Siebel Systems Reports Financial Results for the Quarter and Year Ende

Siebel Systems Reports Financial Results for the Quarter and Year Ended December 31, 2004

    Business Editors/High-Tech Editors

    SAN MATEO, Calif.--(BUSINESS WIRE)--Jan. 27, 2005--

    Confirms Fourth Quarter License Revenues Up 54% and Earnings Per Share Up 233% Sequentially; All Fourth Quarter Revenue Categories and
    Profitability Up Year Over Year

    Siebel Systems, Inc. (Nasdaq:SEBL), a leading provider of business applications software, today announced financial results for the quarter and year ended December 31, 2004, at the high end or above preliminary financial results presented on January 5, 2005.

    Financial Results

    Total revenues for the fourth quarter of 2004 were $392 million, a 24% increase over the third quarter of 2004. License revenues were $161 million, a 54% increase over the third quarter of 2004. Maintenance revenues were $122 million, a 4% increase over the third quarter of 2004. Services and other revenues were $109 million, a 15% increase over the third quarter of 2004.
    Operating income and operating margin for the fourth quarter of 2004 were $65 million and 17%, respectively, a 173% and nine percentage point increase over the third quarter of 2004. Net income and net income margin for the fourth quarter of 2004 were $54 million and 14%, respectively, a 194% and eight percentage point increase over the third quarter of 2004. Earnings per share for the fourth quarter of 2004 were $0.10 per share, a 233% increase over the third quarter of 2004. Income for the fourth quarter benefited from a lower than expected effective tax rate of 32%.
    Total revenues for the year ended December 31, 2004 were $1.34 billion, a 1% decrease from 2003. For the year, license revenues were $487 million, maintenance revenues were $470 million and services and other revenues were $383 million, representing a 1% increase, 5% increase and 9% decrease, respectively, from 2003.
    Operating income and operating margin for the year ended December 31, 2004 were $129 million and 10%, respectively, a $166 million and thirteen percentage point increase over 2003. Net income and net income margin for the year were $111 million and 8%, respectively, a $116 million and eight percentage point increase over 2003. Earnings per share for the year ended December 31, 2004 were $0.20 per share, a $0.21 per share increase over 2003. Income for 2004 benefited from an effective tax rate of 37%.
    The Company's cash, cash equivalents, and short-term investments were $2.25 billion as of December 31, 2004, a $93 million and $223 million increase from September 30, 2004 and from December 31, 2003, respectively. Deferred revenue was $357 million as of December 31, 2004, a $68 million and $75 million increase from September 30, 2004 and from December 31, 2003, respectively. Days sales outstanding in accounts receivable were 67 days for the fourth quarter of 2004.
    "I am pleased with our results, which return Siebel Systems to quarterly year-over-year growth for the first time in fourteen quarters. We continue to execute on our strategy for the next phase of the company's development and growth," said J. Michael Lawrie, CEO of Siebel Systems. "During the last three quarters we have renewed our commitment to deliver demonstrable business results for our customers. This initiative, along with our pursuit of growth opportunities in analytics, key vertical industries, hosted software and SMB, and emerging markets in Eastern Europe and Asia Pacific, is designed to return the company to sustained growth and maximize shareholder value."

    Restatement of Rent Expense

    In the course of preparing its 2004 financial results, the Company identified a calculation error that had resulted in an understatement of facility-related expenses and a corresponding understatement of deferred rent liability since 1998. While the effects of this error were not material to any previously reported period, the Company voluntarily corrected the error by restating previously issued financial statements to ensure full transparency and accuracy of its financial statements. There was no cash impact from these restatements. The impact of these restatements on prior period financial statements are summarized in the supplemental schedules attached to the related Form 8-K we filed today, which may be accessed through our investor relations website at http://www.siebel.com/crm-company/investor_information/index.shtm. We also expect to file an amended Form 10-K for 2003 within the next two weeks.

    New Executive Appointments

    As part of its continuing strategy to add to its leadership team, Siebel Systems announced the following executive appointments:

--	David Sardilli, formerly Client Partner at Accenture, responsible for banking in New England and New York, joined Siebel Systems as Senior Vice President and General Manager for the Company's Financial Services business unit, reporting to the CEO. Mr. Sardilli brings more than 20 years of industry experience from Accenture, Meridian Bancorp and Chemical Bank.
--	Peter Burridge, formerly SVP for Communications, Media, and Utilities (CMU), Financial Services Institutions (FSI), and Government, Education, and Healthcare (GEH) of the Enterprise Applications team at Oracle in the Asia Pacific Region, joined Siebel Systems as Senior Vice President and General Manager for the Company's Asia Pacific and Japan region reporting to the CEO. Mr. Burridge brings more than 12 years of industry experience from Oracle.
--	Brett Ho, formerly CEO at UFsoft, China's largest software company, joined Siebel Systems as Vice President and General Manager of East Asia. Mr. Ho brings more than 17 years of industry experience in Asia and the US from Broadvision and Oracle.
--	Shintaro Nezuka, formerly Director of Linux Sales and Marketing Asia/Pacific at IBM, joined Siebel Systems as Vice President and General Manager of Japan and Korea. Mr. Nezuka brings more than 35 years of industry experience in Asia and the US from IBM.
--	Nelson Eng, formerly Managing Director of Global Sales for the Financial Services industry at Dell, joined Siebel Systems as Regional Vice President Financial Services East. Mr. Eng brings more than 15 years of industry experience from Dell and IBM.
--	Maruf Majed, formerly Vice President Asia at WebMethods, joined Siebel Systems as Vice President OnDemand, SMB and Manufacturing and Distribution Industries in Asia Pacific. Mr. Majed brings more than 20 years of industry experience from WedMethods, Ariba and IBM.

