Siebel barter deals carry on rising
One CRM system = how many toilet rolls?
Enterprise CRM player Siebel Systems Inc caused disquiet in the market last quarter when it disclosed a sharp increase in the revenue it gained as a result of concurrent transactions and is repeating the exercise this quarter, with its SEC filings showing a further increase in the value of these types of sales.
During the three months to June 30, 2002 Siebel recognized $30.7m in concurrent transactions compared to $12.2m in the year-ago quarter. The figure represents 18% of Siebel's highly disappointing $170.1m second-quarter license revenue, which was 28% down on the year-ago quarter, and missed analysts' expectations.
With revenue on a downward slope, this type of income is starting to represent an increasingly significant proportion of the San Mateo, California-based company's revenue and the rate of increase is dramatic. During fiscal 2001 it recognized $76.4m in concurrent transactions over the whole year, compared to $11.6m during 2000 when it contributed just 1% to overall license revenue. For the six months to June 2002 it had reached a figure of $50.6m.
Siebel said the transactions, whereby it purchased goods or services from vendors at or about the same time they licensed software from Siebel, are separately negotiated, settled in cash, and recorded at terms the company considers to be arm's length. CEO Tom Siebel said that Siebel chooses to publish this type of information, whereas other vendors do not.
Despite its openness, the huge increase in the value of its concurrent transactions will unsettle an already nervous market. Swap deals are viewed with caution because companies might buy software as much to maintain a relationship as to immediately utilize the software itself. This raises the question of whether the buyers are undertaking rapid and enterprise-wide implementation, which has potential knock-on effects on maintainance revenue, extensions and upgrades. This is all the more significant in the current economic environment where vendors are increasingly looking to their installed base for revenue generating opportunities.