siebelobserver

A Letter from Charles Phillips

I am pleased to announce that Oracle and Siebel are now officially operating as one.

Over the past year, many of you have expressed your support for this combination. We appreciate your confidence. As the leader in customer relationship management software, we pledge our continued commitment to enabling your success and delivering the benefits we expect from this merger .

Customer-Centric Industry Solutions to Fit Your Business

We plan to provide end-to-end integrated business processes by combining the leading front-office, back-office, and industry solutions from Oracle and Siebel. The integration work has begun with a key focus on developing and enhancing business processes for more than two dozen industries. We believe these solutions will enable you to adapt more quickly to the rapidly changing business environment and significantly simplify your IT infrastructure and lower costs.

Comprehensive Business Analytics to Achieve Greater Business Insight

Our goal is to combine Siebel CRM analytics, Oracle ERP analytics, and industry-specific analytic content to provide the most comprehensive business analytics solutions to all of our applications customers. This is expected to give business executives and managers the ability to monitor, analyze, and act upon intelligence in real-time, while providing end-to-end visibility into company operations and financial performance.

Flexibility and Choice to Create a Superior Ownership Experience

Our combination creates the largest and most comprehensive offering of on-demand and on-premise solutions available today, giving customers choice in how they procure, develop, implement, and deploy business applications. From optimized on-premise solutions to internet-based shared utilities to highly tailored, private environments, we deliver the flexibility and choice you need to maximize the business value of your software investments.

As we work to deliver the value of the combined companies, we are equally as focused on protecting the investments of our customers through our Lifetime Support Policy and continued development of our existing CRM products as planned, including Siebel products. We plan to accelerate Siebel's rapid pace of innovation of CRM solutions and continue to offer customers the choice of an integrated suite or best-of-breed Siebel CRM solution. We also plan to evolve customers, at their own pace, to the next generation of our standards-based applications, Oracle Fusion Applications. Siebel CRM will be the centerpiece of our Oracle Fusion CRM strategy and we plan to incorporate the best features of all of our product lines into Oracle Fusion CRM.

For Oracle, it will always be about the customer. Our goal is 100% customer satisfaction. We are dedicated to increasing the quality of support you have come to expect from Oracle and Siebel, without interruption. All support procedures, announced support timelines, and contacts for Siebel and Oracle products remain unchanged, so please continue to use the same channels you've been using. In addition, your sales and services contacts remain the same and will be reaching out to you to address any questions you may have.

We also encourage new customers to participate in Oracle's independent user group community which provides dynamic forums for sharing information and expertise. More detailed information about our plans for the combination, user groups, and Customer Care numbers can be found at oracle.com/siebel.

Thank you for your continued support.

Sincerely,

Charles Phillips
President, Oracle

End of a Season

Siebel customer events have always had unexpected drama and this year's Siebel CustomerWeek in Boston was no exception. Outside Boston's new convention center the leaves blew in a brisk autumn wind that had more than a touch of impending winter. You could sense a change of season in the wind. Inside the convention center the atmosphere was much the same.

My personal feelings, which seem to be shared at least in part by some our readers here, is the sort of bittersweet disappointment that comes from following a good team that does not win the championship - like this year's the Boston Red Sox. All though the regular season we followed Siebel's fortunes as though they were our own. Now in the playoffs, our team has lost to a stronger competitor.

Except for a comment about Larry Ellison's choice of clothes for his one brief television appearance no one has made a single negative comment about Oracle in my hearing. This is 180 degrees away from PeopleSoft's employees, customer, and partners reaction to similar news.

If anything I think this bodes well for Oracle's eventual integration of Siebel Systems. Although the deal is not done yet, most customers I have spoken to are hopeful that the transaction will be a net gain. Its hard to imagine what will happen if Siebel Systems does not get acquired by Oracle, but I doubt at this point that Siebel would be able to remain independent for long.

Some employees are already beginning to jockey for position in the new company, but most seem to be content sticking to familiar roles in a new situation. Like soldiers who know the war is going to end soon but continue to shoot at each other until the Armistice becomes official, Siebel seems poised to compete with Oracle (and compete hard) until midnight on the day the merger.

Its sad for me to meet people who I have worked with over the years and may not now have much interaction going forward, but everyone I have met here has been unfailingly helpful and professional. I wish them all luck!

Oracle to Acquire Siebel

Oracle (Nasdaq: ORCL) will acquire Siebel Systems (Nasdaq: SEBL) for $5.85 billion in cash and stock. Oracle is offering $10.66 per Siebel share. Siebel's board approved the deal, and founder Tom Siebel agreed to vote his shares in favor of the acquisition

"In a single step, Oracle becomes the number one CRM applications company in the world," said Oracle Chief Executive Larry Ellison in a statement.

