Licenses to lift Siebel earnings

The business software maker says its fourth-quarter report this month will show higher earnings than expected, bumped up by strong demand for licenses and by cost-cutting layoffs.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Siebel Systems said Monday that its fourth-quarter earnings will come in higher than expected, citing stronger demand for its software licenses and a boost from cost-cutting moves.

The software maker's upbeat preliminary earnings announcement for the quarter, ended Dec. 31, contrasts strongly with dour warnings in its three previous quarters. The San Mateo, Calif.-based company issued preliminary warnings that it would miss Wall Street targets in the first and second quarters of fiscal 2003, attributing the shortfall to a slowdown in information technology spending. In the third quarter, it missed revenue estimates.

For the fourth quarter, though, Siebel said it expects to report earnings of 8 cents a share on revenue of $365 million when it formally releases its financial results Jan. 21. That performance surpasses the high end of its October forecast, in which the business applications vendor said its earnings would fall in a range of 5 cents to 6 cents a share and its revenue would be between $335 million and $355 million.

"The restructuring was a complete success, and we'll continue to see the benefits as we go into 2004," said Ken Goldman, Siebel's chief financial officer, during a conference call with analysts on Monday.

In 2003, Siebel laid off staff in 490 positions and streamlined its sales force, marketing and customer service operations as part of a restructuring.

The company expects to post license revenue of $150 million in the fourth quarter, compared with its October forecast of $120 million to $140 million. License revenue is expected to exceed the third-quarter total by 35 percent, according to Goldman.

However, Siebel's announcement does not necessarily indicate that the company is on a fast recovery track, said one analyst.

"Their revenue growth is seasonal, and expectations for their fourth quarter had been muted, so the bar was set low" said Charles Di Bona, an analyst with Sanford Bernstein. "It's important to remember they're still off their year-to-year comparison by 5 percent, so what we're seeing is some stabilization, and not a robust recovery."

Di Bona also questioned Wall Street's expectation that the software applications industry will encounter a healthy upturn this year.

"There is this expectation of a robust recovery in the applications space, but we think it will be a more modest recovery," Di Bona said. "We think we're going into a robust infrastructure spending cycle, rather than applications."

Shares of Siebel rose 96 cents, or about 6.9 percent, to $14.95 in morning trading on Monday.