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Siebel execs call Q1 worst ever

Siebel hit lowered Wall Street estimates, but executives still called the quarter the worst yet.

CRM software market leader Siebel Systems Inc. reported Q1 earnings that met lowered Wall Street estimates this week. Still, officials at Siebel called the quarter the worst in the company's history.

The San Mateo, Calif.-based applications vendor reported net income of $64.6 million, or 12 cents a share for Q1 2002, a significant falloff in comparison to its net income of $76.9 million, or 15 cents a share, for Q1 2001.

Siebel recorded revenues of $477.8 million for the quarter, a greater than 20% drop from the $598.8 million it earned in Q1 of last year. Compared to Q4 2001, net income and revenue fell slightly.

Wall Street analyst firm Thomson Financial/First Call had predicted the company would deliver earnings of 12 cents a share on $483 million in revenue for Q1.

Leading executives at the company blamed a continued slump in the overall economy and in the IT industry at large for Siebel's slow start in 2002.

"I suspect that this will have been for the industry one of the worst quarters ever," said founder and CEO Tom Siebel. "Business that you would think would close just didn't close."

Analysts covering the earnings call agreed that market conditions were the greatest contributor to Siebel's slowed performance. Scott Nelson of Stamford, Conn.-based researcher Gartner said he believes the company did relatively well based on the current economic climate.

"It's obvious people want to see a more robust market, but CRM sales are going to continue lagging until we see a recovery in earnings across the industry," Nelson said.

Siebel said the outlook for Q2 remains unclear and predicted flat earnings performance for Q2 2002. He estimated the company had roughly 50 deals valued at $1 million or more delayed during Q1, most until sometime later this year. However, the company did point to several of its newest enterprise customers including General Motors Corp., Samsung SDS and Telus Corp.

Nelson said these deals are evidence that Siebel is still having some measure of success, as the sales represent long-term commitments from major customers.

The executive admitted that barring a recovery near-term in the software sector, the firm could see license revenue decline by 10% to 15% over the next several quarters. Siebel did not address his previous prediction of 15% license growth for Q1, but the lowered earnings indicate that goal was not met.

Nelson doesn't believe that Siebel's failure to meet predictions is a sign of larger problems.

"Everyone is having trouble predicting the market," observed the analyst. "There are signs that there could be a rebound by Q4 of this year, but if the U.S. economy continues to crawl demand for CRM won't pick up until 2003."

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