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CRM giant Siebel slashes staff

Siebel is handing out pink slips to 1,100 employees after reporting disappointing quarterly revenue. A top CRM analyst thinks it may be time for Siebel to "break products into smaller pieces."

CRM market leader Siebel Systems Inc. delivered second quarter earnings that failed to meet projections. As a result, the software maker said it plans to lay off roughly 16% of its workforce.

The San Mateo, Calif.-based vendor reported Q2 revenues of $405.6 million, down from $560.2 million in the year-ago quarter. Siebel had net income of $29.8 million, or 6 cents a share for Q2, a sharp decline from net income of $76.6 million, or 15 cents a share, for the same period last year. Siebel executives said the earnings drop was driven largely by disappointing software revenues.

Wall St. analysts had predicted revenues of $437.1 million for the quarter, according to market researchers First Call, New York.

Executives at Siebel previously reported that Q2 2002 would stand as the firm's "worst quarter ever," with spending on CRM products continuing to stall. As demand for enterprise applications has slowed over the last year, Siebel has seen its share price fall by nearly 60%.

During the earnings call Wednesday, Siebel CFO Ken Goldman said the firm would lay off some 1,100 employees, or roughly 16% of the company's overall workforce. Goldman reported that almost half of the cuts would come from the software maker's sales and marketing operations and should result in a charge of $200 million to $250 million for Q3 2002. Siebel also detailed plans to close some of its facilities as a result of the downsizing. However, company executives said they plan to reinstate bonus programs and merit increases for remaining employees.

Some industry watchers weren't surprised by the announcement and blamed the dwindling IT economy for much of the turmoil. Scott Nelson, analyst for Gartner, Stamford, Conn., pointed out that Siebel has laid off as much as 5% of its staff on previous occasions to help trim costs, and said the strategy should help keep the company moving forward.

"They still have the strongest position in the market and we're going to have to bide our time for things to come around," Nelson said.

He did not predict a timeframe for any short-term comeback but said the reinstatement of incentive programs at Siebel should help keep key staffers on board during the lean times. Nelson said partnerships would remain key to the application vendor's ability to remain competitive and generate revenues.

"Siebel has a strong partnership network that accounts for a lot of sales so they need to remain aggressive to that end," he said. "They also have to de-couple pricing and try to break their products into smaller pieces. Customers are looking to make smaller investments rather than look for a whole suite."

Nelson said the rugged economic environment should also encourage Siebel to focus more attention on delivering services to existing customers, until software license sales are able to grow again. The analyst believes that current Siebel customers should be able to get more out of their investments and that the company would do more to make sure that new implementations go more smoothly.


In April, Tom Siebel called Q1 his company's worst ever

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