Siebel Systems slumps on downgrades

Siebel Systems hit a new 52-week low after being slapped with two downgrades, a day after the company said its senior vice president of sales was leaving. Analysts are split on the company's long-term prospects.

Shares of the company slipped $3.56, or more than 10 percent, to $30.06 in early trading Tuesday. Siebel (Nasdaq: SEBL) provides customer-relationship software that automates large corporations' sales and customer service operations.

The company was cut to near-term "neutral" from near-term "accumulate" by analyst Craig Wood at Merrill Lynch. At U.S. Bancorp Piper Jaffray, the stock was downgraded to "buy" from an "aggressive buy" rating, while revenue and earnings estimates for 2001 and 2002 were lowered at Credit Suisse First Boston.

The analyst activity comes just after news that Tom Hogan, Siebel's senior vice president of sales, would leave to become president and chief operating officer at Vignette (Nasdaq: VIGN). Shares of Vignette rose $1.22, over 23 percent, to 6.38 in Tuesday's session.

Hogan had been with San Mateo, Calif.-based Siebel since 1999. He came from IBM (NYSE: IBM), where he was vice president of sales. According to Monday's release, President and COO Paul Wahl will continue to run Siebel's sales operations.

The departure of Hogan and uncertainty about Siebel in the near-term were factors cited in Wood's morning research note.

The timing of Hogan's resignation is inopportune, the Merrill Lynch analyst wrote, because it comes near the end of the quarter and amid a slowdown in demand for customer relationship management software.

Wood cut first-quarter and fiscal 2001 earnings estimates, in addition to lowering the stock's rating. The analyst also said that, even with the reduced numbers, valuation concerns still exist given the uncertainty surrounding earnings growth.

"We believe intermediate-term catalysts for the shares may be elusive, particularly ahead of the (first-quarter) earnings season. Therefore, a more guarded opinion seems warranted," he said.

At U.S. Bancorp Piper Jaffray, analyst Sarah Bernstein had a more positive take, despite cutting Siebel to a "buy" rating. The analyst also lowered the company's 12- to 18-month price target to $75 from $125 and slashed estimates for fiscal 2001 and 2002.

In Bernstein's view, the pressures on the company are economic, not competitive. "We believe that the incremental sales lost are not going to competitors, but are being delayed into the future," she wrote.

The analyst said that the current slowdown in information technology spending provides an opportunity for Siebel to gain market share.

"Siebel's reputation and strong balance sheet should help the company weather economic pressures better than weaker vendors, resulting in market share gains as those companies lose relatively more traction," Bernstein wrote. "This should leave Siebel in an even stronger position for an economic upswing."