Updated from 11:43 a.m. EST

Siebel Systems

(SEBL)

joined the long list of software companies issuing warnings this week, when it told investors after the close Friday that it would miss analysts' estimates for the March quarter by 3 cents a share and undershoot revenue expectations by as much as 10%.

As did the dozen or so other software companies that warned in the last few days, the company blamed the poor world economy and war jitters for the shortfall. CEO Thomas Siebel said several major deals set to close on the very last day of the quarter were not signed. "Our biggest five competitors in the quarter were the economy," he said in a call with analysts.

Siebel said revenue for the quarter would fall between $330 million to $335 million. Wall Street expectations were for revenue of $368.86 million, according to Thomson Financial/First Call.

Siebel's post-close announcement ended a day in which software stocks drifted downward for the whole session. In fact, the biggest surprise of the day was that the losses weren't greater.

In regular trading Friday, Siebel was down 36 cents, or 4.4%, to $7.80. After hours, shares were rising 0.6%.

The retreat began after the closing bell on Thursday when

PeopleSoft

(PSFT)

, one of the world's largest software companies, said it could miss license revenue estimates by as much as 40%.

The Pleasanton, Calif.-based company now expects first-quarter earnings of 11 cents to 12 cents a share on total revenue of $450 million to $455 million. Wall Street had expected the company to earn 14 cents on revenue of $483.6 million in the March quarter.

Tellingly, PeopleSoft has reduced its guidance for a key measure -- revenue derived from license sales -- from a range of $125 million to $135 million to $80 million to $85 million. Analysts called the results "shocking and appalling," and quickly moved to adjust estimates for the sector.

Patrick Walravens of JMP Securities cut estimates on the seven enterprise software companies he covers, including PeopleSoft,

Oracle

(ORCL) - Get Report

,

SAP

(SAP) - Get Report

,

Siebel

(SEBL)

and

TheStreet Recommends

J.D. Edwards

(JDEC)

for the next three quarters. JMP has no banking relationship with the companies mentioned.

Like most of the other companies dispensing bad news on Thursday, PeopleSoft execs blamed the war and the weak economy for at least part of their company's woes. Moreover, PeopleSoft's problems could mean that other major companies that sell applications, such as Oracle and Siebel, are also in for a bad time, said analyst Mark Murphy of First Albany. "It's hard to believe that something isn't going on that would affect application sales for other companies."

Oracle is heavily dependent upon its flagship database business, but many analysts believe the company won't resume growth until it expands its application business.

Piper Jaffray Analyst Tad Piper also trimmed estimates for PeopleSoft and Siebel and noted that the end of March, when software companies typically close many deals, presented

an unusually difficult environment.

He, too, thought that Friday's market wasn't as brutal as he feared. "The misses were worse than we expected, but long-term the fundamentals in the sector are somewhat stronger," he said. Piper Jaffray has a banking relationship with PeopleSoft, but not with Siebel.

The PeopleSoft announcement prompted a rapid-fire selloff. Shares dropped $2.69, or 16.3%, to $13.81 in after-hours trading. The stock recovered a bit Friday, and in recent trading was off $1.80, or 10.9%, to $14.70.

"Obviously the environment for capital spending worsened in 1Q with added concerns about the war and its impact on the already-weakened economy. The result was delays in corporate purchasing worldwide," PeopleSoft CEO Craig A. Conway said in a prepared statement.

The warnings have reversed a software rally that began on Wednesday, sparked by good war news and a robust earnings announcement by business intelligence vendor

Cognos

(COGN)

.

Siebel was off 37 cents, or 4.5%, to $7.79 a share; Oracle lost 19 cents, or 1.7%, to $11.43;

Microsoft

(MSFT) - Get Report

was down 35 cents, or 1.4%, to $25.38;

BEA Systems

was down 49 cents, or 4.4%, to $10.63; SAP is off 47 cents, or 2.3%, to $20.09;

Sybase

(SY) - Get Report

, which warned on Thursday, was off 22 cents, or 1.7% to $12.51. Cognos was up 10 cents to $25.42.