Michael Lawrie resigned as CEO of Siebel today after disappointing Q1 earnings. The CRM giant has suffered declining revenues since 2000. Lawrie came on board from IBM under a year ago to reverse the slide. Siebel faces growing competition from larger vendors, as well as hosted CRM solutions such as Salesforce.com. This has greatly eroded the premium pricing power they once had. Perhaps more importantly for a company that regularly closed 8-figure deals, purchasing managers know the pressure Siebel is under to “make the numbers” and they are drawing out negotiations. As Lawrie noted earlier, while lowering guidance for this quarter:

We believed we had a sufficient number of deals in the pipeline to make our management guidance, but during the last several days of the quarter, a number of deals were delayed by customers,” Lawrie said in a statement at the time of the announcement. “This was a combination of poor execution on our part, exacerbated by a challenging economic and IT environment.

This is where the relationship between Wall Street and companies with relatively few, relatively large deals turns poisonous, and detrimental to both sides. The emphasis on “the numbers” severely erodes the pricing power that could deliver the profits needed for a healthy business. It’s like being a retailer and making half your revenue at low margin during holiday sales, except that the see-saw swings four times a year.

I don’t know whether customers simply didn’t sign deals, or asked for such deep discounts that Siebel could not have made its numbers anyway, or if Siebel simply did not execute. Probably some combination of the above. Investors certainly have other reasons to be disappointed with the company (such as its $2B in unused cash). But the pricing pressures have taken millions directly from the bottom line. Competitive pressure is one thing, but numbers pressure is a self-inflicted wound.

Comments are closed.