The purchase is expected to close in early 2006, subject to regulatory and Siebel shareholder approval.

Commentary:

Since most of the founders and employees of Siebel Systems learned the software business at Oracle, there has always been fratricidal aspect to their competition. The personal feelings on both sides ran deep, at times to almost operatic levels. At one customer event a few years ago Tom Siebel showed up with cuts and bruises on his face.

"I ran into Larry Ellison at bar last night," he joked at the time.

Oracle's efforts to put Siebel Systems out of business were no laughing matter. There is a story, which like most good stories deserves to be true even if it isn't, that early in the Siebel's corporate history an effort was made to convince the Redwood Shores giant to buy the new company's solution. The contract made its way up the corporate ladder until it reached Larry Ellison's desk. Ellison then made an appointment to see Tom Siebel personally. When Siebel arrived Ellison took the contract and ripped it to pieces in front of him.

True or not, it is a matter of record that Oracle turned Siebel Systems out of its partnership program when Siebel's technology was largely based on Oracle. Oracle then announced it would enter the CRM market and spend more on marketing than Siebel's total revenue. This was the impetus to create a partnership program that mandated joint marketing as a way to overcome this enormous disadvantage.

None of this should hide the great business benefit the acquisition of Siebel Systems will have for Oracle. The deal makes economic sense in a time of consolidation and business sense since at $10.66 as share it seems to have been done largely on Oracle's terms.

This transaction should prove very profitable for Oracle since it is buying Siebel at a low point in its corporate history.

Siebel Systems has been fighting a two front battle against SAP and Salesforce.com and increasingly losing both. More significantly the company was addicted to the opium of perpetual software license revenue and despite its best efforts to come clean was unable to transition quickly enough to a term licenses business model to please shareholders.

Yet a recent survey we conducted among the leading systems integrators with Revenue Rocket indicated that many clients were moving ahead with Siebel and that their business was surprisingly good.

This bodes well for Oracle's acquisition since enterprise software is very difficult to bet rid of once it is in production. The continuing maintenance and service revenue stream alone should pay for the acquisition quickly. All that lies in the future.

What should be in focus today is that Oracle has been trying for years to put Siebel Systems out of business and they finally succeeded.

Perry Keating Joins Siebel Systems as Senior Vice President of Global Services

Siebel Systems (Nasdaq: SEBL) has named Perry Keating as Senior Vice President of Global Services, reporting to Chief Executive Officer George T. Shaheen. A highly seasoned technology executive with more than fifteen years of senior leadership experience, Mr. Keating will be responsible for the company's Professional Services, Business Consulting Services, Technical Training, and End User Education business units.

"Perry has established a strong track record of building leading services practices that help ensure customers receive significant value from their investments in software," said Mr. Shaheen. "Perry's contributions in his new role at Siebel Systems will be critical given our focus on helping organizations achieve outstanding customer-driven business results, and I look forward to working with him."

Mr. Keating most recently served as Senior Vice President, Global Enterprise Solutions, at BearingPoint, where he led the company's Oracle, SAP and Siebel Systems practices. Prior to working at BearingPoint he served as Director of Strategic Market Development at PeopleSoft Corporation, where he oversaw market development of products and services to the federal government's civilian, defense and intelligence agencies. Previously, Mr. Keating worked at Oracle Corporation as a Senior Practice Director, responsible for leading that company's East Coast Applications Group that supported multiple federal, state and local government agencies. Mr. Keating also served in management roles at James Martin & Co. and American Management Systems. He received an MBA from the Virginia Polytechnic Institute and State University, and a BS in Computer Science from Tulane University.

FD Suit Dismissed

A federal judge has dismissed the Securities and Exchange Commission's Regulation FD (which requires equal disclosure of information to all investors) suit against Siebel Systems.

Ken Goldman to Present at Citigroup

Ken Goldman, Siebel Systems (Nasdaq:SEBL) CFO will present at Citigroup's 12th Annual Global Technology Conference in New York on Wednesday, September 7th, 2005 at 1:35 pm eastern.

The presentation will be available live over the Internet at www.siebel.com/investor. A replay of the call will also be available.

An Interesting Quote

"Anyone can cut costs, but at what cost?"

Terry Lee

Siebel Systems to Webcast Investor Meetings

Siebel Systems (Nasdaq:SEBL) will webcast investor meetings it plans to hold on Tuesday August 2, 2005 at 6:30AM PT at www.siebel.com/investor. A replay of these meetings will be available at the same site.

