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MAY 6, 2005
By Steve Hamm Siebel's Ousted CEO Speaks Michael Lawrie says he tried to move the outfit in a new direction, but disagreements with founder Thomas Siebel sealed his doom It came as a shock when Michael Lawrie was fired as chief executive of troubled software maker Siebel Systems. After all, the 26-year IBM (IBM ) veteran had been CEO for less than one year. Although the company had suffered a bad quarter on his watch, it usually takes more than that before a CEO is shown the door. Now, in an exclusive interview with BusinessWeek Online, Lawrie has spoken publicly for the first time since losing his job Apr. 13. It's clear his main problem was a failure to connect with Siebel (SEBL ) founder and former CEO Thomas Siebel, who had handed the reigns to him in May, 2004. "There's no bitterness," says Lawrie, who has returned to his long-time home in Connecticut. "I don't see it as a defeat. I just barely got started." The two executives met frequently, but it didn't seem to do Lawrie much good. "There were issues between Tom and me in terms of how I was changing the company. He wasn't comfortable with it," says Lawrie. Though he says Siebel, who stayed on as chairman of the board of directors, never directly criticized his strategy or expressed displeasure at the overhaul of Siebel's management ranks, "he intimated it." RAPID ROTATION. Thomas Siebel and other Siebel Systems executives wouldn't comment for this story, but on the day he announced Lawrie's departure, Siebel said, "I'm unaware of any disagreement on strategy. This is all about performance." Throughout his career, Siebel has been quick to fire top lieutenants when the company performance failed to meet his expectations. He has run through a long list of head of sales, including people who have been extremely successful elsewhere -- before and since. Siebel had lost money and seen its revenues decline for two years straight when Lawrie came in as its supposed savior. Rather than cutting staff and narrowing the outfit's focus, he kept investing in technology, pushed hard on the online version of the company's software, and began building up the services organization. EMBARRASSING RESULTS. He expanded in the rapidly-growing markets of China, India, and Eastern Europe. And he acquired a couple of small companies to forge into new product areas -- including electronic bill-payment. "I was broadening the company and moving it from a products company to a solutions company," Lawrie explains. Things were O.K. -- for a while. In last year's fourth quarter, Siebel's sales rose 7%, to $392 million, and profits climbed 32%, to $54 million -- the first good quarter in a couple of years. Lawrie had announced his strategy in the first month of the quarter. But shortly after this year's first quarter ended, Lawrie warned that Siebel's earnings would come in way under expectations. Ultimately, when the San Mateo (Calif.) company reported earnings on Apr. 28, it had lost $4 million and revenues declined 9.2%. "We were all embarrassed," Lawrie says now. "It was partly our execution and partly macro-economic." NO NEW DIRECTION. Looking back, Lawrie believes he should have paid more attention to expenses than he did -- rather than focusing mainly on growth. After the warning, he was prepared to make cuts, but he also wanted to continue to fund his initiatives. Two weeks later, Lawrie met with lead independent director James Gaither to see if the board would back him. "I suspected they didn't agree," he says. Lawrie won't detail the conversation, but the result tells the story: The board asked for his resignation a few days later. Investors and Wall Street analysts have been clamoring for change since Lawrie's departure -- but without much satisfaction (see BW Online, 4/28/05, "It's Show Me Time for Siebel"). Siebel continues to sit on top of its $2.2 billion cash horde rather than handing some of it to shareholders though a stock buyback or dividend. During an analyst briefing May 5, Siebel's new CEO, longtime board member George Shaheen, didn't announce any significant departures from the Lawrie strategy. "We believe there are three things to do: Improve revenue generation, align cost structure, and continue to invest in leading-edge products and services," he said. So why then was Lawrie's command so short? Maybe only Tom Siebel knows for sure.  Hamm is a senior writer for BusinessWeek in New York Additional reporting by Sarah Lacy in San Mateo, Calif.
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