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April 13, 2005

Siebel CEO helped onto his sword

Less than a year into the job and following the revelation of a truly awful financial quarter, Siebel Systems CEO Mike Lawrie has been ousted, replaced by long-term board member and the previous CEO of Andersen Consulting (now Accenture), George Shaheen.

By CBR Staff Writer

Lawrie’s tenure began in May last year when founder Tom Siebel relinquished the CEO role with the expectation that the newcomer would lead the flagging company into chapter two of its development. Preliminary results released last week showed that chapter two was potentially a long way off, when the company missed its figures by miles.

Siebel expects to report a loss of between $7m to $9m on total revenue of $297m to $300m. Previous guidance anticipated revenue coming in at $325m to $345m. At the time Lawrie said he accepted full responsibility for Siebel’s poor results.

Commenting on the decision, chairman Tom Siebel said that the board of directors had come to the decision that a change was needed because the company was not meeting anyone’s expectations and that it was not a reaction to the Q1 prelims.

The results of the last four quarters in general did not meet the expectations of investors or internal expectations. The board carried out a review of the operations and the business and decided it was in the best interests of the shareholders and the company to make changes. It was not based on one quarter, he said. Lawrie’s departure was described as being by mutual agreement.

There is no question that Siebel is under intensifying pressure. Share price movements and option buying early in the month sparked rumors that Siebel might be subject to an acquisition attempt. Meanwhile shareholders are pressurizing the company to act quickly to improve shareholder value.

Activist investor and president of investment bank Providence Capital Herb Denton had convened a meeting of institutional shareholders for April 13, to discuss the company’s situation and called for Siebel to use its $2.2bn cash pile to either buy back shares to improve stock market value or make acquisitions that would improve its performance.

Siebel’s CEO swap announcement came just hours before the meeting was due to start, suggesting that the hard line the attendees were expected to take had a bearing on the timing of the announcement.

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Although he did not comment on the meeting Shaheen did comment on Siebel’s cash mountain saying, I think the shareholders want us to tell them how we will put it to work. He did not outline any potential plans, saying only that the company has several options and the board will be assessing them.

The sense that Siebel had been maneuvered into the decision to remove Lawrie was increased when during a conference call to discuss the change, Shaheen said that he had not formulated detailed plans as to how he and the management team would improve Siebel’s position.

This contrasted with assurances from the company that given his familiarity with the company, its products and customer base, he was able to hit the ground running. He has been on the board of directors since 1995 and said that over the past couple of years he has devoted large amounts of time to Siebel.

Shaheen did highlight one major change in emphasis between his planned approach and that of Lawrie. Where Lawrie was focused on shareholder value, Shaheen spoke of the need to focus on customer value as the means of driving performance.

My key role as CEO is to deliver on the promise to create customer value. My experience is that if you do that and make the customers feel like they are getting value from the products, that is the best fuel for results, he said.

Although no direct link was made, the emphasis on customer value probably speaks to the shock Siebel had in terms of its licenses sales in Q1 with sales expected to come in at around $7f5m, against the $100m to $120m that was expected. Poor license sale figures was the major reason for Siebel’s massive earnings miss.

He also plans to align company costs with income and said the company was not there yet but promised that he would not run the company only for short-term results. We will invest and continue to come to market with market leading products, Shaheen confirmed.

In the period during and immediately after the conference call Siebel shares dropped by $0.26 or 2.9% as the market appeared to show disappointment at the lack of forward planning detail.

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