Siebel Systems shares took off Thursday on the company's first-quarter report, despite cautious comments from management that tough times lay ahead. Analysts cut their 2001 estimates.
Shares in the developer of customer relationship management (CRM) software were up $7.06, or 21 percent to $41.04. CRM software automates the sales and customer service operations of large corporations.
Siebel (Nasdaq: SEBL) topped analysts' estimates in its first quarter Wednesday, raking in $76.9 million, or 15 cents a share, on sales of $588.7 million. First Call was expecting 11 cents a share on sales of $473 million. The $588.7 million in sales marks an 84 percent improvement from the year-ago quarter when it earned $35.3 million, or 7 cents a share, on sales of $319.7 million.
Aside from topping the Street's estimates, the company also lived up to its own high expectations, set when it reported its fourth-quarter results. Analysts were shocked at the time when the company raised sales and earnings targets for fiscal 2001 despite signs of a macroeconomic storm brewing and signs of trouble among competitors such as Oracle (Nasdaq: ORCL).
Siebel's news, along with IBM's (NYSE: IBM) earnings report Wednesday evening, worked to uplift competitors' shares. Oracle was up $2.11, or 11 percent, to $20.03 Thursday, and Morgan Stanley raised its ratings for several software companies, including Oracle, Siebel, Agile Software (Nasdaq: AGIL) and Computer Associates (NYSE: CA).
Siebel also impressed investors by not announcing as many layoffs as were rumored. The company handed out pink slips to 10 percent of its staff on Wednesday, not the 20 percent that was alleged ahead of the company's earnings report. The cuts were part of its internal performance-evaluation program.
Adjustments for "tough" times ahead
Siebel acknowledged that the second quarter and rest of fiscal 2001 will be "tough," and guided numbers lower for the year.
Most analysts maintained their "buy" ratings on the company's first-quarter results, but several lowered their estimates for 2001.
UBS Warburg analyst Ken Carey maintained his "buy" rating, and remained positive on the stock despite lowering estimates.
"Siebel is the 'gorilla' in the sector and should benefit from the consolidation that is likely to occur," Carey wrote. He recommended investors that plan to stick around for more than six months get into the stock at current levels.
Robertson Stephens analyst Eric Upin was more cautious. "We would not be aggressive buyers of the stock at this time," Upin wrote. He maintained his "buy" rating and "near-term cautious" outlook on the stock.
He also lowered estimates for the company's second quarter, full year 2001 and 2002 based on management's warning. Upin said these numbers (revenue of $2.2 billion and earnings of 54 cents a share in fiscal 2001, with revenue of $2.49 billion and earnings of 61 cents per share in 2002) are expected to be the absolute minimum the company will produce.
Goldman Sachs analyst Rick Sherlund went against the grain by upgrading Siebel to "buy" and added it to Goldman's recommended list.
"We encourage long-term investors to begin building positions in the stock now even though fundamentals may not have hit bottom," Sherlund wrote. The analyst added that the bad news of slower business conditions for the next two quarters may appears to be built in to the stock already.