The move goes some way towards addressing shareholder demands for Siebel to redistribute a portion of its $2.2bn cash pile, but is not the $1bn stock buyback some investors have been pressing for.
In an open letter to shareholders, CEO George Shaheen said: We believe it is the best way to increase long-term shareholder value, while preserving the financial strength and flexibility we need to take full advantage of growth opportunities. The dividend will be payable on July 15, 2005 to shareholders who own shares at the close of business on June 30, 2005.
Shaheen also provided limited details on how he plans to promote Siebel’s recovery through better execution. As he has previously stated his aims are to improve revenue generation, align the company’s costs to its income, continue investing in products in growth areas, and undertake acquisitions where appropriate.
As previously announced, Siebel intends cutting costs by around $25m. Shaheen said the company was in the process of taking out $14m worth of quarterly costs and savings of further $10m per quarter would be identified by year-end.
All areas are being looked at with cuts in products, sales and marketing, R&D, and general and administrative expenses as Siebel drives towards its goal of achieving 15% operating margin by the end of 2005 and 20% thereafter.
The news will no doubt be greeted with a laconic smile at growing CRM rival SAP AG, given CEO Henning Kagermann’s comment made during his keynote at the recent European Sapphire user conference that no-one can cut himself to success. Job losses with surely come but there
Another key action point will be the restructuring the complex sales and sales support operation, which Siebel describes at an overly complex, matrixed organization, in an effort to make it more nimble and flexible. As well as helping improve execution this is also an attempt to make it easier to do business with Siebel as the company has been accused of being hard to deal with.
Other internal changes on the sales side include more rigorous account planning and account management to bolster the size and quality of its sales pipeline and simplifying the contract execution process to allow deals to be closed more quickly and easily.
He did promise continued investment in Siebel’s core product, in BI and analytics which is Siebel’s fastest growing area with sales up 40% between 2003 to 2004 generating sales of $140m last year, and the on demand service.
There are also plans for acquisitions that will add to the core Siebel 7 platform and boost Siebel’s vertical capability. More interestingly, the company is also looking for acquisitions in the on demand and BI/analytics areas.
As far as opportunities goes Shaheen is sticking to the view that there is plenty of scope in the broad-based front office, customer facing area of the market, maintaining that the market could be worth $100bn. It is also looking to the custom build CRM market, which it believes is worth $24bn. Later this summer it intends launching its component platform, codenamed Nexus, which is designed to appeal directly to this market.
Nexus is Siebel’s implementation of a service oriented architecture, which componentizes the core Siebel product, enabling customers to assemble the components they require alongside their existing or third party applications or components. Siebel’s component assembly CRM framework, which has cost $500m over three years, is built on both the J2EE and .NET platforms.
While the move to a SOA is positive, Siebel is not the only one undertaking this type of development with rivals SAP and Oracle both having unveiled similar initiatives. Nor will it lead to an immediate revenue boost for Siebel as adoption of SOA among organizations is a slow process.
Whether Shaheen’s plans will be enough to calm its angry shareholders remains to be seen but they were reported to be in feisty mood prior to the AGM. Reports stated that they were threatening to vote against Tom Siebel’s membership of the board as a way of sending a clear message of their disconnect and there were also murmurings that a proxy war could be brewing for next year if they are still unhappy with the way the company is progressing. Aware of the threat Siebel has announced the appointment of two additional independent directors.
Although the execution plan has gained more flesh there is still a lack of detail, but it may be enough to buy Shaheen some much needed extra time.
