Siebel Systems is culling 490 staff -nine per cent of the pay-roll in an effort to hold profit margins steady at 15 per cent as sales fall.

Apparently 350 staff have already gone in this round, with the rest expected to be out the door in the next few weeks. By the end of October the CRM vendor will have 5,000 employees on its books. Last year, Siebel reduced its staff by 1,000.

Siebel is also to merge some product lines and reshuffle some business operations offshore in its drive to strip out $30m costs per quarter this year. By next summer, Siebel wants to reduce costs by an extra $10m a quarter.

In a conference call to discuss the the firm's Q2, Tom Siebel said "we have bit the bullet" over costs. Which is all very well, Tom, but it's the 490 pink slippers who are doing the biting, surely?

Siebel blames the cost cutting and a poor set of results on "a long, dry spell in the business applications market". This won't last for ever, he said. But when will it pick up? Uncertainty created by Oracle's takeover attempt of Peoplesoft had also had a negative impact, with some customers deferring buying decisions, he says.

For the three months to June 30, Siebel produced net income of &9.8m, down 67 per cent on last year. Revenues were $333.3m, down 17.8 per cent on last year. ®