Siebel Systems' (Nasdaq: SEBL) Financial Analyst Day will take place on tomorrow in New York from 2:45 p.m. to 7:00 p.m. eastern.
Siebel Systems' (Nasdaq: SEBL) Financial Analyst Day will take place on tomorrow in New York from 2:45 p.m. to 7:00 p.m. eastern.
Jacada Ltd. (Nasdaq:JCDA) will release its Q1 2005 financial results before the market opens on Monday, May 16, 2005. At 10:30 a.m. Eastern Time on May 16 the company plans a conference call to discuss results. The call can be accessed at 1-800-553-5260 or 612-332-0932 for international callers or at www.jacada.com. To access the call, click on the "Investors" button on the "About Us" menu and then on the "2005 first quarter results teleconference" icon.
Oracle Has Discussed Siebel Buyout
Talks Underscore Pressure
To Act on Earnings Slump,
Cash Hoard of $2.2 Billion
By DAVID BANK and DON CLARK
Staff Reporters of THE WALL STREET JOURNAL
May 2, 2005; Page B4
Siebel Systems Inc. and Oracle Corp. recently discussed the possibility of a buyout of Siebel, as pressure builds on the smaller software company to respond to earnings woes and share its $2.2 billion cash hoard with investors.
The talks aren't active, according to a person familiar with the matter. Nor is Oracle particularly keen to do a deal, given that it is still digesting its $10.6 billion purchase of PeopleSoft Inc. Siebel has a market capitalization of about $4.6 billion.
Some analysts also believe that Siebel would prefer other options, such as a management-led buyout that might keep Chairman Thomas Siebel in control of the company that bears his name. Siebel and Oracle officials declined to comment.
The discussions, reported Friday by TheDeal.com, a financial-news Web site, nonetheless underscore the pressure on Siebel to take action as the company prepares to meet with Wall Street analysts Thursday. Among other things, a group of shareholders is pressing Siebel to distribute some of its cash in the form of a stock buyback or dividend, or pursue a sale of the company.
On a conference call with analysts last week to discuss earnings, Ken Goldman, Siebel's chief financial officer, said the company has used outside banking advisers to review "ways to look at this equation," referring to the company's $2.2 billion in cash, adding that Siebel hasn't formally hired an investment-banking firm.
Siebel's shares rose nearly 5% Friday to $9, up 41 cents, on the Nasdaq Stock Market. Oracle's stock declined six cents to $11.56, also on Nasdaq.
Siebel, of San Mateo, Calif., was formed in 1993 by Mr. Siebel, an Oracle veteran. The company specializes in "customer-relationship management" software, which includes programs to help companies manage sales operations and call centers. After a rapid growth phase, that business slowed and encountered stiff competition, from both bigger competitors such as SAP AG and newcomers such as Salesforce.com.
The company recruited former International Business Machines Corp. executive J. Michael Lawrie in 2004 to try to reverse its slide. But it removed Mr. Lawrie on April 13, after warning that first-quarter sales had fallen far short of expectations. He was succeeded by a longtime board member, George Shaheen, who headed the consulting firm now called Accenture Ltd. and Webvan Inc., a failed Internet venture.
Mr. Shaheen has promised cost cutting, but hasn't articulated a new strategy. Meanwhile, the company's actions are being closely scrutinized by dissident shareholders led by Herbert A. Denton, president of Providence Recovery Partners, a unit of Providence Capital Inc.
In a letter last week to Mr. Siebel, Mr. Denton cited "persistent market rumors of a premium offer for Siebel made to the Board by a natural strategic acquirer." Mr. Denton said in an interview he was referring to Oracle, but didn't have direct confirmation of any offer.
Nevertheless, Mr. Denton used the hint of renewed talks to warn Mr. Siebel against attempting "an ill-advised major acquisition" of its own, which could drain the company's cash reserves and make it less attractive to potential suitors. He said he also intended to warn Siebel against a management-led buyout on less-generous terms than might be available from an acquirer.
The letter argues that Siebel is losing market share to SAP, and urges action to conserve its cash. "Siebel can be viewed as a 'decaying asset,' " the letter says.
Mr. Shaheen acknowledged shareholder concern about its cash position in the conference call with analysts. "We will continue to gather, and we greatly respect and appreciate all the input we've received from our shareholders and advisers," he said.
In addition to its cash, Siebel's recurring revenue for product upgrades and support could make it an attractive takeover candidate. In June 2003, after launching his hostile bid for PeopleSoft, Oracle Chief Executive Larry Ellison disclosed he had also had takeover talks with Mr. Siebel, though a deal never materialized.
