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January 12, 2006

Siebel: exceeding expectations

Siebel Systems has posted fourth-quarter preliminary results that show major improvements across all areas, exceeding its own expectations and those of financial analysts. Oracle's takeover bid for the company is likely to be a key factor in this impressive performance, and Oracle will no doubt be pleased to hear that Siebel has indeed proved itself as CEO George Shaheen promised last year.

By CBR Staff Writer

Siebel Systems has announced better-than-expected Q4 2005 preliminary results.

In what will be its last quarter as an independent company, Siebel expects revenue of $469 million, a 20% year-on-year increase and a 35% sequential increase. Within this, license revenue is expected to contribute $214 million, maintenance $131 million, and services and other revenue $124 million.

When Siebel gave an update on October 26, 2005, it said it expected fourth-quarter revenue to be in the range of $340 million to $360 million, including $110 million to $130 million from license revenue. Analysts had expected total revenue of $362 million, including $124 million in license revenue.

The differential between its own guidance and the current expectations suggests Siebel has been surprised by the extent of its resurgence. There could be several contributing factors. Oracle’s $5.85 million bid for the company, which came after months of speculation, released some of the pressure felt by prospective and existing customers about the future of the company, enabling pent-up purchase decisions to be made.

Given Siebel’s declining performance, Oracle was seen as a safer harbor, and customers may have been reassured by the promises of product development and long-term support, as well as the experiences of PeopleSoft and JD Edwards.

There may also be an element of customers buying or moving onto Siebel’s newer architecture as a mid-term safety measure, on the grounds that if they move up now, their technology will be up-to-date and stable, allowing them time to assess Oracle’s Fusion project without feeling pressured into taking it.

Additionally, this is a friendly acquisition backed by both boards, and its progress has been smooth so far. Siebel shareholders are due to vote on the proposal on January 31, 2006 and there is nothing to indicate they will reject the deal.

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As far as Siebel is concerned, the results go some way towards backing up comments CEO George Shaheen made last October when he said he was of the opinion that the company might have been able to prove itself if it had a couple more quarters.

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