Taking about CRM, Siebel and GMST, here are some news to ponder about:
Siebel Revenue From Swap Deals
Increased Dramatically in 2001
By MARCELO PRINCE and MYLENE MANGALINDAN
Staff Reporters of THE WALL STREET JOURNAL
Siebel Systems Inc.'s revenue from so-called swap deals with its suppliers increased more than sixfold last year, even as the company's total software sales fell 4%.
The disclosure by the San Mateo, Calif., company is the latest sign of the growing use of such transactions, which typically involve a vendor and a customer agreeing to buy each other's products. Swaps, also known as barter deals, have been in use for many years but have become a touchier topic along with other accounting concerns since the collapse of Enron Corp.
See continuing coverage of accounting issues in Questioning the Books
Siebel's swap deals accounted for $76.4 million, or 7.2%, of its total software license revenue in 2001, up from just $11.6 million, or 1%, in the previous year, the company said in its annual report released Friday. Siebel, which makes software to automate corporations' sales and telemarketing operations, reported $1.065 billion in total software licenses in 2001.
Chief Executive Officer Tom Siebel defends his company's disclosure of what he calls "concurrent transactions." Mr. Siebel says the company does business with its suppliers, which include AT&T Corp., Bank of America Corp. and Cisco Systems Inc. It discloses those transactions because it follows "a realistic and conservative interpretation" of accounting rules, he said. Mr. Siebel questioned why other software companies don't disclose such transactions, which comes down to "a fundamental issue of transparency," he said.
Siebel says it is one of a few software companies that discloses the value of the swap contracts.
Swaps have been frowned upon in other industries. For example, WorldCom Inc. and Electronic Data Systems Corp. came under fire for a multiyear transaction in which each company sold the other billions of dollars in services. WorldCom and EDS defend the transaction, which was inked in 1999.
In the software market, critics argue, swaps may lead some customers to pay inflated prices in an industry that typically sells its products at a discount. In the case of Siebel, which has reported varying amounts of swaps over the past few quarters, critics have questioned whether the deals have been used to help meet Wall Street estimates each quarter.
Although swap deals are common in software, says Charles Phillips, software analyst at Morgan Stanley, "it does appear to be a larger number for Siebel than for most companies in the industry." The company, he adds, has been "aggressive in extracting revenue from business partners" and using its clout to require partners to prove their commitment by using Siebel products. He notes, however, that these swap deals have declined sequentially from $38 million of Siebel's revenue in the first quarter of 2001 to $14 million of revenue in the fourth quarter.
Siebel has about 3,500 customers. The suppliers involved in its swaps include AT&T Corp., Bank of America Corp., Cisco Systems Inc., Dell Computer Corp., Microsoft Corp. and Lucent Technologies Inc., according to the company.
Brent Thill, software analyst at Credit Suisse First Boston, suggests that Siebel may have looked to suppliers for revenue in 2001 because there were fewer corporations purchasing software than in previous periods. "In 2000, there were three or four times as many companies to sell to," he says.
Such deals can go awry. For example, a dispute between Siebel and News Corp. escalated into lawsuits last year after a swap deal with its Fox News and Fox Broadcasting units unraveled. The dispute has since been settled, a Fox spokesman says.
Write to Marcelo Prince at marcelo.prince@dowjones.com and Mylene Mangalindan at mylene.mangalindan@wsj.com
Updated April 4, 2002
Take care
JAPG |
