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The Starting Line: News dearth pleases software investors

Not a stitch of new financial information flowed from Siebel Systems, and no news turned out to be great news as far as stockholders were concerned.

Even rising stocks illustrate Wall Street's nervousness.

Not a stitch of new financial information flowed from Siebel Systems on Tuesday, and no news turned out to be more than good news--it was great news as far as stockholders were concerned. Shares of the enterprise software company rose 15.2 percent--their largest one-day gain since April. Call it the biggest sigh of relief for company observers in six months.

"There's as much uncertainty surrounding this September quarter as any quarter in recent memory," said David Gremmels, analyst with Thomas Weisel Partners. "Just having the certainty that it's not a complete disaster is a positive thing for Siebel."

Investors are worrying about the entire tech industry, especially companies like corporate software sellers who close most of their sales in the last few weeks of a quarter.

Siebel bears an especially heavy burden of investor fear because it's the undisputed leader in its space. No one sells more sales and customer service automation software than Siebel, so if it's hurting, you can reasonably assume that its entire industry is in trouble.

A research note released last week by UBS Warburg analyst Ken Carey summed up Wall Street sentiment about enterprise software: "How bad can the current quarter be? Very...We expect no bright spots, and even companies that believe they are in good shape going into the fourth quarter will likely provide cautious commentary."

Whether Siebel's fourth quarter will be in good shape remains to be seen, but at least the third quarter seems to be clear to investors. Had there been a problem with the September quarter's results, Siebel likely would have said so at an analyst meeting held Tuesday as part of its annual User Week.

But Siebel said nothing, so shareholders were smiling. "It suggests the quarter's results are at least close to consensus estimates," Gremmels said. "By today, Siebel would at least have a rough idea of where they finished."

The average analyst forecast for Siebel's September quarter currently calls for a profit of 9 cents per share, according to earnings tracking firm First Call. But that prediction already represents lower expectations because Siebel originally set an earnings target of 14 cents per share for the quarter. Analysts have been slashing estimates for Siebel and other software companies throughout the last several weeks, even past the end of the quarter.

That trend had enterprise software investors primed for the worst. In their minds, the question wasn't whether Siebel and its peers would miss estimates, but by how much. With the analyst part of Siebel's User Week complete and free of a profit warning, investors believe the company is in the clear.

Of course, not every company will benefit from a lack of earnings news, otherwise many stocks would have shot into orbit on Tuesday. In fact, other corporate software companies may still have preannouncements up their sleeves.

Major software companies facing September-ending quarters will know by week's end. Whether their stocks will drop from warnings is an open question--some analysts believe share prices for most software companies already reflect bad news.

But if Siebel is any guide, silence on earnings would be enough to please investors.