Siebel Is Solid

The 'plain tech' company shows why tech firms deliver in ways that Old Economy firms only dream about.
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There's old tech (like hardware makers) and new tech (like pure-play dot-coms) and then just plain tech, like

Siebel Systems


. The San Mateo, Calif., company's blowout first-quarter earnings are a textbook example of why investors love to invest in such companies, the true bargains in the seemingly distant



Software maker Siebel isn't the tech bellwether that


(INTC) - Get Report

is. Nor does it serve as the broad gauge of consumer use of technology that one gets from watching

America Online


. (Both

AOL and

Intel reported earnings after the close Tuesday.)

But it is a solid company in a critical stage of development. Its annualized revenue run rate has blown by $1 billion -- the dangerous level at which


(ORCL) - Get Report

a decade ago and



in 1999 saw their businesses come unglued. Still, Siebel continues to grow apace.

Indeed, that a company Siebel's size posted a 90% year-over-year earnings gain in the first quarter shows why the tech sector, generally speaking, is so resilient. Whether the topic is innovative software or how an established company embraces the Internet, tech companies like Siebel deliver in ways Old Economy firms simply can't.

Siebel, which started by selling software used by corporate sales forces, has embraced all the latest buzzwords in the software world essentially without changing what it does. Now it's a "customer relationship management" company, and it offers so-called e-CRM applications, just like upstarts




Kana Communications



But Siebel is different. It is what cynics -- or those who grew cynical when tech shares tanked -- identify as a "real" company. Software licensing sales accounted for 62% of overall revenue of $309 million in the first quarter, with consulting services making up the balance. Net margins were 15%, and Siebel earned $46.2 million, or 19 cents per share, up 90% from the year-earlier period. The results include a 2-cent-per-share gain from the sale of shares of service provider



. Wall Street had expected earnings per share of 15 cents.

Siebel founder and CEO Thomas Siebel brags that his company's eCRM sales exceed everyone else's combined. "There is not a company in the marketplace that comes close to

our functionality," said Siebel, in the post-earnings conference call with investors Tuesday.

Anthony Ursillo, a

buy-side analyst with fund-management firm

Loomis Sayles

in Boston, is a believer -- and a shareholder. "In the non-Web CRM world, they're still the go-to people," he said. With the acquisition of

OpenSite Technologies

(discussed below), Siebel had some things to say about the Web portion of its business as well.

Siebel also released the latest version of its software Tuesday along with a flurry of press releases about customers that are using it.

He also warned of several factors that will slow Siebel's growth in coming quarters, a tactic


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used to great effect when its growth rate was zooming: Follow up a red-hot earnings release with as many cautionary comments as possible.

Chief among the drags on Siebel's coming quarters will be the

acquisition announced Tuesday of 4-year-old auction software maker OpenSite Technologies. OpenSite had operating losses of $12 million on 1999 revenue of $8 million and will cause Siebel to restate results from earlier periods when the transaction closes in May. The company says this will temper some of the exuberance Wall Street would have been expected to add to estimates of Siebel's second-quarter performance due to the better-than-expected first-quarter results.

Left unspoken by Siebel is that OpenSite, based in Durham, N.C., had been in registration to go public in a deal led by

Goldman Sachs

. At the pre-market announced price of $444 million, Siebel's all-stock offer for OpenSite represented a 26% premium to the top range of the valuation OpenSite had hoped to reap in its IPO. Undoubtedly a good deal for OpenSite's shareholders, investors in other business-to-business offerings should take notice that this well-positioned company decided to sell out rather than go public.

Siebel also says competition from


(SAP) - Get Report

should intensify later in the year, a rare admission that anything can stand in Siebel's way.

Before such slightly sobering comments, Siebel's shares rose 13% to 126 7/8 Tuesday, still 28% below their early March high but a nearly eightfold increase from the company's 52-week low.

A momentary low on


of 75 3/8 now is looking like an incredible bargain.

Ah, tech.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at