Siebel Systems'

(SEBL)

net loss in the third quarter would have been almost double if the software maker had expensed options.

And the company's loss for the nine months ending Sept. 30 would have been 10 times higher if Siebel had expensed options, according to its quarterly filing with the

Securities and Exchange Commission

on Thursday.

San Mateo, Calif.-based Siebel reported that its GAAP net loss of $59.3 million in the third quarter would have soared to $110.1 million if the company had included an estimated $50.8 million in options expenses. Its net loss for the nine-month period ending Sept. 30 would have skyrocketed from $44.9 million to $457.9 million if the company had expensed its options. However, the company's option expenses during the nine-month period included $251.8 million in options canceled by CEO Tom Siebel in January.

In the third quarter, Siebel estimated the value of in-the-money options at $8.8 million and the value of out-of-the-money options at $42 million, based on a closing price of $9.76 on Sept. 30.

Those numbers have likely shifted, however, because Siebel's stock price has climbed. Shares of Siebel were down 4 cents, or 0.3%, to $13.68 in recent trading.

Historically, Siebel has been a particularly generous provider of employee stock options in the tech world. But as regulations requiring options expensing have become increasingly likely, Siebel has been taking steps to reduce its outstanding stock options. The number of Siebel's outstanding stock options has fallen by 33.5 million during the first nine months of 2003, to nearly 152 million. That's still 31% of common shares outstanding, however.

In addition, Siebel has taken another step that lowers the cost of its options. In February, the company began granting stock options with a contractual life of six years, compared with 10 years for previously granted options.

That reduces the estimated life of the options -- a factor used in the Black-Scholes model used to calculate the value of options. The expected life of Siebel's options declined to 3.1 years for the nine months ending Sept. 30, from 3.4 years for the same period in the year-earlier period.

"Mathematically, that would lower the value of the options," said Ken Broad, co-manager of TransAmerica's Premier Growth Opportunities Fund, which does not hold Siebel shares. "The lower the term, the less they're worth."

"That's one way for companies to manage down the cost of their options program," Broad added.