Analysts Take Dim View of Siebel's Silence

Updated from Dec. 3.

No news proved to be bad news for Siebel SystemsSEBL stock, which fell Thursday after the software vendor held a midquarter conference call a day earlier that offered few specifics on the company's financial picture.

Shares of Siebel were down 85 cents, or 6.2%, to $12.77 in recent trading.

Siebel Systems, which sells customer-relationship management software, said Wednesday that its recent foray into the hosted arena is exceeding expectations. Market interest in the company's hosted CRM offering, called CRM OnDemand, "is nothing short of overwhelming," CEO Tom Siebel said

But Sanford C. Bernstein analyst Charlie Di Bona said in a note Thursday that he is concerned increased operating costs for the OnDemand initiative, including advertising and sales, will hurt Siebel's operating margins. He issued estimates for 2004 that were far short of the consensus, with pro forma earnings of 23 cents a share on revenue of $1.36 billion vs. Thomson First Call consensus estimates of earnings at 28 cents share on revenue of $1.41 billion.

A lack of bad news and the prospect of an above-average fourth quarter should support the stock near term, Di Bona wrote. But a risk of a disappointment early next year could hurt the stock. Di Bona, who has an underperform rating on Siebel, suggested the stock is overpriced, trading at roughly 55 times forward consensus earnings before Thursday's drop. That's the stock's highest valuations in the last two years, even as growth expectations have fallen. (Bernstein doesn't have an investment banking business.)

Siebel, who was cited earlier this year for violating Regulation FD, launched the conference call Wednesday with a laundry list of topics he would not discuss, including financial guidance, the pipeline of potential sales and his view of the economy.

Goldman Sachs software analyst Rick Sherlund griped on the call that Siebel "wiped out most of our questions" with his list of untouchables. Siebel responded that the last time he responded to questions like that it cost him $250,000.