Oracle and Siebel held acquisition talks, reports say

Discussions took place after PeopleSoft deal, but are now over

Fresh from its takeover of PeopleSoft, Oracle was recently in discussions about the possibility of buying out another applications rival, Siebel Systems, although the talks are no longer active, according to published reports.

The discussions highlight the pressure on Siebel to take action following its disappointing earnings report last month and amid pressure from investors to share some of its $2.2 billion cash reserves, according to a report in The Wall Street Journal on Monday. The paper cited an unnamed person familiar with the talks, which were first reported Friday by financial news Web site, the Journal said.

Last month Siebel ousted its chief executive officer, Mike Lawrie, for presiding over a particularly disappointing quarter at the struggling CRM (customer relationship management) vendor. The company reported license revenue of $75 million for the quarter to March 31, its lowest since 1998. Total revenue was $298.9 million, down 9 percent from a year earlier and far below analysts' original forecasts. On a GAAP (General Accepted Accounting Principles) basis, Siebel posted a $4 million loss, compared to a profit of $31 million a year earlier.

Lawrie, a former IBM sales executive, had been in the job for slightly less than a year. He replaced Tom Siebel, the company's founder and chairman, in May 2004.

Analysts have pointed to Siebel's high cost structure and the shrinking size of its deals as causes of its problems. After a period of heavy spending on CRM applications from Siebel and others, enterprises have been buying more cautiously in recent years, creating longer sales cycles.

Siebel's new CEO, George Shaheen, is expected to present further details of his turnaround plan at a meeting with financial analysts scheduled for Thursday. He has offered few specifics so far, but indicated that he will likely overhaul Siebel's sales process.

Oracle, in Redwood Shores, California, has said adding customers through acquisitions is an important part of its strategy for competing with applications rivals such as SAP AG and Inc. However, it has also said it would be unlikely to make another big purchase that could distract it from its integration of PeopleSoft, which it acquired for $10.3 billion.

Oracle representatives in Europe did not immediately respond to a request for comment, and Siebel representatives were not available. Both companies declined to comment to the Journal.

Copyright © 2005 IDG Communications, Inc.