In a copyrighted story, The Daily Deal Reporter Kate Gibson reports that a source at Oracle revealed to her that Siebel and Oracle are in high level discussions about a possible acquisition. She estimates purchase price to be around $5 billion. If true, this would mean Siebel shares would be worth about $10 a share to Oracle. In trading before the market, shares jumped up from yesterday's $8.59 close to $9.03.
One of the highlights of the Q1 earnings announcement was that a record number of users - over 290,000 - went live this quarter. According to its own estimates, Siebel Systems has 3.2 million total live CRM users, more than the rest of the industry combined. How does that reconcile with disappointing software license revenues of only $75 million? One word, deflation.
Operator: Our next question comes from the line of Larry Robbins with Glenview Capital.
Larry Robbins: On the newest prior CapEx guidance I think given in the 25 to $30 million range. We did 3 million in CapEx in the first quarter. Should we still be thinking about 25 million plus of CapEx for this year or is that likely to come down?
Ken Goldman We actually did closer to 8 because we have about 4 million of leases, capitalized leases, I believe. I think we're going to run about 7 million. Frankly, I keep on really trying to squash as much as I can because of obviously the expense so my sense for the year by quarter is it will be in the 5 to 8 or 9 million per quarter give or take so I think there's nothing -- I think our original guidance for the year, my sense is 30 million for the year is about right, give or take.
Larry Robbins Okay. And given the fact that we have I guess 90 million of annualized depreciation and only 30 million of annualized capital expenditures at the high end --.
Ken Goldman: Wait, wait, wait, wait. Depreciation on capital equipment is 13.6, 13.5 million. So it's more like 52 million.
Larry Robbins: Then what's the other 8 million of amortization in the depreciation and amortization line?
Terry Lee: Amortization related to --.
Ken Goldman: Not R&D.
Terry Lee: It's intangible --
Ken Goldman: Intangible is what I meant to say.
Larry Robbins: Okay. So is there a scenario by which we would envision that the Company would not be free cash flow positive? In other words, we have a $60 million cushion between D&A and CapEx. I guess we'd have to lose $60 million on an operating basis in order for us to burn cash. Given --
Ken Goldman: I'm not sure -- I said -- are you looking at all amortization, as opposed to -- I mean, let's say it this way. We run this company for cash and so I expect to be cash flow positive each quarter.
Larry Robbins: Okay. And obviously I'm not talking about like the seasonal adjustments of when bonuses get paid et cetera, I asked a question before and you were nice to take it but as long as we have time I'm going to ask it again. Can you please provide me what the argument is to maintain a $2 billion plus cash balance on a company that never burns cash?
Ken Goldman: I think I said my piece and, you know, I'm not going to add to what I just said already.
Larry Robbins: Well, but there's a very big implicit cost to wait, and I think that shareholders have been asking these questions for a long period of time, and I think that the Company has made public commentary for a long period of time that the Board is studying the issue. And, you know, it is beyond us to think about what exactly the board could be studying. In the business that is free cash flow positive even during difficult times, in a business which has market leadership, right, and in a business where you can right-size your cost structure to the demand environment it seems as though 85 to 90% of your existing cash balance is what normal people would consider to be excess cash that could be utilized productively. I think you yourself made the commentary in the public conference call that you would have to look at acquisitions very, very critically in the medium term given how internally focused you're going to be on your customers, your sales force and right-sizing your cost structure, and so as we look at it, whether a company's cash is utilized to fund capital expenditures and research for growth in the future to fund acquisitions or that that actually should be returned to shareholders. If we listen to your public commentary if we look at your guidance the first two really fall off in which case we end up with this massive excess cash and we simply don't understand what takes so long given the fact that for nine months we've been hearing public commentary from the Company that they're studying the issue, at what point in time would the Board like to share with the shareholders what it is that we're studying? It's shocking.
Ken Goldman: You can ask the question 25 times and I'll give you the same answer 25 times. We're a public company. You have every right to ask the question, you have every right to buy the stock, sell the stock. Right now the way we believe we can add value is by improving performance. That is the only fundamental way we will improve the stock price, and if you think you can use your cash that you have invested in our company more wisely that's certainly your prerogative.
Larry Robbins: I believe that on behalf of the shareholders our cash includes the $2.2 billion that is currently sitting on the Company's balance sheet. So on behalf of all shareholders I think that we have the right to discuss that. Is there any return on capital special inclusive of the cash that is utilized for management bonuses or performance targets?
Ken Goldman: I'm not going to continue on. That cash was there when you bought into the Company so you know it was there when you bought your stock and I have nothing more to say.
Larry Robbins: Could you comment?
Ken Goldman: I have nothing more to say. No.
Operator: Ladies and gentlemen there are no further questions at this time.
Ken Goldman: I'll take other questions but I'm not going to answer the same question 20 different times.
