Financial results

For years, Siebel, the customer relationship management (CRM) software supplier, was a high-profile Wall Street favourite. It turned in quarter after quarter of strong growth, and founder Tom Siebel’s rapacious appetite for the fight, not least against his erstwhile employer Larry Ellison of Oracle, made him a popular candidate for conference keynotes and magazine covers.

But every successful company has its critics, and in Siebel’s case, the doomsayers have been warning for years that CRM is not a large software ‘platform’ category like enterprise resource planning (ERP) or database software. Eventually, they have been saying, the CRM business will be subsumed as the likes of SAP, Oracle and Microsoft expand their range.

Siebel’s first quarter results, for the three months to 30 March, do not necessarily confirm that analysis, but they have certainly spooked investors – especially because rival SAP’s CRM sales are now booming.

After a surprisingly good fourth quarter, it now looks as though Siebel kept little in reserve for the new year. Revenues in this latest period fell by 9%, resulting in a $4 million loss. Of most concern, software licence fees, used by Wall Street as the key indicator of underlying health, fell dramatically from $127 million in the first quarter of 2004 to $75 million in the comparable period of 2005.

It might have been worse: losses were reduced by nearly $16 million due to the interest generated by Siebel’s $2.5 billion cash pile and were further helped by favourable currency movements.

Siebel, which is already on its third CEO in a year, is now being harried by some of its shareholders who would like the management to sell the company or at least return a large chunk of its cash horde to investors. Unswayed by such calls, Siebel has now put in some rudimentary takeover defences. Once again, Oracle has been cited as an obvious buyer, although with two CRM product sets already following its acquisition of PeopleSoft, there is considerable doubt over whether it needs Siebel.

The big ERP vendors are not the only companies worrying Siebel., which provides CRM software as an online service, is tearing into Siebel’s territory at the low end. In the first quarter, Salesforce’s revenues jumped 84% to $64 million as profits rose to $4 million from a mere $0.4 million in the year-earlier period. However, it was not all bad news for Siebel. Sales of its equivalent service, Siebel OnDemand, grew by 250% to $11 million, suggesting that, given a year or two, it could yet stand up to its young rival.

Meanwhile, another high profile and troubled company, systems and services giant Hewlett-Packard (HP), announced its first set of results since new CEO Mike Hurd took over. With revenues up 7%, profits up from $844 million to $966 million and overall margins also slightly up, it is at first glance difficult to see exactly why Wall Street carried out its earlier coup, forcing out previous CEO Carly Fiorina. But dig deeper, and there are many trouble spots: margins in printing and imaging, HP’s most profitable business, are deteriorating; Dell is rampant in the server and PC market while HP is only edging forward slowly; and HP’s software business remains unprofitable – just.

Hurd, of course, was not in office while some $130 billion of shareholder value was gambled or withered away, so investors are ready to give him a chance. Most are impressed by the fact that, rather like Lou Gerstner when he took the helm before ‘saving’ IBM in the early 1990s, Hurd is saying little and doing a lot of investigating. So far, he is seen as a steadying hand. “He has about one-tenth the polish of Carly Fiorina, but his believability quotient is about 10 times greater,” wrote one analyst. By the end of the calendar year, however, investors will be expecting to see some substantive actions.

Secured future

Security software is one sector that stood out in the first quarter for its strong performance – to no one’s surprise. Shares in Symantec, the largest independent security software company, have been drifting down since December, but that is nothing to do with its success in the market; rather, investors do not want its growth and profitability harmed by its proposed takeover of storage software supplier Veritas, which is slower-growing but entirely healthy.

Symantec’s latest results conformed to its recent pattern of success. Fourth quarter revenues surged by 28% to $713 million as home and corporate users invested in software to protect themselves against hackers, viruses and other sorts of malware; profits edged up slightly to $120 million. For the year, Symantec’s sales rose 38% to $2.58 billion, making it the world’s fourth largest software company after Microsoft, SAP, Oracle and Computer Associates. Veritas, a similarly sized company, also reported sales up by 15%, to $559 million for the same quarter, with profits up from $100 million to $104 million.

Three other security companies, ISS, McAfee and RSA all reported growth, though none is doing as well as Symantec. Analysts might see this as a sign of ‘breakout’ for Symantec – the point when a company establishes such a clear lead that it starts to consume the lion’s share of the market and extend its product set to such an extent that many rivals are eliminated.


