Siebel records strong rebound

Siebel Systems marked what is likely to be its last quarter before being acquired by Oracle with its strongest financial performance in almost four years, though analysts warned that the performance might reflect one-off effects.

The maker of customer relationship management software, whose $5.9bn purchase by Oracle is expected to be completed within weeks, attributed the rebound to greater customer confidence thanks to the pending deal, as well as an expansion into analytics software.

However, Rob Bois, an analyst at AMR Research, said the bounce in sales might have had much to do with a rush by Siebel sales representatives to close deals before the merger, a move that would leave a weaker pipeline of sales prospects for Oracle.

A similar effect was evident at PeopleSoft, the applications software company bought by Oracle last year, he added. The PeopleSoft deal has been followed by a steady erosion of market share for Oracle’s applications software, as the combined company has continued to lose ground to SAP, the market leader.

SAP said earlier this week that its software licence revenue had risen by 18 per cent in the fourth quarter, with sales in the US jumping by 35 per cent.

By contrast, Oracle’s application licence sales in the quarter to the end of November dropped more than 40 per cent, after adjusting for the effects of the PeopleSoft acquisition.

Siebel said it expected to report revenues of $469m for the final three months of last year, up from $392m a year before. Sales of new software licences – seen as the most important indicator of future performance, since they lead to recurring maintenance revenues – jumped to $214m from $161m. The quarterly new licence sales are the strongest since the first quarter of 2002. However, at $479m, annual licence sales were still slightly below each of the previous two years.

George Shaheen, chief executive officer, said Siebel’s pending acquisition by Oracle had “removed a certain amount of uncertainty about the future”.

The company had succeeded in closing a number of large deals that it had been working on throughout last year, he added.

Mr Bois said Siebel’s customers, as well as its sales force, had an incentive to bring transactions forward into the most recent quarter, since they would be in a stronger position to negotiate better terms.

In New York, Siebel shares closed 1 cent higher at $10.61. Oracle shares ended 12 cents off at $12.52.

The scale of Siebel’s rebound in the latest quarter is roughly the same as that recorded by PeopleSoft in its final three months as an independent company, said Charles di Bona, a software analyst at Sanford C Bernstein. Larry Ellison, chief executive of Oracle, attributed the PeopleSoft performance to its salesforce’s “draining” its pipeline of future business in the run-up to the acquisition, he added.