According to AFX News in Frankfurt, Henning Kagermann, the chief executive of German software group SAP, told the Financial Times Deutschland that he's not interested in buying rival Siebel Systems.
“It doesn't make any sense to buy a company with an overlapping product portfolio," Kagermann was quoted as saying. The report said Siebel shareholders have urged management to try to sell the company to a larger rival such as Oracle Corp., Microsoft Corp. or SAP.
Meanwhile the abrupt sacking of Michael Lawrie and equally abrupt promotion of George Shaheen to the chief executive’s seat at Siebel give the impression of a company unsure of its direction.
Siebel expects to report a loss of between $7 million to $9 million on total revenue of $297 million to $300 million. Previous guidance anticipated revenue coming in at $325 million to $345 million. At the time Lawrie said he accepted full responsibility for Siebel's poor results.
And as ZDNet Australia/New Zealand further reports – in an article with the great headline "Siebel CEO Helped Onto His Sword" – activist investor and president of investment bank Providence Capital Inc. Herb Denton “had convened a meeting of institutional shareholders for April 13, to discuss the company's situation and called for Siebel to use its $2.2 billion cash pile to either buy back shares to improve stock market value or make acquisitions that would improve its performance.
“Siebel’s CEO swap announcement came just hours before the meeting was due to start, suggesting that the hard line the attendees were expected to take had a bearing on the timing of the announcement.”
Not that the folks over at Salesforce.com are gloating or anything, but the marked decline of Siebel’s software sales, along with the seemingly sacrificial goat-style management change at the top has only intensified speculation about Siebel's fate.
Observers are bearing in mind that Siebel does have $2.2 billion in cash, which could be used to buy other companies, or even take the company private.
Richard Davis, a Needham & Co. analyst told The Deal that while Salesforce.com is “nibbling at the low end, and SAP is banging them from the high end,” Siebel should focus its resources on one market or the other because chasing both is "causing their research and development, as a percentage of revenues, to be twice what it should be.”
The question is how much authority and power any Siebel CEO, Lawrie or Shaheen really has. Tom Siebel, the company's founder and chairman, still has an office at the company and is a high-profile presence.
"New CEOs that are not able to bring in their own management team or board members never do well," The Deal reports Peter V. Coleman, an analyst with Think Equity Partners as saying. "Tom [Siebel] built a phenomenal business, but the business has obviously changed. It is very difficult to come into a company with somebody else's name on it and have to say, 'Here's what you've been doing wrong.'"
While attempting to fend off impatient analysts Wednesday amid a sell-off of Siebel's shares, Shaheen, the former CEO of defunct online grocer Webvan Group Inc., was also drawing fire at a New York gathering of investors holding a roughly one-third stake in the company.
Herbert Denton, the president of investment firm Providence Capital Inc., which organized the meeting, told The Deal that investors felt Siebel is "a decaying asset" and that its new CEO "drove Webvan into the ground."
Denton also said that most investors at the meeting agreed that selling Siebel was the best alternative. "The most persistent view was to sell the company now," Denton said.
Assuming that SAP genuinely does not have interest in buying Siebel – and there’s no compelling reason why they should – other potential Siebel acquirers include Oracle, IBM or Microsoft. The Deal cites analyst estimates that Siebel could sell for $5 billion to $6 billion, or a net $4 billion to $5 billion counting its $2.2 billion in cash.
Although investors are clamoring for an outright sale, some analysts wondered whether Siebel management might instead opt to take the company private.
"There is a lot of cash around," Davis said. But as The Deal notes, Siebel's inability to maintain sustainable cash flows could be a problem. "None of these guys on the private equity side want to catch a falling knife," Davis said.
David Sims is contributing editor and CRM Alert columnist for TMCnet.
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