    About Siebel Systems

    Siebel Systems, Inc. is a leading provider of business applications software, enabling corporations to sell to, market to, and serve customers across multiple channels and lines of business. With more than 4,000 customer deployments worldwide, Siebel Systems provides organizations with a proven set of industry-specific best practices, CRM applications, market-leading analytics products, and business processes, empowering them to consistently deliver superior customer experiences and establish more profitable customer relationships. Siebel Systems' sales and service facilities are located in more than 30 countries.

    For more information on Siebel Systems solutions and services, please visit our Web site: CRM - http://www.siebel.com/crm; OnDemand Solutions - http://www.crmondemand.com; Industry CRM - http://www.siebel.com/industry-crm; Call Center & Service - http://www.siebel.com/call-center; Sales Force Automation - http://www.siebel.com/sales-force-automation; Marketing Automation - http://www.siebel.com/marketing-automation; Business Intelligence - http://www.siebel.com/business-intelligence; Integration Solutions - http://www.siebel.com/integration-solutions; CRM Services - http://www.siebel.com/crm-services

    This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include the statements regarding the nature and scope of Siebel Systems' internal review and of its restatement of its financial statements. These statements are just predictions and involve risks and uncertainties, such that actual results may differ significantly. These risks include, but are not limited to, additional actions resulting from the ongoing internal audit committee review of the historical financial statements, as well as the review and audit by the Company's independent auditors of the restated financial statements and actions resulting from any discussions with or required by the Securities and Exchange Commission. In particular, the impact to the Company's restated results for the years ending December 31, 1998, 1999, 2000, 2001, 2002, 2003 and 2004 and each of the quarters in the year ended December 31, 2004 may differ from the anticipated adjustments discussed above due to factors that include, but are not limited to, ongoing review of the results and preparation of the financial statements. In addition, future operating results of Siebel Systems may differ from the results discussed or forecasted in the forward-looking statements due to factors that include, but are not limited to, risks associated with customer relations, such as the availability of Siebel Systems' products and services, customer implementation of products and services, relationships with customers, third-party vendors and systems integrators, concentration of revenues in a relatively small number of customers, existence of errors or defects in products, ability to successfully manage growth, significant current and expected additional competition and the need to continue to expand product distribution and services offerings. Further information on potential factors that could affect the financial results of Siebel Systems are included in Siebel Systems' 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.

    Siebel is a trademark of Siebel Systems, Inc. and may be registered in certain jurisdictions. All other product and company names mentioned are the property of their respective owners and are mentioned for identification purposes only.

SIEBEL SYSTEMS, INC.

Consolidated Balance Sheets (In thousands, except per share data)

Dec. 31, Sept. 30, Dec. 31, 2003 2004 2004 ----------- ------------ ---------- (as restated) (as restated) Assets --------

Current assets: Cash and cash equivalents $ 583,532 $ 506,574 $ 597,272 Short-term investments 1,439,674 1,647,162 1,649,216 ----------- ------------ ----------

Total cash, cash equivalents and short-term investments 2,023,206 2,153,736 2,246,488

Accounts receivable, net 259,834 208,805 293,527 Deferred income taxes 11,973 14,453 17,542 Prepaids and other 52,186 47,557 53,894 ----------- ------------ ----------

Total current assets 2,347,199 2,424,551 2,611,451

Property and equipment, net 157,391 93,730 83,908 Goodwill 140,957 202,488 208,306 Intangible assets, net 10,786 24,066 23,004 Other assets 42,406 37,300 36,937 Deferred income taxes 151,788 152,451 123,828 ----------- ------------ ----------

Total assets $2,850,527 $2,934,586 $ 3,087,434 =========== ============ ==========

Liabilities and Stockholders' Equity -------------------------------------

Current liabilities: Accounts payable $ 18,907 $ 31,898 $ 10,048 Accrued expenses 333,270 317,462 346,672 Restructuring obligations 53,676 36,397 30,639 Deferred revenue 282,217 288,869 357,223 ----------- ------------ ----------

Total current liabilities 688,070 674,626 744,582

Restructuring obligations, less current portion 99,250 80,407 75,227 Other long-term liabilities 22,437 20,781 20,981 ----------- ------------ ----------

Total liabilities 809,757 775,814 840,790 ----------- ------------ ----------

Stockholders' equity: Common stock; $0.001 par value; 2,000,000 shares authorized; 498,305, 507,596 and 508,953 shares issued and outstanding, respectively 498 508 509 Additional paid-in capital 1,550,834 1,622,821 1,635,652 Deferred compensation (1,479) (3,021) (2,993) Accumulated other comprehensive income 58,650 49,366 70,541 Retained earnings 432,267 489,098 542,935 ----------- ------------ ----------

Total stockholders' equity 2,040,770 2,158,772 2,246,644 ----------- ------------ ----------

Total liabilities and stockholders' equity $2,850,527 $2,934,586 $ 3,087,434 =========== ============ ==========

SIEBEL SYSTEMS, INC.