Key supplier financial results – May 2005
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net Inc ($M)  
Actuate Corp Enterprise reporting s/w 1Q05 31-Mar 24.6 -4% 0.2 -0.4
Advanced Digital Info Corp Storage systems 2Q05 30-Apr 106.2 -4% 0.7 -1.3
Art Technology Group Inc Marketing, sales, services s/w 1Q05 31-Mar 22.0 31% 1.4 -1.8
Atos Origin SA* IT services 1Q05 31-Mar 1762.8 4% n/a n/a
BEA Systems Inc Appln middleware 1Q05 30-Apr 281.7 7% 34.1 25.3
Beta Systems Software AG* Data centre automation s/w 1Q05 31-Mar 25.7 71% -1.5 -0.9
Business Objects SA Business intelligence s/w 1Q05 31-Mar 248.8 15% 15.0 3.3
Cap Gemini Ernst &Young Grp* IT services 1Q05 31-Mar 2220.4 16% n/a n/a
Chordiant Software Inc Customer management s/w 2Q05 31-Mar 19.2 -5% -5.6 -0.4
Ciber Inc Systems integration 1Q05 31-Mar 239.6 33% 7.8 6.0
Cisco Systems Inc Networking products 3Q05 30-Apr 6187.0 10% 1405.0 1211.0
Cognizant Tech Solutions Corp Offshore IT services 1Q05 31-Mar 181.7 52% 32.0 19.8
Computer Horizons Corp IT services 1Q05 31-Mar 66.6 12% 0.3 -0.6
Computer Sciences Corp IT services 4Q05 01-Apr 3878.5 8% 411.8 190.6
Compuware Corp Prog tools, sys mgmt &services 4Q05 31-Mar 318.8 -6% 26.7 33.9
Dell Inc PCs &servers 1Q05 29-Apr 13386.0 16% 934.0 731.0
Detica Group Plc* IT consultancy 2H05 31-Mar 73.0 23% 7.4 10.4
Electronic Data Systems Corp IT services 1Q05 31-Mar 4940.0 -5% 4.0 -12.0
FileNet Corp Content management s/w 1Q05 31-Mar 100.0 1% 8.3 4.0
Hewlett-Packard Co Systems, s/w &IT services 2Q05 30-Apr 21570.0 7% 966.0 884.0
Hummingbird Ltd Data analysis/content mgmt s/w 2Q05 31-Mar 54.3 -1% -1.2 2.1
IDS Sheer AG* Business process consultancy 1Q05 31-Mar 98.4 17% 5.8 3.2
IFS AB* Business applications s/w 1Q05 31-Mar 70.3 -4% 0.0 -3.5
Intentia AB* Business application s/w 1Q05 31-Mar 87.4 -8% -10.7 -15.8
Internet Security Systems Inc Security s/w 1Q05 31-Mar 76.8 15% 7.8 5.2
McAfee Inc Security s/w 1Q05 31-Mar 235.7 8% 36.0 58.0
McData Corp Storage switches 1Q05 30-Apr 98.9 2% -2.9 -9.8
Micromuse Inc Network management s/w 2Q05 31-Mar 37.9 -1% 4.1 0.6
Microsoft Corp Applns and systems s/w 3Q05 31-Mar 9620.0 5% 2563.0 1315.0
MicroStrategy Inc Business intelligence s/w 1Q05 31-Mar 60.0 22% 15.1 10.4
NCR Corp Data warehousing/financial systems 1Q05 31-Mar 1343.0 4% 30.0 -5.0
NetIQ Corp Systems management s/w 3Q05 31-Mar 51.1 -8% -3.1 -10.6
Network Appliance Corp Storage servers 4Q05 30-Apr 451.8 34% 63.4 36.4
Open Text Corp Content management s/w 3Q05 31-Mar 105.2 31% 5.3 3.3
Parity Group Plc* IT services 2H04 31-Dec 151.1 -1% 14.2 -3.4
Perot Systems Corp IT services 1Q05 31-Mar 473.3 13% 26.4 18.7
Quantum Corp Storage systems 4Q05 31-Mar 240.0 17% -3.4 -9.1
Quest Software Inc Application management s/w 1Q05 31-Mar 103.3 25% 9.2 0.4
RSA Security Inc Security s/w 1Q05 31-Mar 75.6 5% 7.2 6.5
Sage Group Plc* Financial applns s/w 1H05 31-Mar 725.1 15% 133.8 113.6 inc CRM products 1Q05 30-Apr 64.2 84% 4.4 0.4
Serena Software Inc Change mgmt s/w 1Q05 30-Apr 61.3 82% 8.1 -4.3
Siebel Systems Inc Customer relationship mgmt s/w 1Q05 31-Mar 298.9 -9% -4.0 31.0
Software AG* Database and XML mgmt s/w 1Q05 31-Mar 130.4 5% 15.3 12.7
SPSS Inc Business intelligence s/w 1Q05 31-Mar 57.5 1% 2.4 2.1
Symantec Corp Security s/w 4Q05 31-Mar 712.7 28% 119.7 116.9
Veritas Software Corp Data storage s/w 1Q05 31-Mar 559.3 15% 104.7 100.0
Vignette Corp Content management s/w 1Q05 31-Mar 45.6 15% 2.7 -24.7
Vitria Technology Inc Appln/process integration s/w 1Q05 31-Mar 16.5 16% -2.4 -6.6
WebMethods Inc Appln/process integration s/w 4Q05 31-Mar 52.9 0% -3.9 -8.7
* Figures converted into US$ at exchange rates averaged over the period.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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