Siebel admits sharp jump in “barter” deals

Customer relationship management (CRM) software vendor Siebel Systems has reported a sharp increase in the amount of revenues it derives from swap deals with suppliers.

The practice of including swap deals, which typically involve a vendor and customer agreeing to buy each other products, as part of a company’s revenue figures has been questioned since the collapses of energy giant Enron and telecoms start-up Global Crossing.

For its fiscal 2001, Siebel’s software license revenues from swap deals rocketed by 560% to $76.4 million (€86.6m), over its previous year. This means that swaps, often called barter deals, now account for 7% of Siebel’s 2001 software license revenues of $1.07 billion (€1.21bn).

The suppliers Siebel executes swaps with include telecoms provider AT&T and networking equipment giant Cisco Systems. For example, in a swap deal Siebel could supply Cisco with CRM software, but in return receive Cisco equipment such as routers or voice over Internet protocol (IP) technology. Siebel would then count this sale as license revenue, although it may not receive a cash payment from Cisco.

Siebel CEO Tom Siebel defended the practice and said it was one of the few companies that discloses the value of its swap deals. He referred to swaps as “concurrent transactions”.

However, analysts have questioned Siebel’s motives. Not only are swaps – also known as barter deals – often regarded as a mechanism for meeting Wall Street estimates, but they can also lead to inflated prices for a vendor’s software. They also frequently end up in acrimonious legal disputes between contracting parties.

Avatar photo

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...

Related Topics