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Technology Stocks : Siebel Systems (SEBL) - strong buy?
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To: Melissa McAuliffe who wrote (1175)3/3/1998 2:42:00 PM
From: Clam Clam  Read Replies (3) of 6974
 
What this merger says about Siebel, IMO.

1) SEBL is obviously concerned about the ERP threat but because of its lofty stock valuation it can soften this threat by acquiring the most obvious takeout candidate. Siebel is protecting itself long-term. The stock has run on momentum investors buying in droves as Siebel has executed magnificently thus far. From a competitive standpoint, they were a lot like PSFT was in the early days - terrible competition enabling tremendous mind-share. Siebel has gained critical mass and is situated well from a fundamental standpoint, especially now with Scopus. They have mitigated the risk but the stock was ironically being valued like it was Peoplesoft when indeed that is not the case, at least not yet. SEBL has leveraged 4 huge customers (Cisco, Nationwide, Prudential & Schwab) and a bunch of medium sized customers into a $2.5 billion market cap. Siebel has lost multiple deals recently, including SFA. At Fidelity to Scopus and a handful to Vantive. Who knows? they may sign up a few huge new customers and continue to grow 30% sequentially. But they may not?

2) This deal is clearly a signal that SEBL's service software is a serious weakling in SEBL's product line-up. Service/support is a technical sale to the IT people where SFA is a sale to the CEO/CFO about sales force productivity. Siebel is great at marketing SFA but techies can see through this when it comes to support/service. Scopus is commonly known as having the most elegant architecture so acquiring them just eliminated the best technical competition. The question is what happens to the existing installed base of Siebel Service Enterprise customers as Siebel transitions these users to Scopus' product line.

Finally, the integrated "suite" approach to front-office automation has now been clearly trumpeted by Mr. SFA, Tom Siebel. His stock valuation has allowed him to fill in weaknesses on the cheap. This move is good for Siebel in the long-run but not to shareholders over the next 3-6 months. Before, investors could justify this stock valuation saying "Siebel is by far the leader. The P/E is high but the numbers are low."

Siebel deserves a premium valuation but $2.5+ billion is a joke. Time for a reality check, Tom.
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