SEBL Siebel Systems (MM)

Confirms License Revenues Up 92% over Third Quarter; Profitability Exceeds Preliminary Results: Operating Margin Reaches 25%; Operating Income Up 220% over Third Quarter Siebel Systems, Inc. (NASDAQ:SEBL), a leading provider of customer-facing solutions, today announced financial results for the fourth quarter and full year ended December 31, 2005. The results reported today exceed preliminary financial results presented on January 12, 2006, original management guidance and analyst consensus expectations, and reflect strong sequential and year over year growth across all revenue and profit measures. -0- *T Q4 2005 ------------------------------------------------ Q4 2005 Company Analyst Q3 Q4 2005 2004 ($M, except Results Preliminary Guidance Consensus Actual Actual %s, EPS) --------------------- ----------- ---------- --------- ------ -------- Revenues License 215 214 110-130 124 112 161 Maintenance 130 131 120-126 126 125 122 Services & Other 124 124 110-115 114 111 109 -------- ----------- ---------- --------- ------ -------- Total Revenues 469 469 340-360 362 348 392 Operating Income 116 107-111 N/A N/A 36 65 Operating Margin 25% 23%-24% 13%-16% 15% 10% 17% Net Income 89 N/A N/A 43 35 54 Net Margin 19% N/A N/A 12% 10% 14% Earnings Per Share $0.16 N/A 0.07-0.08 $0.07 $0.06 $0.10 Q4 2005 Results vs. -------------------------------------------------- Q4 2005 Company Analyst Q3 Q4 2005 2004 ($M, except %s, EPS) Preliminary Guidance Consensus Actual Actual ------------------------------------- -------- --------- ------ ------ Revenues License +0.5% +79% +73% +92% +34% Maintenance -0.8% +6% +3% +4% +6% Services & Other -0.2% +10% +9% +12% +14% ----------------- -------- --------- ------ ------ Total Revenues -0.1% +34% +29% +35% +19% Operating Income +6.1% N/A N/A +220% +77% Operating Margin +5.0% +70% +68% +137% +48% Net Income N/A N/A +108% +156% +65% Net Margin N/A N/A +60% +90% +38% Earnings Per Share N/A +114% +129% +167% +60% Q4 2005 Guidance as of October 26, 2005. Analyst Consensus as of January 6, 2006. Preliminary results published January 12, 2006. *T Fourth Quarter Results Total revenues for the fourth quarter of 2005 were $469 million, consistent with preliminary results, above analyst consensus expectations by 29%, up 35% sequentially, and up 19% year over year. License revenues for the quarter were $215 million, consistent with preliminary results, above analyst consensus expectations by 73%, up 92% sequentially, and up 34% year over year. Maintenance revenues were $130 million, consistent with preliminary results, above analyst consensus expectations by 3%, up 4% sequentially, and up 6% year over year. Services and Other revenues were $124 million, consistent with preliminary results, above analyst consensus expectations by 9%, up 12% sequentially, and up 14% year over year. In addition, OnDemand total contract value for the fourth quarter of 2005 was $16 million, up 43% sequentially and 66% year over year. Operating income was $116 million, $5 million or one percentage point over the high end of the preliminary results range, up $80 million or 220% sequentially and up $50 million or 77% year over year. Financial results for the fourth quarter of 2005 include the impact of $11 million in acquisition-related earnout and intangible asset impairment, merger-related legal, and other charges. Operating margin was 25%, up fifteen percentage points sequentially and up eight percentage points year over year. Net income was $89 million, up $54 million or 156% sequentially and up $35 million or 65% year over year. Net margin was 19%, up nine percentage points sequentially and up five percentage points year over year. Earnings per share for the quarter ended December 31, 2005 were $0.16, a ten cent or 167% increase sequentially and a six cent or 60% increase year over year. The effective tax rate was 33% in the fourth quarter. Full Year Results Total revenues for the year ended December 31, 2005 were $1.43 billion, a 7% increase from 2004. For the year, license revenues were $480 million, maintenance revenues were $500 million and services and other revenues were $449 million, representing a 1% decrease, 6% increase and 17% increase, respectively, from 2004. Operating income and operating margin for the year ended December 31, 2005 were $59 million and 4%, respectively, a $70 million and six percentage point decrease compared with 2004. Financial results for the full year of 2005 include the impact of $111 million in restructuring, acquisition-related earnout, in process research and development and intangible asset impairment, merger-related legal and other charges. Net income and net margin for the year were $70 million and 5%, respectively, a $41 million and three percentage point decrease from 2004. Earnings per share for the year ended December 31, 2005 were $0.13, a seven cent per share decrease from 2004. The effective tax rate for 2005 was 43%. Balance Sheet The company's cash, cash equivalents and short term investments were $2.39 billion as of December 31, 2005, reflecting net cash generated during the fourth quarter of 2005 of $147 million. Deferred revenues were $411 million as of December 31, 2005, up $96 million over the third