Update: Siebel turns to layoffs as revenue slides

Siebel Systems lived up to the expectations it reset earlier this month when it warned analysts and investors that its revenue and profit would for the second quarter in a row be below its initial forecasts.

Siebel’s revenue for the quarter ended June 30 was $333.3 million, an 18 percent drop from last year’s $405.6 million total for the quarter, the company said Tuesday. Siebel’s net income also declined, dropping 67 percent year-over-year, from $29.8 million to $9.8 million.

Siebel’s software license revenue slid 35 percent, to $109.9 million. Its professional services and maintenance revenue held steadier, dropping 5 percent, to $223.4 million.

To lower its operating costs, Siebel, based in San Mateo, California, is restructuring in a move that includes cutting 490 positions, the company said. It hopes to achieve up to $40 million in quarterly savings by mid-2004 though job cuts, the consolidating of some facilities and elimination of others, and the shift of some jobs out of the U.S. to overseas locations.

“It just does not appear that the IT economy is picking up, and as a result we’ve made a decision to rework our operating plan,” Chairman and Chief Executive Officer Tom Siebel said in a conference call with analysts.

Siebel’s headcount has been steadily dwindling since the economic downturn. It expects to end the current quarter with 5,000 employees, down from more than 8,300 at the start of 2001. The company has eliminated 900 positions so far this year. It has also accelerated efforts, begun in the second half of last year, to save money by outsourcing to cheaper labor markets positions in several software design and testing fields, Siebel said.

Oracle Corp.’s hostile bid to take over PeopleSoft Inc. contributed to the depressed buying climate during the quarter, he said.

“I don’t think it was good news for anyone,” Siebel said. “I can think of a number of specific transactions … that did get pushed out as a result of this ongoing dialogue.”

Siebel deflected during the call questions about potential holes in Siebel’s product portfolio or business model, focusing instead on highlighting deals in which the company beat its rivals.

That category does not yet include Microsoft Corp., though it could if Microsoft decides to invest heavily in extending its enterprise applications and marketing them at larger customers, Siebel said. The company also does not feel any pressure from hosted CRM (customer relationship management) vendors such as Salesforce.com Inc., Siebel said, in response to an analyst’s question about Siebel’s rumored plans to venture back into the hosted software market.

“The only evidence we see of (Salesforce.com) in the market is by reading their advertisements,” Siebel said.