October 29, 2002 4:44 PM PST

Oracle, Siebel execs see tough 2003

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Oracle hits mark despite sales drop

September 17, 2002
SAN FRANCISCO--Software executives from Siebel Systems and Oracle said Tuesday that they don't expect businesses to be much more eager to buy software in 2003 than they are today.

Executives aired their gloomy outlook during presentations to institutional investors at an RBC Capital Markets conference here. Dozens of business-software companies are scheduled to present at the conference this week, where the choice topic of debate is when the market for everything from call-center applications to manufacturing software will come out of an almost two-year slump.

Spending on information technology will be about the same next year as this year, showing little growth, predicted Ken Goldman, senior vice president of finance at Siebel Systems.

"In my opinion, (spending) will remain relatively flat," said Goldman, noting that it may be 2004 before the market expands again. Siebel, a leading maker of customer relationship management software, reported a third-quarter net loss of $92.1 million this month, the first loss for Siebel since 1997. The company, which grew sales 121 percent in 2000 and managed 14 percent growth in 2001, has seen a dramatic reversal of fortune this year.

A number of factors, including declining consumer confidence and the threat of war in the Middle East, are leading businesses to keep a lid on IT budgets, said Goldman.

Consumer confidence hit a nine-year low this month, according to new data released by the Conference Board on Tuesday. The group's consumer confidence index fell to 79.4 percent in October from 93.7 percent in September.

Bad omen from Oracle
Executives at Oracle didn't paint a rosy picture either. An IT market recovery appears further away than it did just three months ago, said Jeff Henley, CFO of the database-software giant.

Oracle reported a 10 percent decline in revenue in its fiscal first quarter, which ended in August. At the time, Henley had said revenue would begin to bounce back in the first half of next year. Tuesday he said the outlook is unclear beyond Oracle's second quarter, which ends Nov. 30.

Businesses in Europe and Asia are starting to show the same frugality in IT spending as their American counterparts, said Henley, and 46 percent of Oracle's first-quarter sales were from outside the United States. The company is moving ahead with a previously announced plan to cut about 500 jobs abroad, mostly in Europe, said Henley.

Siebel, which laid off 10 percent of its employees in April, has no plans for further workforce reductions or restructuring, said Goldman.

Neither Henley nor Goldman offered any updates on how their companies are tracking against their financial forecasts for the quarter now under way. Oracle said previously that it expects to earn a profit of 8 cents to 9 cents per share with overall revenue down 4 percent to 7 percent in the second quarter. Siebel said earlier this month that it expects fourth-quarter earnings in the middle of the single-digit range and license revenue to be between $135 million and $165 million. Siebel's fourth quarter ends Dec. 31.

One business-software executive offered an even darker take on the state of the IT industry. Marc Benioff, chief executive of privately traded Salesforce.com, said there are few signs of light in the U.S. economy as companies continue to lay off employees, particularly sales and marketing people.

"It's still a bloodbath among domestic sales forces," said Benioff.

 

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