Operator: There are no other questions at this time.
Siebel Systems (Nasdaq: SEBL) announced final financial results for the first quarter. Total revenues were $299 million. License revenues were $75 million. Maintenance revenues were $123 million. Services and other revenues were $101 million. Applying GAAP rules, the operating loss was $21.9 million or minus 1 cents a share. Excluding an acquisition related charge of $11 million the company would have earned 1 cent a share.
The company generated $43 million of cash in the quarter, which was offset by $93 million paid in cash for edocs, resulting in a net $50 million reduction in cash from the end of 2004.
“The shortfall in our license business is disappointing and we are taking immediate steps to improve our operating and financial performance,” said George T. Shaheen, CEO of Siebel Systems. "Q1 has been a call to action."
"I fully expect net head count to go down in the second quarter as we rationalize," said Chief Financial Officer Kenneth Goldman
Siebel did not announce plans for a stock buyback, as some investors are demanding, but management said it was considering just such a move, although it had not hired an investment bank to advise it though such a transaction.
In the first quarter Siebel Systems concluded new software licensing agreements with 72 customers and additional software licensing agreements with more than 172 existing customers. The list includes Amylin Pharmaceuticals, Banco de Chile , Banco de Credito e Inversiones, Blue Cross Blue Shield of Florida, Centers for Medicare and Medicaid Services, COVANCE Inc., Echostar Satellite Corporation, Fastweb SPA, Mercury Interactive Corporation, Penton Learning Systems, PROXISERVE,, Robert Bosch, SITA (EGN BV), SITA France, SKF Data Service AB, Symrise GmbH & Co. KG, Nuon NV and Verizon Wireless.
In the first quarter of 2005, Siebel CRM OnDemand Total Contract Value (TCV) grew approximately 245% over the first quarter of 2004 to $10.6 million and total subscribers increased approximately 18% over the fourth quarter of 2004 to approximately 33,000. Siebel Systems also introduced Siebel CRM OnDemand Release 7.
First let me admit to a personal basis. I met Mike Lawrie and found him every bit as authentic in person as he was on stage. People who know him better than me unfailingly voice respect for his professionalism, realism, and determination to make an impact. So the news that the Siebel Systems Board of Directors had accepted his resignation was as big a surprise to me as it was to the company’s customers, partners, employees, and investors. Not sitting on the board, I was not privy to their deliberations. Yet as a long time observer of the company my view is “avec les memes choices avec les plus change” (the more things change the more they remain the same).
Certainly in George Shaheen, Siebel Systems has found an executive with equal or greater gifts. Many in the investment and analyst communities have focused on Shaheen's unimpressive board memberships, the fact that he has not “worked” in five years but mostly have faulted him for serving as CEO and Chairman of Webvan, the ill fated on-line grocery. Yet Shaheen is an executive who has dealt with unusually difficult situations in his business career. Few now recall how bitter the warfare was between auditors and consultants within the old Arthur Andersen In retrospect, Shaheen lead the consultants in absolutely correct direction. If the consulting business had remained a part of the old Andersen, it would have been swept away in the Enron scandal along with, billions of dollars in wealth and thousands of jobs.
WebVan was a very different story. Capitalized at over $1 billion, the company ambitiously tired to solve the biggest challenge in e-commerce, the last mile problem. Instead it became one of the highest profile failures of the dot.com era. Life tells me that bad experiences teach you more than good ones. That being said I find it difficult to imagine that Shaheen would have accepted the position as CEO without seeing a clear path to success. This should be an encouraging sign for those who’s living depend on the company.
Yet both Lawrie’s and Shaheen’s hand are tied. The course of action available to both men is not all that different and in the end it is the market that will determine what happens to the company.
The integration between Concord's eHealth Suite and Siebel Version 7.7 has been successfully validated by Siebel Systems. The product maps business processes to the IT infrastructure, and measures end-user experience, and manages the applications, systems and networks. The eHealth Suite had already completed validation on both Siebel 7 and Siebel 7.5. With this latest validation, joint customers have move end-to-end visibility of their Siebel investment and more management tools.
"Concord can tie together networks, systems, and applications with the user experience," said Tom Casey, Product Marketing Manager APM Products, for Concord Communications. "This allows users to catch application service problems before they impact the business."
Concord's eHealth Suite for Siebel 7.7 also includes complementary management capabilities for Microsoft Exchange servers, Computer Telephony Integration, and other IP telephony applications. By proactively detecting problems before they impact end-users or quickly identifying the root cause once problems arise, companies can improve the performance and availability of their business service.
Concord Communications, Inc. (NASDAQ: CCRD) is a Strategic Software Partner in the Siebel Alliance and was recently acquired by Computer Associates (NYSE: CA).