Oracle buying Siebel a no-go

Fresh from its takeover of PeopleSoft Inc., Oracle Corp. was recently in discussions about the possibility of buying out another applications rival, Siebel Systems Inc., although the talks are no longer active, according to published reports.

The discussions highlight the pressure on Siebel to take action following its disappointing earnings report last month and amid pressure from investors to share some of its US$2.2-billion cash reserves, according to a report in The Wall Street Journal this month.

The paper cited an unnamed person familiar with the talks, which financial news Web site first reported, the Journal said.

Last month Siebel ousted its chief executive officer, Mike Lawrie, for presiding over a particularly disappointing quarter at the struggling customer relationship management (CRM) vendor. The company reported license revenue of $75 million for the quarter to March 31, its lowest since 1998. Total revenue was $298.9 million, down nine per cent from a year earlier and far below analysts’ original forecasts.

Lawrie, a former IBM sales executive, had been in the job for slightly less than a year. He replaced Tom Siebel, the company’s founder and chairman, in May 2004. Analysts have pointed to Siebel’s high cost structure and the shrinking size of its deals as causes of its problems.

After a period of heavy spending on CRM applications from Siebel and others, enterprises have become more cautious buyers in recent years, creating longer sales cycles. At press time, Siebel’s new CEO, George Shaheen, was expected to present further details of his turnaround plan at a meeting with financial analysts. He has offered few specifics so far, but indicated that he will likely overhaul Siebel’s sales process.

Oracle, in Redwood Shores, Calif., has said adding customers through acquisitions is an important part of its strategy for competing with applications rivals such as Inc. and SAP AG.

However, Oracle has also said it would be unlikely to make another big purchase that could distract it from its integration of PeopleSoft, which it acquired for $10.3 billion.

Oracle representatives in Europe did not immediately respond to a request for comment, and Siebel representatives were not available to talk. Both companies declined to comment to the Journal.

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