BroadVision Goes Private

BroadVision (Nasdaq: BVSN) will be taken private by Vector Capital, a San Francisco-based private equity firm. Current BroadVision stockholders will receive $0.84 per share in cash and BroadVision will operate going forward as a privately-held, independent software vendor. The offer was below the company's share price on the date when the deal was announced. Under a separate agreement with the holders of its outstanding convertible notes, BroadVision, through additional capital to be provided by Vector, will make cash payments totaling $16 million to retire the notes.

Vector Capital is a San Francisco-based private equity firm specializing in buyouts, spinouts and recapitalizations of established technology companies. Vector has taken private companies similar to BroadVision. Other Vector investments include LANDesk Software, Savi Technology and Corel Corporation, which Vector took private in 2003 and subsequently successfully turned around.

"With the current liquidity challenges of the Company and the challenges associated with being a small-cap public software provider, we feel that a cash offer today represents the best course for stockholders," said Dr. Pehong Chen, BroadVision's president and CEO.

The deteriorated and uncertain liquidity outlook, coupled with a continued challenging environment for software sales, the high costs of operating a public company and feedback from numerous potential strategic partners, most of whom declined to pursue discussions, led BroadVision to the conclusion that an outright acquisition of the Company in a cash transaction represented the most desirable outcome for its stockholders.

BroadVision reported second quarter license revenue of $3.4 million, less than 50% of the license revenue reported in the same quarter of the prior year, and total net revenue of approximately $15.5 million, nearly 9% below the midpoint of the company's range of guidance. Due poor sales and certain financial obligations created by the convertible notes, BroadVision's June 30 net cash balance was insufficient to meet its obligations in the second half of 2005.

During the dot.com boom BroadVision was one of the software market's highest fliers and in June of 2000 hit a stock price high of over $550 a share.

"We believe strongly that BroadVision's best opportunity for future stability and growth is as a private company," said Chris Nicholson, a partner at Vector Capital.

HP To Reduce Workforce by 14,500

Siebel Systems' Strategic Partner HP (NYSE: HPQ) plans to reduce its workforce by by 14,500 employees, (or about 10% of its staff) and modify its U.S. retirement benefits programs. The move was taken to simplify HP's organizational structure, reduce costs and place greater focus on its customers. The company expects to save $1.9 billion annually as a result of these changes.

Beginning in fiscal 2007, HP expects approximate ongoing annual savings of $1.9 billion, composed of $1.6 billion in labor costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion.

"I think we know what we are doing," said Mark Hurd, HP chief executive officer and president in a conference call after the announcement.

HP plans to simplify its organizational structure by embedding sales and marketing efforts into the business units. The company will dissolve the Customer Solutions Group (CSG) - a standalone business group responsible for sales to enterprise, small and medium-size businesses and public-sector customers. It will merge the sales function directly into three individual business units - Technology Solutions Group (TSG), Imaging and Printing Group (IPG) and Personal Systems Group (PSG).

"I don't have a very high affection for matrices. We like to have accountability," continued Hurd. "While I know the head count numbers set the headlines, it's not how we approached it. We approached it by trying to eliminate multiple decision makers."

Headcount-reduction plans will vary by country, based on local legal requirements. The majority of staff reductions will come in support functions, such as information technology, human resources and finance. The remainder will be made inside the business units. To facilitate these reductions, HP will offer a voluntary retirement program in the United States. Reductions in sales positions will be minimal. There will also be little change to headcount in research and development.

In addition, HP is modifying its U.S. retirement programs. As of January 2006, the company will freeze the pension and retiree medical-program benefits of current employees who do not meet defined criteria based on age and years at the company. Instead, HP will increase its matching contribution to most employee's 401(k) plans to 6 percent from 4 percent.

These changes will not affect benefits currently received under such programs by retirees or eligible employees who are longer-serving and close to retirement age. Additionally, existing employees will retain the benefits they have already earned.

Following the dissolution of CSG, Michael J. Winkler, 60, will retire from his position as executive vice president of CSG, after nearly 10 years at HP and Compaq and more than 35 years in the IT industry.

Cathy Lyons, a 26-year HP executive, was named executive vice president and chief marketing officer. Todd Bradley, formerly president and chief executive officer of palmOne, was named executive vice president of PSG. Randy Mott, formerly chief information officer at Dell and prior to that at Wal-Mart Stores, Inc. for 22 years, also joined HP as executive vice president and chief information officer.