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Siebel Systems earnings dazzle; raises bar for 2001

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Siebel Systems shattered analysts’ estimates in its fourth quarter Tuesday, posting a profit of $106 million, or 20 cents a share, on sales of $581.6 million. It also raised its first-quarter sales estimate and confirmed that it was comfortable with analysts’ estimates for fiscal 2001.

First Call Corp. consensus expected the software developer to earn 15 cents a share in the quarter on sales of $536 million.

Siebel Systems (Nasdaq: SEBL) shares closed up 88 cents to $78.50 ahead of the earnings report but rocketed up to $84.31 in after-hours trading.

The $581.6 million in sales represents a 111 percent surge from the year-ago quarter when it pocketed $39.2 million, or 8 cents a share, on sales of $275.9 million.

“The fourth quarter was an exceptional quarter in absolutely every respect,” said CEO Thomas Siebel during a conference call with analysts. “As we enter 2001, we see strong demand for all our product lines and we don’t expect any significant changes, as far as competition goes, for at least the next three quarters.”

Siebel told analysts the company was comfortable with fiscal 2001 estimates calling for sales of $2.6 billion, up from $1.8 billion in 2000, and earnings of 67 cents a share, up from 24 cents a share this year.

“Market conditions for our products appear to be robust heading into 2001,” Siebel said. “We see no evidence of budget cuts or declining demand from our customers. In fact, we see spending increasing substantially mainly because we are perceived as a safe buy in these challenging economic times.”

During the conference call, Siebel told analysts it will likely surpass the current First Call Corp. consensus sales estimate of $557 million.

Siebel also expects operating margins to expand by about 1 percent a quarter for the rest of the year, bringing fiscal 2001 margins to around 23 percent.

Bill Chappell, an analyst at Robinson-Humphrey, said Siebel, currently trading at a price-to-earnings ratio of 235, is one of the few technology stocks that actually deserves its lofty premium.

“Obviously they’re extremely profitable and have more than $1 billion in cash on hand,” he said. “You can’t really look at the price-to-earnings or price-to-revenue figures to value this stock. Sure, it’s at a premium compared to its peer group, but it’s tough to bet against it.”

Siebel, which holds a dominant market share in the exploding customer relationship management applications market, says it will continue to grow market share, operating margins and total sales while simultaneously lowering operating expenses and sales cycles.

“Siebel can’t keep growing at 135 percent year-over-year,” Chappell said. “The company would tell you that itself. But if they can keep improving margins while growing sales at between 45 percent and 50 percent at these levels, that’s very impressive.”

For the fiscal year, Siebel pocketed $257.9 million, or 49 cents a share, excluding charges, on sales of $1.8 billion compared to a profit of $110 million, or 23 cents a share, on sales of $813.5 million in fiscal 1999.

It exited the quarter with more than $1.15 billion in cash and short-term investments, up from $500 million at this time last year.

Siebel said competition from other application vendors in the quarter was virtually unchanged. Oracle (Nasdaq: ORCL) and SAP (NYSE: SAP), two of Siebel’s largest competitors, were present at only 6 percent of the company’s selling opportunities. At 49 percent of those opportunities, there was no competition for the sale.

Last quarter, it also blew past analysts’ estimates, earning $71 million, or 14 cents a share, on sales of $480.9 million.

Siebel shares have consistently outperformed the S&P 500 Index by a widening margin since October 1999. The stock gained 395 percent in 1999, 61 percent last year and a further 15 percent since the start of this year.

The stock peaked at $119.88 in November after falling to a low of $37.69 last January.

Twenty of the 21 analysts following the stock maintain either a “buy” or “strong buy” recommendation.