quarter. As of December 31, 2005, headcount was 4,686. "Our fourth quarter and second half of 2005 results clearly affirm the market opportunity in customer facing solutions and business analytics, the improvements we have made to address this market, and customer confidence in the future of Siebel customer solutions and analytics following the proposed Oracle transaction," said George T. Shaheen, Chief Executive Officer of Siebel Systems. "I am particularly proud of our employee loyalty in serving our customers, addressing our investor commitments, and preserving and enhancing our franchise during this unsettling merger period. As we prepare to combine with Oracle, we remain committed to further improving our financial performance, sustaining and enhancing our product and technology leadership, and helping our loyal and strong network of partners and customers achieve continued success with Siebel customer facing solutions. Every employee can take great pride in a final quarter and transition to Oracle that reflect the professionalism, work ethic and values on which this company was founded." The company will not conduct a conference call in conjunction with this earnings press release. About Siebel Systems Siebel Systems is a leading provider of software solutions and services that drive value and loyalty in client-customer relationships, providing best-in-class capabilities in on-premise and hosted customer relationship management (CRM), business analytics, and customer data integration. Siebel's new Customer Adaptive Solutions enable organizations to model their customer-centric business processes in order to drive the most effective customer interactions, gain increased insight over time, and continually realign those processes for systemic and consistent improvement. With more than $2 billion in R&D investments, 13 years of customer software experience, an extensive global ecosystem of alliance partners, and more than 4,000 customers and 3.8 million live users, Siebel is the proven choice in helping organizations of all types and sizes achieve customer-driven business results. For more information, visit www.siebel.com. Siebel is a trademark of Siebel Systems, Inc. and may be registered in certain jurisdictions. This press release contains forward-looking statements that involve risks and uncertainties. Future operating results of Siebel Systems, Inc. may differ from that forecasted in the forward-looking statements due to factors that include, but are not limited to, risks associated with our pending merger with Oracle Corporation, financial, economic, political and other uncertainties, the business software applications market, dependence on the Internet, risks associated with new versions and new products and risks associated with rapid technological change. Further information on potential factors that could affect the financial results of Siebel Systems, Inc. are included in its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and its other filings with the Securities and Exchange Commission, which are available at www.sec.gov. Siebel Systems assumes no obligation to update the information in this press release. -0- *T SIEBEL SYSTEMS, INC. Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, --------------------- --------------------- 2004 2005 2004 2005 ---------- ---------- ---------- ---------- Revenues: Software license $ 160,920 $ 215,059 $ 487,127 $ 480,493 Professional services, maintenance and other 231,441 253,689 852,666 948,647 ---------- ---------- ---------- ---------- Total revenues 392,361 468,748 1,339,793 1,429,140 ---------- ---------- ---------- ---------- Cost of revenues: Software license 4,262 10,702 13,316 22,809 Professional services, maintenance and other 118,175 125,491 443,585 478,072 ---------- ---------- ---------- ---------- Total cost of revenues 122,437 136,193 456,901 500,881 ---------- ---------- ---------- ---------- Gross margin 269,924 332,555 882,892 928,259 ---------- ---------- ---------- ---------- Operating expenses: Product development 79,981 74,040 299,051 285,941 Sales and marketing 96,072 111,462 337,690 382,351 General and administrative 27,954 31,773 104,541 107,806 Restructuring and other charges 482 (415) 6,789 82,629 Purchased in-process product development - 6,000 10,890 ---------- ---------- ---------- ---------- Total operating expenses 204,489 216,860 754,071 869,617 ---------- ---------- ---------- ---------- Operating income 65,435 115,695 128,821 58,642 Other income, net 13,670 15,951 46,746 64,216 ---------- ---------- ---------- ---------- Income before income taxes 79,105 131,646 175,567 122,858 Income taxes 25,268 42,826 64,899 53,330 ---------- ---------- ---------- ---------- Net income $ 53,837 $ 88,820 $ 110,668 $ 69,528 ========== ========== ========== =========== Diluted net income per share $ 0.10 $ 0.16 $ 0.20 $ 0.13 ========== ========== ========== =========== Shares used in diluted share computation 540,874 553,494 540,530 545,616 ========== ========== ========== =========== Basic net income per share $ 0.11 $ 0.17 $ 0.22 $ 0.13 ========== ========== ========== =========== Shares used in basic share computation 508,229 530,508 505,044 521,752 ========== ========== ========== =========== *T