Siebel Systems has reported results for its first quarter, ended March 31.
Siebel Systems CEO Tom Siebel described the market position as fragile and uncertain during a conference call to discuss the company’s quarterly results, and said he remains cautious despite a sharp increase in first-quarter profit.
The top-line figures gave every indication that it has sorted out its operational issues and realigned to match the market environment. The company was able to reap the cost-cutting benefits of nearly 2,000 fewer employees and fewer factories plus higher software license revenue. However, interpretation of some of the underlying numbers was not so straightforward.
While license revenue, the ever important barometer of company health, was up 13% at $127 million and came in at the high end of Siebel’s revised expectations, service revenue declined year on year from $221 million to $203 million, and was a major factor in the slight slip in overall revenue to $329 million.
As maintenance and service revenue is increasingly becoming the largest aspect of enterprise software vendors’ revenue, any slippage is worth noting. A reduction or flattening of income from these sources, coupled with increased license sales, suggests customers are still in a winning position when it comes to price negotiations.
With Siebel predicting a sequential increase in license revenue next quarter, in the range of $120 million to $140 million, it will be interesting to see which direction maintenance and services revenue will go. However, its non-maintenance paying OnDemand offering will be a complicating factor. The European launch is imminent, although early sales are already coming in, and Siebel is expecting a surge once localized versions are available.
What is certain is that its lower cost structure and mixed onpremise/ondemand deployment model offerings means it is well positioned to take advantage of improving market conditions and changing customer requirements.
This article is based on material originally published by ComputerWire
