Just when it seemed like things couldn't get much worse for

Siebel Systems

(SEBL)

, a shareholder revolt and rumors of a major challenge to the company by

SAP

(SAP) - Get Report

promise to put even more pressure on the troubled software maker.

Hours after the San Mateo, Calif., company announced the appointment of its third CEO in about one year on Wednesday, an angry group of institutional shareholders met in New York City. "It was a firefight -- people were outdoing themselves saying how much they wanted the company to be sold," said Herbert Denton, president of Providence Capital, who organized the meeting.

According to Denton, about 70 people attended the closed-door meeting, either in person or via a conference call. The investors represented 150 million to 175 million shares, or nearly a third of the shares outstanding; Denton's firm has a "modest position" in Siebel stock, he said.

Some, he said, pushed for the company to buy back $1 billon worth of shares, a move that would push up the stock's value, at least in the short term; the stock was recently down 0.4% to $8.65, and is down 17% year to date.

A spokesman for the company declined to comment on the issues raised by the disgruntled shareholders.

Significantly, there was no support expressed for CEO George Shaheen, according to Denton. Shaheen headed

Accenture

(ACN) - Get Report

and later became CEO of WebVan, the short-lived Internet grocery service. While he was at WebVan, the company burned through more than $1 billion in three years, fell into bankruptcy and was dissolved.

Shaheen's tenure at WebVan bothers some Siebel investors, as does his relatively tiny stake in the company. According to his most recent filing with the

Securities and Exchange Commission

, Shaheen, a board member for 10 years, owns just 3,750 shares directly, and another 50,280 via a trust. He was granted 1.5 million options by the company, but he has not exercised them.

Denton's account of the meeting was confirmed by an investor with a large position in the stock who attended but asked that his name not be published. If anything, his account was far angrier than Denton's.

"A $1 billion buyback would be a beginning, not an end," the source said. "Unless this company can explain how it can create more shareholder value by being independent than as part of a larger company, we won't accept it. Tom Siebel thinks this is his company, but it isn't. It belongs to the shareholders."

The investor warned Siebel that it does not understand its own investor base. "There are very few tech investors who own the stock; now it's mostly owned by value investors," he said. "All the buyers are value buyers. The criticism will only get worse."

During a conference call with analysts on Wednesday, Shaheen promised to give more details on his plans to right the company when it reports final first-quarter results on April 27, and even more during its analyst meeting in early May.

Poor results in the quarter -- Siebel

missed both top- and bottom-line targets by a wide margin -- apparently precipitated the departure of CEO Michael Lawrie, who headed the company for less than a year. In May 2004, Lawrie replaced Tom Siebel, the company's founder, who stayed on as chairman.

"The revolving door at Siebel suggests to us that the company has not yet come to grips with its most pressing issues," wrote JMP Securites analyst Patrick Walravens. The sell-side analyst went on to say that a major issue facing the company is increased pressure from larger companies, such as SAP, selling "suites" of products to the same customer base. (JMP does not have an investment-banking relationship with Siebel.)

Similarly, Prudential analyst Brent Thill suggested Thursday that the German software giant will announce a new hosted customer relationship management (CRM) application that is priced on a subscription basis. And that, of course, is exactly the business that Siebel is counting on to broaden its base, at a time when the popularity of ordinary license software applications is waning.

"Over time, we believe SAP's hosted CRM offering could hamper SEBL's fledgling CRM OnDemand business and interfere with

Salesforce.com's

(CRM) - Get Report

upward inroads into the enterprise segment," Thill wrote, noting that SAP would not comment on the rumored new product. (Prudential does not have an investment-banking relationship with Siebel or Salesforce.com.)

SAP stock was down 0.9% to $38.09 in recent trading; Salesforce.com was off 2.6% to $15.04.