2,000 heads to roll in Oracle-Siebel tie-up

The integration of Siebel Systems Inc. into Oracle Corp. will result in a reduction of 2,000 in the total workforce of the combined companies, but a majority of the layoffs will affect Oracle employees, Oracle said Thursday.

Oracle, in Redwood Shores, California, will retain 90 percent of Siebel’s support and development engineers, sales representatives and technical sales consultants, according to the company’s Chief Executive Officer Larry Ellison. Non-technical marketing employees and back-office workers will be laid off, he said. When the integration is complete, Oracle’s work force will total about 55,000.

Ellison and other executives spoke on a webcast Thursday to discuss the impact of the approximately US$5.85 billion deal.

On the technology front, Siebel Systems software will form the basis of Oracle’s CRM (customer relationship management) offering following integration of the two companies, according to Oracle.

Siebel’s business analytics technology also will play a key role in Oracle’s product line, being sold as an attachment to Oracle products and software that came from recent acquisitions PeopleSoft and J.D. Edwards in addition to products from Siebel, Ellison said. “It’s one of the hidden jewels” that Oracle got with the acquisition of Siebel, which closed last week, he said.

Oracle also provided a more detailed financial forecast for its fiscal third quarter and preliminary guidance for its fourth quarter. In the third quarter, ending this month, the company now expects total revenue to grow between 13 percent and 15 percent from the year-earlier quarter, compared with a range of 9 percent to 12 percent in the previous forecast, said Safra Catz, Oracle’s president and chief financial officer.

Using generally accepted accounting principles (GAAP), Oracle expects revenue growth between 17 percent and 19 percent. The company forecast third-quarter GAAP earnings per share of $0.13 or $0.14, she said.

For the fiscal fourth quarter, Oracle’s preliminary guidance is for total non-GAAP revenue growth of 10 percent to 14 percent, with GAAP revenue up 13 percent to 17 percent from a year earlier.

The integration of Siebel is likely to be less wrenching than the aftermath of Oracle’s earlier acquisition of PeopleSoft because there is less overlap between the product lines of the two companies, analysts said. By comparison to the layoffs announced Thursday, in integrating PeopleSoft, Oracle laid off almost half the company’s employees, said David Dobrin of B2B Analysts Inc., in Cambridge, Massachusetts.

However, there is overlap between Siebel’s offerings and products that Oracle brought in from PeopleSoft, said Rob Bois, at AMR Research, in Boston. In the long run, Oracle will probably do a good job with its strategy of combining parts from many companies into Fusion, but along the way it may have a hard time during the transition between now and 2008, Bois said.

“It’s a little bit of a balancing act on Oracle’s part,” Bois said. What’s more, the company will be in the awkward position of trying to sell the benefits of many separate products, he added. “For now, it’s kind of antithetical to their traditional message of a single unified suite.”

The biggest challenges are likely to be cultural rather than technical, according to Paul Greenberg, president of consulting company The 56 Group LLC. Aside from layoffs, he expects many former Siebel employees to leave Oracle voluntarily.

“The cultural disintegration at Oracle is pretty substantial. They haven’t even been able to integrate PeopleSoft yet,” Greenberg said.

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