Siebel Jumps on Solly Upgrade - TheStreet

(Updated from 8:52 a.m. EDT)

Siebel Systems


caught a break this morning when

Salomon Smith Barney

analyst Heather Bellini upgraded the e-business software maker to market outperform from neutral, telling investors the firm is well-positioned and worth buying at current levels, even in the dour economic climate.

Siebel's second quarter is on track to meet expectations, she wrote in a research note today. That's a feat

that was accomplished by competitor


(ORCL) - Get Report

last night, when the company said it beat earnings estimates by a penny thanks to some severe cost-cutting. And Oracle said the fourth quarter could have been a bottom for sales, giving investors a brighter outlook on the company and tech stocks in general.

Bellini's upgrade of Siebel was based on valuation and not a change in her fundamental outlook on the company. Simply put, she likes the risk-reward profile on the stock and thinks the macroeconomic environment is the biggest risk the company faces.

Siebel, which has dropped 46% since the start of the year and 26% in the past 7 days, was gaining 10.8% to $42.42 in early trading today. Oracle was up 13.2% to $16.80.

Bellini said Siebel's future is good, given that she expects cautious corporate purse-string holders to be more willing to spend money on an established player instead of less-experienced upstarts. "CIO's and CFO's have become more risk-averse given the current economic climate," she wrote. "This will benefit Siebel, as it is the customer relations leader with the largest install base."

Once information technology budgets thaw, the analyst said, she thinks Siebel will get a windfall from licensing revenues when companies that have picked Siebel's products are able to pony up the bucks to install them. Bellini points to the Siebel pipeline as proof, telling investors it has 3,400 deals totaling $1.2 billion in revenue. The only problem is closing those deals, which she expects will continue to be a problem for Siebel and competitors such as Oracle and



until the economy improves.

Bellini also upped her 12-month price target on Siebel's stock to $48 from $40. But she advised investors to be careful when buying shares, because she thinks more bad news is likely to rock the software space as preannouncements and earnings releases will continue to hit the market until after the July 4 holiday. Salomon does not have a banking relationship with Siebel.