Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Siebel Systems (SEBL) - strong buy? -- Ignore unavailable to you. Want to Upgrade?

To: Lee L. who wrote (2948)	7/19/1999 6:55:00 PM
From: Trader Dave	Respond to of 6974

The mid market is a very tricky place to play. IMO, the low end of the mid-market where GPSI plays, THE ONLY economically viable way to play is with a VAR channel. GPSI dynamics CS/+ product is appropriate for companies with $40 million to as much as $500 million in revenues. It is hard to imagine how difficult and time consuming it is to build a VAR channel. IMO, it takes years and only some of them stick. Selling to the mid market where GPSI plays on a direct basis is guaranteed way to lose money, probably in perpetuity. Hence my strong dislike of ONX's profitless prospects. I think partnering with GPSI will provide SEBL with significant incremental revenue and will be very unlikely to at all overlap with the enterprise class business SEBL is currently pursuing. Great partnership with the best vendor that has the broadest footprint in the space. JDEC is a different mid market play more in the with a target to sell to companies with $250 million to $5 billion in annual revenues. This could be an interesting partnership, but here i'd worry more about potential conflict with SEBL's internal sales force. However with gross margins in software being what they are, there's probably room for a little dual commission structure. Bottom line, i think it's an extremely intelligent strategy and will likely work out well for SEBL. I do have some worries about JDEC, a company i've never been fond of. I HATE the rumors of SEBL buying them or any other erp company. I can't imagine it happening, but market research folks like AMR which are desperate to show "value" in the dying ERP back office, keep insisting sebl needs to do a deal here to survive. I think Tom is smart enough to know this is utter and complete B.S. but i worry anyhow. TD

To: Lee L. who wrote (2948)	7/20/1999 12:35:00 PM
From: Lee L.	Read Replies (1) \| Respond to of 6974

Oracle's got their PR/propaganda machine going at full-speed. I don't worry about a competitive threat from Oracle, the focus on Siebel's high DSO is worth probing. I haven't worried about their DSO based on my previous dealings with Siebel. For several of my large orders, Siebel would insist on locking-in an order letter that legally committed my company to a set number of seats for a set price with no future contingencies. Siebel always tried to get all of this cash immediately upon execution of the Order Letter. I always negotiated payment terms that allowed for $200K now, $200K in three months, $500K in six months, etc. I would then receive invoices for all payments immediately. If other customers followed the same tactic, Siebel would naturally have a high DSO. This was just part of doing business. Therefore, one shouldn't necessarily interpret a high DSO with customers' reluctance to pay Siebel invoices. Should we be worried about Siebel's DSO? I don't think so. What am I missing? fnews.yahoo.com Analysts Wonder if Siebel Will Stumble Forget Siebel's (Nasdaq:SEBL - news) second-quarter numbers. Analysts, who are expecting a strong one from the maker of customer-management software, are looking ahead to more troubling questions: How is the company faring with Oracle (Nasdaq:ORCL - news)entering its market, and how quickly is it generating cash? First Call's survey of 14 analysts predicts Siebel will earn 21 cents per share when it reports earnings Tuesday, compared with 12 cents in the same quarter last year. But most analysts say the Menlo Park, Calif., company could beat those numbers. BancBoston Robertson Stephens analyst Eric Upin notes that the company has consistently beaten Wall Street's estimates for the past six quarters. So a positive surprise wouldn't be much of a surprise in itself. Upin, whose firm has underwritten for Siebel, has a strong-buy rating on the stock. Instead, the focus will be on the company's health in the face of an aggressive campaign by Oracle. The leader in database software has been muscling into Siebel's market. Oracle is eloquent on Siebel's prospects. Craig Brennan, senior vice president of Oracle's global customer relationship management group, said Oracle's front-office software sales surged to $90 million in its fourth quarter ended May 31, a 138% rise from a year ago. Brennan predicts those figures will continue to rise for Oracle to the detriment of Siebel's revenue. The effect should be seen in Siebel's earnings starting in the next six months, he says. There are other concerns. On July 6, Adams Harkness and Hill analyst Ben Rose downgraded Siebel to sell from market perform, citing increased competitive pressures and an increase in the number of days sales outstanding, a standard measure of how fast customers are paying for goods. "Over the last two quarters, Siebel Systems has recorded $40 million in net income, yet has generated virtually no cash," Rose wrote in the report. As a result, days sales outstanding rose to 99 days in the March quarter, up from 90 days in the previous quarter. Rose also questions where Siebel's revenue is coming from. "The Sept. 30 '98 10-Q revealed that more than 10% of revenue was derived from 'related parties,' which seem to be defined as firms that are Siebel Systems suppliers as well as customers," he wrote. "This raises the specter of barter transactions, a particularly worrisome sign, as customer concentration has been rising." In 1998, Siebel's top 10 customers accounted for 22% of sales, but in the first quarter of 1999, the top 10 accounted for 34%, according to Rose. Most analysts who cover the stock rate the company either buy or strong buy. Siebel has long been the dominant force in the front-office space and until now has boasted a winning track record. So Rose's downgrade came as a shock. Siebel shares closed down at 61 7/16 from a high that day of 65. The stock slipped further the next day, hitting a low of 54 5/8 before rebounding to close at 63 1/2 on Monday. Though other analysts continue to be optimistic about Siebel's future, they admit that Rose's concerns are legitimate. The criticisms "seem to emanate from reasonable concerns," says Bob Austrian, analyst at Banc of America Securities, which has underwritten for Siebel. But he notes the quality of earnings concerns and increasing competitive issues aren't new and says they don't yet signal a "significant disease at the company... There's been much ado, but the question is: Is it much ado about nothing?" Austrian rates Siebel a buy, with an earnings per share estimate that matches the consensus. At the same time, Austrian admits, "I hope they bring DSOs down. I would be moderately concerned if they were unchanged and disappointed if they went up."