In a Week of Warnings, Is Siebel's Silence Golden?

Right now in software, no news really is good news.

And guess what? Siebel Systems(SEBL) hasn't said a thing.

While a slew of software companies warned this week that numbers for their March-ended quarters will be lower than expected, Siebel hasn't made a peep on that front. With the close of the quarter now 4 days old, analysts are gaining confidence that Siebel's silence means it came through.

"If we haven't heard from them yet, we probably won't," says George Godfrey, an analyst at ING Barings who rates Siebel a buy. "At this point, they know what the numbers are. Give or take a fractional difference from what the Street is expecting, I'd expect them to be in good shape." (His firm hasn't done underwriting for the company.)

Analysts expect Siebel to earn 14 cents per share on revenue of $559.9 million when it reports later this month, according to Multex.com.

If it meets those expectations, that in and of itself would be an accomplishment. Software firms i2 Technologies(ITWO), Ariba(ARBA), Art Technology Group(ARTG), Agile Software(AGIL), Commerce One(CMRC), E.piphany(EPNY), Clarus(CLRS), Rational Software(RATL) and webMethods(WEBM) all have said first-quarter numbers will be below expectations, some by a breathtaking amount. In some cases, as with Commerce One and webMethods, smaller-than-expected misses resulted in rallies in the stocks.

Before the quarter wound down, Siebel was a prime candidate, along with Ariba, Commerce One and i2, as a company that would warn. But in the last week of March, that sentiment changed, and the lack of news out of the company now tells Wall Street that Siebel made the cut. Given the backdrop of bad news from other companies, that could help its stock rally, or at least hold present levels, until its actual numbers come out.

On Thursday, the stock closed up $4.88, or 20.4%, to $28.76 during the broad Nasdaq rally.

But before Siebel, which sells customer relationship software, makes you feel all warm and fuzzy about the software sector again, you should probably consider this: The firm will likely hedge its future financial guidance. At a business conference earlier this week, CEO Tom Siebel reportedly said there was currently a "global economic recession" and that there would be "incredible carnage" at B2B software companies.

Comments like that are markedly different from those made by the confident CEO just six weeks ago.

"You can't assume that anyone is too comfortable with the outlook," says Jim Pickrel, an analyst at J.P. Morgan H&Q who rates Siebel a buy. "Clearly, Tom Siebel is out there talking about carnage and recession. Based on that, they're probably feeling big changes in their business."

Which means the company may have squeaked by during the first quarter, but still sees tough times ahead.

It's that dichotomy that has dampened analysts' enthusiasm about the few companies that are signaling positive things to come. Even though Manugistics(MANU) made its quarterly numbers and BEA Systems(BEAS) said it is comfortable with its quarter, and while BMC Software(BMC) preannounced to the upside Thursday afternoon, uncertainty about corporate spending is still tempering enthusiasm.

For instance, Robinson-Humphrey analyst William Chappell doesn't see BEA's repeated reiteration of its quarterly guidance as that significant, especially because the company still has a month to go until the end of its April quarter.

"Nothing against BEA's internal model or their ability to forecast, but when a customer decides to postpone buying, you can't forecast that in your model," says Chappell, who rates BEA Systems an outperform. "When someone turns the spigot off and there's a complete slowdown, the internal forecasting model needs to be thrown out the window." (His firm hasn't done underwriting for BEA Systems.)

In fact, Thursday's big rally in the Nasdaq, and software stocks specifically, was likely more about investors' latching onto any good they could find than onto anything definite at specific companies.

"I don't think there's any definitive pattern right now in any of this stuff," says J.P. Morgan H&Q's Pickrel. "Thinking you can make sense out of any of this right now is probably the worst trap to fall into."

Robinson-Humphrey's Chappell sounds a similarly cautious tone.

"I think you have to look at BEA or, for that matter, a Siebel or any of the others, short and long term, and expect that volatility will continue," says Chappell. "At least, in my mind, through this summer, if not the fall."

No news indeed.

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