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Technology Stocks : Siebel Systems (SEBL) - strong buy?
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To: muckraker71 who wrote (3931)9/26/2000 7:38:52 PM
From: Trader Dave  Read Replies (2) of 6974
 
a thoughtful and appropriate analysis. It is a valid approach to thinking about valuation. A few thoughts:

As you know, the approach may be completely accurate, but getting there it will be volatile as all get out.

Price to revenue multiples may shift around as business model potential shifts. Look at oracle's operating margins, is this a possible challenge to Tom and Company to raise target operating margins by running their business more efficiently? If so, that could extend the run for another year or raise your price to sales ratio.

Two or three years ago, i sized the crm market at roughly 3 to 6 times the erp market. today, i would size the demand chain market at 8 to 15 times the size of the erp market. Moreover, SEBL is in a far more dominant position than SAP ever achieved. Does the peak revenue figure change based on that?

Offsetting those positives, the cancerous perpetual licensing model should drive far lower price to sales ratios than you mention. Perhaps SEBL will develop some subscription businesses out of the new market segments that are emerging.

I don't see any risk of market maturation yet, but I'm always on alert. (Note major difference between SATURATION and MATURATION!!! When perpetual license markets reach 35% penetration, growth will start to slow significantly. A saturated market (Netware 2000) is dead, a maturing market (Netware in 1994) is doomed to declining growth.

sleeping with one eye open,

TD
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