Consolidated Statements of Operations (In thousands, except per share data)

Three Months Ended Twelve Months Ended December 31, December 31, --------------------- ----------------------- (as restated) (as restated)

2003 2004 2003 2004 ----------- --------- ----------- ----------- Revenues: Software $ 150,285 $160,920 $ 482,274 $ 487,127 Professional services, maintenance and other 216,457 231,441 871,954 852,666 ----------- --------- ----------- -----------

Total revenues 366,742 392,361 1,354,228 1,339,793 ----------- --------- ----------- ----------- Cost of revenues: Software 3,394 4,262 18,357 13,316 Professional services, maintenance and other 116,211 118,175 490,006 443,585 ----------- --------- ----------- ----------- Total cost of revenues 119,605 122,437 508,363 456,901 ----------- --------- ----------- -----------

Gross margin 247,137 269,924 845,865 882,892 ----------- --------- ----------- -----------

Operating expenses: Product development 83,146 79,981 310,686 299,051 Sales and marketing 80,612 96,072 358,318 337,690 General and administrative 24,332 27,954 106,594 104,541 Restructuring and related expenses (650) 482 102,310 6,789 Purchased in-process product development 5,312 - 5,312 6,000 ----------- --------- ----------- ----------- Total operating expenses 192,752 204,489 883,220 754,071 ----------- --------- ----------- ----------- Operating income (loss) 54,385 65,435 (37,355) 128,821

Other income, net 9,157 13,670 39,144 46,746 Loss on early extinguishment of debt - - (10,711) - ----------- --------- ----------- ----------- Income (loss) before income taxes 63,542 79,105 (8,922) 175,567

Income taxes (benefit) 22,809 25,268 (3,731) 64,899 ----------- --------- ----------- -----------

Net income (loss) $ 40,733 $ 53,837 $ (5,191) $ 110,668 =========== ========= =========== =========== Diluted net income (loss) per share $ 0.07 $ 0.10 $ (0.01) $ 0.20 =========== ========= =========== =========== Shares used in diluted share computation 543,535 540,874 491,961 540,530 =========== ========= =========== =========== Basic net income (loss) per share $ 0.08 $ 0.11 $ (0.01) $ 0.22 =========== ========= =========== =========== Shares used in basic share computation 496,579 508,229 491,961 505,044 =========== ========= =========== ===========

SIEBEL SYSTEMS, INC.

Condensed Consolidated Statements of Cash Flows (In thousands)

Twelve Months Ended December 31, ---------- ----------- 2003 2004 ---------- ---------- (as restated) Cash flows from operating activities: Net income (loss) $ (5,191) $ 110,668 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Write-off of property and equipment abandoned in restructurings 17,506 1,908 Write-off of acquired technology 2,449 - Write-off of purchased in-process product development 5,312 6,000 Loss on early extinguishment of debt 10,711 - Depreciation and amortization 158,873 115,031 Tax benefit from exercise of stock options - 16,586 Deferred income taxes (17,270) 32,252 Provision for doubtful accounts and sales returns 5,184 (3,509) Other, net (3,387) 133 Changes in operating assets and liabilities: Accounts receivable 12,775 (27,713) Prepaids and other (20,425) 2,876 Accounts payable and accrued expenses 10,847 3,591 Restructuring obligations 2,927 (49,175) Deferred revenue 7,723 73,156 ---------- ---------- Net cash provided by operating activities 188,034 281,804 ---------- ---------- Cash flows from investing activities: Purchases of property and equipment, net (14,958) (8,725) Purchases of short-term investments, net of sales 31,288 (243,457) Other, net (57,500) (76,801) ---------- ----------

Net cash used in investing activities (41,170) (328,983) ---------- ----------

Cash flows from financing activities: Proceeds from issuance of common stock, net of repurchases 62,636 63,566 Repurchase of convertible subordinated debentures (307,080) - Repayments of capital lease obligations (12,766) (11,887) ---------- ---------- Net cash provided by (used in) financing activities (257,210) 51,679 ---------- ----------

Effect of exchange rate fluctuations 26,367 9,240 ---------- ----------

Change in cash and cash equivalents (83,979) 13,740 Cash and cash equivalents, beginning of period 667,511 583,532 ---------- ----------

Cash and cash equivalents, end of period $ 583,532 $ 597,272 ========== ==========

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CONTACT: Siebel Systems, Inc. Terry Lee, 650-295-5656 (Investor Relations) email: Investor.relations@siebel.com or Stacey Burbach, 480-377-3725 (Public Relations) email: stacey.burbach@siebel.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: Siebel Systems, Inc.

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