Siebel Systems boss relinquishes CEO post

Siebel will continue to serve as chairman, and IBM executive Mike Lawrie has been hired to assume the CEO post, the company said on Monday. Lawrie, a 26-year IBM veteran, resigned the same day as senior vice president and group executive of sales and distribution at IBM, causing an executive reshuffle there.

Speaking via teleconference, Siebel said the move was a long time in the making.

"It was little over a year ago that I made the decision to separate the roles of chairman and CEO," Siebel said. "After giving it a lot of thought?I was absolutely certain this was the right decision for the company. I just can't image a better outcome for the company."

Other companies, including Siebel rival Oracle, have followed a similar path as a new emphasis on corporate governance emerged in the aftermath of numerous business scandals. Larry Ellison, Siebel's counterpart at Oracle, recently gave up his role as chairman to retain the CEO post, reassigning the company's chief financial officer to fill the vacant post.

Some observers expressed surprise at the company's decision to bring in an outsider and that Siebel, who has been the face and voice of the company, would give up the more hands-on job of CEO.

"Tom is such a control person," said former Siebel executive Craig Ramsey, now on the board of rival Salesforce.com. "He's put his stamp on the company."

A Siebel competitor said investors, unhappy about the company's falling fortunes in recent years, may have sought an executive shake-up. "Tom Siebel has been under a tremendous amount of pressure," said Salesforce CEO Marc Benioff, who years ago worked with Siebel at Oracle under Ellison, as did Ramsey.

Siebel Systems, based in San Mateo, Calif., appears to be emerging from a financial rough patch. The company recently reported a six-fold increase in first-quarter profits and double-digit growth in software sales. But the surge in business comes after three years of lackluster earnings and a restructuring that saw the departure of thousands of employees.

After leading his company through an impressive growth spurt in the late '90s, Siebel came under fire for failing to foresee shrinking demand for its products in the early days of the information technology industry's recession. The company has also been the subject of two regulatory investigations--one of which is ongoing--and the target numerous shareholder lawsuits. One of the big complaints from investors during the company's fall from glory was its executive compensation plan, which relied on generous stock option grants.

During Monday's teleconference, Siebel said he intends to remain active in the company, assisting with key partner and customer relationships and helping to lead the executive transition. During the same call, Lawrie said he had no immediate plans for significant management or structural changes for the company.

Lawrie is highly respected in the industry. He steered IBM's sales through a difficult climate in recent years, said Richard Petersen, analyst with Pacific Crest Securities. "By all accounts, he did a pretty good job."

Analysts said the change was positive for Siebel Systems because it brings in a strong sales executive very familiar with its products while retaining the founder's strategic vision. IBM is a partner and the largest customer of Siebel, so Lawrie has firsthand experience with the product.

Making it happen
Yet Lawrie may face a difficult transition as Siebel's chief executive, according to an executive recruiter. "The most difficult CEO transition is the first transition, especially when you have the former CEO still sitting at the company as chairman," said David Nosal, who heads CEO searches for Korn Ferry International in the Americas.

Nosal added that he has no doubts Siebel will remain active with the company, but said other Siebel executives who were passed over for the CEO position may feel less inclined. "The internal candidates will do an assessment of their own (about whether) this is a good place for them to stay," Nosal said.

Some sources wondered if David Schmaier, Siebel executive vice president and the person whom many analysts thought of as Tom Siebel's heir-apparent, would resign as a result of Lawrie's appointment. A Siebel representative said Schmaier is not planning to leave the company.

"It would be a negative for the company if he left--he remains the number two operating guy," said Peter Coleman, senior analyst at Schwab Soundview Capital Markets.

The executive shake-up also caused some to ponder Siebel Systems' long-term prospects as an independent company as the business software industry undergoes consolidation. "I question whether the company can continue," Ramsey said, suggesting that "good performance" by Lawrie would be "to package Siebel and sell it to SAP or Microsoft."

Of the handful of possible suitors, only Microsoft is at all likely to try to buy Siebel, Coleman said. But bringing in a new CEO and the turnaround he sees in applications sales makes it less of a possibility.

News.com staff writers Ed Frauenheim, Dawn Kawamoto and Karen Southwick contributed to this report.