my notes from cc, I know I spelled a bunch of names wrong but I have a few cc's today.
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July 17, 2002
Ken Goldman, Tom Siebel, Paul COO, David Schmeir EVP
TOM:
Rocky mkt conditions out there. 2nd qtr IT environment tougher than first
406mm total revs, 170mm license revenue, 37mm profit, 10% of total revs.
Qtr finished over 2billion in cash.
Ken- financial results- highlights:
License + total revenue were down from Q1 and last year. Total service revs consistent with Q1,
some declines in consulting and increase in maintenance from Q1.
Maint 5% up sequentially, up 20% y/y. Sebl holding their own in maintenance revs, renewal rates.
-georgraphic breakdown:
US 66%, Intl 33% of revenue.
Would like to see more like 60-40 breakdown.
DSO for qtr 80 days, right in middle of 75-85 range.
Payment terms 36 days, decreased. Sebl is careful wrt payment terms.
Avg transaction size 370K
Avg transaction size excluding those under 50K - 680K
deferred rev 277mm
51 transactions over 1mm $$ about the same as last qtr, 53 last qtr.
only 3 deals 5mm or more vs. 12 deals over 5mm in Q1. Fewer megadeals this qtr.
1st half top 10 customers = 26% revs, compared to 39% Q1
It was a back end loaded qtr.
-exceptional balance sheet management
cash up 128mm for qtr, over 300mm for year
2billion in cash total.
no external financials, internally generated
pretax income up 46mm
acct rv balance down 10mm
eps .06 down from .12 last qtr and .15 last year.
uses of cash plant prop equip 26mm charge
taxes 8mm charge
tax rate 36%
working capital up 100mm
what we see going forward
Year MUCH MORE challenging than assumed at beginning yr
260K/year revenue per exployee goal
220K/year goal expenses per employee
Q3 expenses changes will be made
headcount will be reduced to 6000 from 7164
will reinstate MBO bonuses and merit increases
headcount will be where it was in mid-2000
We will consolidate for operational efficiencies, consolidate IT, mktg, Sales to core dept
Sebl will be more operationally effective with consolidated depts
-chrg in Q3 for downsize-
Charge in 3rd qtr for severance and consolidation as much as 25mm cash expense
200mm charge in 3rd qtr for excess facilities, noncash
-
TOM:
Tom feels outlook going forward must be subdued
General mkt for IT extremely weak. Geopolitical risk, acct scandals all kinds of weakness.
Not much business at all.
IT environment tougher than we thought, we don't see any reason to improve Q3/Q4.
In 2001 we thought we'd see recovery in IT in first qtr 2002. But the mkt did not turn
up, and doesn't look like it is turning up in short term. Capex is lagging recovery and
corps are focussing on cost-cutting.
In 2001 Sebl decided to carry 1500 excess people to maintain for the anticipated upturn.
Bonuses were reduced to keep these people but now they must be cut.
Going forward staff will be maintained with strength of overall economy.
225K companies out of busienss in US since beginning 2002.
Germany 19000 companies out of business this year.
2100 software companies out of business this year, 600 packaged appl companies.
Sebl will focus on cash flow positive business, second qtr generated over 130mm
in cash, qtr ended over 2billion in cash
Mkt share gained in every product category.
DAVID S.
-Major consolidation
competive climate, these are the competitors we see and frequency:
PSFT 9% flat from Q1
Orcl 5% down from q1
SAP 6% down from Q1
Notable win replaced CRM at HP, Bell south, Cingular wireless, agilent against Oracle CRM
Psft - nazdaq at tx instrument, Airbus Marriot,
Sebl license revenue gaining share in every category
80% SFA 76% call center
TOM
CRM remains a top IT priority
Customer loyalty rates at 96%, 93% are willing to act as references
Customer say 8% increase in revs from Siebel utilization.
GUIDANCE
Q3 - something like Q2
145-175license revs
110-125mm prof svcs
100mm maint
355-400mm range total Q3, EPS expect 5-8cents not including restructuring chg
Q4- probably look like Q3
Tom is not going to sugar coat this! <-big surprise here
Bottom line- the market is tough.
Hey did I mention sebl is gaining share, no say it one more time Tom
QUESTION AND ANSWER
Dolan DBAB
competitive- pipeline delays permanent? Large deals a thing of the past? Are oracle and
sap pushing the deals out?
Tom- Orcl/sap are not pushing the deals out, no way.
Deal size just a function of contracting IT mkt. Tom met with auto CEO who said CRM was
top priority, in this environment it turned out to be a small deal. Tom thinks this is just
an economic cycle, short term.
