Update: Siebel pulls back into the black for 2004

CRM vendor rights itself after two years of losses

After two years of losses, Siebel Systems pulled itself back into the black in 2004 even as its revenue continued to decline, the company said Thursday as it released its 2004 financial results.

Siebel's revenue for the year ended Dec. 31 totaled $1.34 billion, a slight drop from the $1.35 billion it generated in 2003. However, the company's net income for the year rose to $110.7 million, following annual losses in 2002 and 2003.

Siebel's fourth-quarter results showed year-over-year growth in both revenue and income. In a prepared statement, Siebel Chief Executive Officer Mike Lawrie praised the quarter as the first in more than three years in which Siebel showed growth over the same period in the previous year. Revenue rose 7 percent to $392.4 million, and net income for the quarter rose 32 percent, to $53.8 million.

In a conference call with analysts following the earnings announcement, Siebel executives disclosed for the first time a count of paying subscribers for Siebel's year-old CRM (customer relationship management) OnDemand product. The hosted service had 28,000 end users at the end of 2004, including 8,000 inherited through Siebel's October 2003 acquisition of hosted CRM provider UpShot, executives said.

That user count puts Siebel far behind hosted CRM leader Salesforce.com Inc., which claims 214,000 subscribers from more than 13,000 companies, and behind other independent ASPs (application service providers) like NetSuite Inc., which has around 7,000 companies running on its software.

San Mateo, California-based Siebel has fallen significantly short of the lofty target initially set by Siebel founder and Chairman Tom Siebel, who said as the service launched in late 2003 that he considered it "highly likely" Siebel would overtake Salesforce.com within a year. However, Siebel's new executives, including CEO Lawrie, have taken a more modest tone in describing Siebel's CRM OnDemand goals.

"We feel like we're on the field now," Lawrie told analysts on Thursday. He said he's pleased with the hosted service's growth rate, and considers the service a key investment area for Siebel even though he doesn't expect it to generate a profit "in the near term."

Lawrie, who took over as Siebel's chief executive in May, reiterated an earlier pledge to dedicate himself to three tasks: improving Siebel's revenue growth, operating margins, and customer satisfaction.

With an estimated 2.9 million users worldwide, Siebel remains the CRM industry leader by most analysts' calculations. Lawrie said he was pleased with Siebel's fourth quarter results, but he singled out the Asia-Pacific region and the U.S. as two areas where he felt Siebel fell short of its growth potential. Consequently, Siebel brought in a new group of executives during the quarter to lead its Asia/Pacific operations. Former Oracle Corp. executive Peter Burridge is Siebel's new senior vice president and general manager for the Asia/Pacific and Japan regions, reporting directly to Lawrie.

Asked where Siebel sees the strongest growth potential for the coming year, Lawrie named Japan and China, along with the public sector and financial services industries and Siebel's analytics product lines.

Copyright © 2005 IDG Communications, Inc.

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