reported new license revenues of $170.1 million a year earlier.

Siebel anticipates the restructuring plan will help the company achieve a 15 percent operating margin at current revenue levels. The company expects to end the third quarter with approximately 5,000 employees. The plan is expected to achieve quarterly savings of nearly $30 million by the fourth quarter of 2003 and nearly $40 million by the second half of 2004.

Siebel Chief Executive Officer Thomas Siebel attributed some of his company's struggles to Oracle Corp.'s hostile takeover attempt of PeopleSoft in a conference call.

Echoing PeopleSoft CEO and President Craig Conway's comments of a week ago, Siebel said the turmoil led to a purchasing freeze, with customers looking to defer purchases until issues in the space are settled.

More broadly, the enterprise applications space is mature and has been ripe for acquisitions of late. While PeopleSoft's successful bid for Denver's J.D. Edwards was widely publicized for having triggered Oracle's hostile maneuver, there have been other acquisitions. Dutch applications provider Baan was purchased by SSA Global Technologies just yesterday and Toronto-based Geac snapped up Comshare earlier this month.

In fact, Siebel itself has been mentioned as a possible takeover target, leaving German giant SAP as the only company safe from predators or other suitors.

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