Chris Shilakes Merrill
David:headcount, how will layoffs shake out by biz function. Is maintenance discounting as well
as licenses. Real estate is HQ up for grabs.
40-45% in sales in mktg, 25% in services less than 25% in R&D, 13% in G&A- layoffs
18% sales 18% mktg is the target breakdown
mainenance, no repricing, but some companies have fewer seat licenses. Still maintenance
revs are growing q1/q2 5%
Facilities some in san mateo will be vacated. Headquarters still intact.
Rick Sherland Goldman
Q4 look like Q3- what about seasonality? Why don't you think that will happen this year?
Tom: I'm trying to be conservative. Maybe the budget flush will happen, we have historically
closed a lot of business in Q4. Nothing has changed the historic trend.
What about the pipeline for Q4. Does it show an uptick.
Tom- pipeline shows an uptick/
Thrill CSFB
New customers what are they buying- call center SFA product mix
David: No change to product mix. ERM and analytics on target. Analystics allow
customers to meter their business. An upsell opportunity for the salesforce.
Verticals, governments
Over 70 customers in e-gov, 22 wins in Q2 incl. american red cross. Reorder from US Naval.
e-gov large potential segment.
Heather Bellini Solomon Smith Barney
Tech and telecom only verticals you are concened with? Pipeline 4th qtr an uptick but then are
close rates going to continue to decline?
Tom: Softness in IT is all verticals, all geographies, all mkts. CEOs have not talked to Alan Greenspan.
Growth rates in supply chain, database mkt, ERP and HR software mkt. CRM a good mkt but
modeling for Q4 indicated uptick.
Historically closed 38% of business in Q4. Q4 could close 40% of license revenue for year.
Tom knows its a broad range.
???- didn't get the name.
Capex plans?
Capex server infrastructure and Utah unchanged. Other capex will be cut.
Adam Holt JP Morgan
700 people upgrading to Sebl 7. What is the outlook for other customers.
-70-90 of customers upgrade historically.
Chuck Phillips Morgan Stanley
Trend pipeline vs. close rate is pipeline
Tom: We don't have pipeline available today.
Unused seats not significant.
Cameron Steel RBC capital mkts
Pricing is discounting helping move process, what about sebl midmarket is that working
-Deals are not moving faster at lower price. Per user price flat not down.
Oracle disappeared from the planet as far as Tom can see, SAP gives product away.
Psft offers CRM for vantive $10/$20 per year. This is very significant pricing pressure.
Psft is the most pricing pressure.
Midmarket any unit uptick, is it a starter?
Tom: it sells into smaller businesses, not an uptick to enterprise doesn't happen.
Schneiderman wedbush morgan
Smaller deals, any change in sales strategy?
Tom: salesforce was never targeted to big deals. Salesforce is supposed to close whatever
they can. Deals are smaller. Historically recessions have few big deals.
Can you comment on Ellison's views that suite vendors win due to integration issues.
Tom:No historical economic data to support Oracle's views, Tom understands why
Oracle takes that view. Oracle has lost share with OraApps for each of the last 10 years.
OraApps has no significant share in CRM or supply chain today.
Last 2 qtrs Tom sold more CRM than SAP sold its entire suite in US.
Chris Kwok Bear Stearns
New customer quality- which verticals stronger
-Life sciences, energy, public sector automotive are upticking
-Telecom slow
Rich Petersen WR Hambrecht
Why weren't these announcement preannounced.
Tom: We review numbers with acct and legal experts and wasn't told to preannounced.
Brendan Barnacle
Sebl 7 where are we with installed base.
-700 customers out of 3500 customers have currently upgraded. 60 customers live today.
Who were customer wins in analytics
-50 new customers, Phillips medical, baxter healthcare, pepsi bottling, Guidant
Rob Schwatz Wietzel
Any risk sharing in pricing? CRPs? etc.
-No risk sharing increase in customer base.
Ken, trying to cut 70mm$. How far will you get in Q3.
Ken: about half cuts will be made in Q3.
Patrick Mason Pacific Growth equities
Geographical beakdown people letting go
Tom: 1100 total, less than 30% international vs. domestic.
Jeff Nivens First analysis
2002 seeing revenue deteriorate. Is sebl going to continue to cut costs with declining trend?
Tom: We don't think we'll see much more cost cutting going forward. We will be rightsized
for
% of concurrent transaction vs license revenue
-6-7% of total revenue.
Tom: Okey Doke, thanks for your time. |
