Posted on 07/18/2002 8:37:03 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
SAN FRANCISCO (AP) - Business software maker Siebel Systems Inc. is slashing more than 1,100 jobs to deal with the brutally bad market for corporate technology spending, which caused a 61 percent decline in Siebel's second-quarter profits.
The job cuts amount to 16 percent of Siebel's 7,160-person work force. They were announced Wednesday as Siebel released earnings that fell well short of Wall Street expectations and lowered its outlook for the rest of the year.
"It's difficult to express how weak it is, in Europe, in Asia, in the United States," said Thomas Siebel, chairman and chief executive, in a conference call with analysts. "There's just not a lot of business being done in the information-technology market."
In the second quarter, which ended June 30, Siebel Systems earned $29.8 million, or 6 cents per share. In the comparable period last year, the company earned $76.6 million, 15 cents per share.
Revenue fell 28 percent, to $405.6 million from $560.2 million a year ago.
Analysts polled by Thomson Financial/First Call had expected Siebel, based in San Mateo, Calif., to earn 9 cents per share on revenue of $437 million.
Some analysts had predicted layoffs would be announced, saying Siebel needed to keep expenses in line with flagging sales.
Even so, investors apparently still were not prepared for the degree of pessimism in the report, which was released after the company's shares had risen 3 percent on the Nasdaq Stock Market. Siebel shares plunged 11 percent to $10.46 in extended trading.
Siebel is one of the leading makers of customer relationship management software, which automates several business functions and helps keep track of customer accounts.
The company will take about $225 million in charges to pay severance to laid-off employees and to close facilities, including some in Silicon Valley. The cuts should bring Siebel Systems' staffing to its mid-2000 level of about 6,000 people.
Thomas Siebel said the company, which he founded in 1993, had carried 1,500 more employees than it needed for the past year in hopes that a turnaround in tech spending would have taken hold by now.
Instead, the high-tech swoon has deepened and is being compounded, Siebel said, by the overall negative business climate — with fears of terrorism, a decline in worldwide stock markets and recent questions about corporate accounting fraud.
Siebel's chief financial officer, Ken Goldman, predicted earnings of 5 to 8 cents per share in the current third quarter, excluding restructuring costs, on revenue of $355 million to $400 million. Analysts had been estimating 9 cents per share and revenue of $432 million in the third quarter, according to First Call.
The fourth-quarter outlook appears similar, executives said.
Executives said they hoped to return to growth in 2003. But Goldman acknowledged in response to an analyst's question that without a meaningful turnaround in tech spending, next year's revenue could be around $1.5 billion or $1.6 billion. That would be well below current projections for 2003 sales of $2 billion.
For the first half of 2002, Siebel showed net income of $94.4 million, 18 cents per share, on $883.4 million in revenue. Each figure dropped from the comparable period in 2001, when Siebel earned $153.5 million, 29 cents per share, on $1.16 billion in revenue.
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