23 July 2003 Siebel Systems, the embattled customer relationship management (CRM) software supplier, descended into a fresh crisis yesterday when it said it had to cut another 9% of its workforce to counter an alarming sales and profits slump.
Almost 500 jobs have gone in the latest cull, meaning the software company has axed almost one-third of its workforce in the last 18 months.
CEO Tom Siebel said the cuts – which will generate savings of about $40 million – were made in order to prop up margins in a difficult market.
That prognosis appears to be supported by Siebel Systems’s second-quarter results, which were also announced yesterday. The company reported net income of just $9.8 million, down 67% on last year, while sales tumbled 18% to $333.3 million. Worse, licence revenue – regarded as a key indicator of the underlying health of a software company – fell 35% to $109.9 million.
“It doesn’t appear that the IT economy is picking up,” said Siebel. “We have bit [sic] the bullet after going through a long dry spell.” That “dry spell” could last until early 2005, he warned.
However, many analysts suggested that the software company’s problems run deeper than simply being a victim of the IT downturn.
Denis Pombriant, research director of Aberdeen Group, the IT analyst company, said Siebel Systems was being forced to discount heavily to head off fierce competition from rivals such as SAP and PeopleSoft. “It’s harder to get a premium price when you’re not the only player. For a long time Siebel was the only game in town,” Pombriant told the Reuters news agency.
And Meta Group analyst Liz Roche said Siebel Systems had been hurt by its emphasis on selling multimillion dollar contracts to big businesses. “Companies aren’t buying in bulk as much. The days of the $30 million and $40 million deals have been over for a while now,” she told the Associated Press.
Other critics say that Siebel Systems software is difficult and expensive to implement and offers little in the way of a fast payback.
But the software supplier points to recent studies from Gartner, the IT analyst group, and CSFB, the investment bank, which heaped praise on Siebel’s software products and placed the company well ahead of its rivals in terms of market share.