Siebel loses US$59.3 million, acquires two companies

Siebel Systems Inc. released its third quarter financial results on Wednesday and announced the acquisition of UpShot Corp., an online hosted CRM service, and Motiva Inc., an enterprise incentive management software vendor.

Total revenues for the third quarter 2003 were US$321.4 million, with revenues from license fees US$110 million, down 13 per cent from last year.

One industry analyst said the reduction in revenue from new licensees does not bode well for the company.

“The combination of a drop in license revenue and actual loss really tells the story of a company that is having serious problems and needs to change how it organizes its business,” said Joshua Greenbaum, principal at Enterprise Applications Consulting.

Net loss for the third quarter was US$59.3 million or US$0.12 per share, which was consistent with analyst estimates and preliminary figures released on Oct. 2, according to Ken Goldman, senior vice-president of finance and administration and CFO.

Net income for the third quarter was US$16.1 million or US$0.03 per share, excluding restructuring and other charges.

Although the financial numbers were expected, the news that Siebel is acquiring UpShot and Motiva caught most observers off guard.

The company will pay US$70 million, US$50 million in cash upon closing, and US$20 million to be paid in earn outs over the next year. Motiva will be acquired for less than US$3 million.

It remains unclear how long Siebel will continue to support the UpShot product line. In a released statement the company said that “Siebel will support both offerings and enable seamless transition from UpShot to Siebel CRM OnDemand.”

Industry analysts appear to be of two minds concerning the UpShot acquisition.

“Upshot is not long for the world and that is a good thing for the world. Siebel is more user-friendly and usable,” said Mark Smith, CEO of Ventana Research.

Smith also said that the Upshot deal gets Siebel more market share and a better position in the SMB market.

Taking a more pessimistic view, Greenbaum said that a large enterprise application vendor like Siebel faces severe challenges in offering a hosted solution.

“The model for hosted software is extremely different than packaged (software). Pricing is different (and) incentives for a sales force is different. (Hosting) is one (model) that is hard for large software companies to justify based on their sales structure and their cost structure. It also has potential to undermine your existing business. That is why they got out of it (two years ago) because it was cannibalizing what they do for a living,” said Greenbaum.

Greenbaum said the more traditional way for an enterprise vendor to get itself out of a hole is to upsell more product.

“I would question these acquisitions of having the ability to make a tremendous difference,” he said.

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