Siebel announces first-ever stock dividend

Enterprise software maker Siebel Systems announced its first-ever stock dividend payout to shareholders on Wednesday, just ahead of what could prove to be a contentious meeting of the company's investors.
In a statement, Siebel's board of directors said that on July 15 the company will pay a quarterly dividend of 2.5 cents per share to shareholders who have purchased their stock before the Nasdaq's close of business on June 30.

The company said that it would also continue to pay a dividend to investors each fiscal quarter going forward, but that the board will determine the size of future disbursements on a case-by-case basis.

The dividend announcement comes just hours before the kickoff of Siebel's annual shareholder meeting and board elections in Burlingame, Calif. Several of the company's major investors had been expected to withhold their votes for Tom Siebel, company founder and chairman, and two other directors. Among investors leading that effort were Jana Partners and Providence Capital, which have both publicly stated their displeasure with the company's current management.

A potential dividend payout had been rumored as one of the ways Siebel might appease investors who wanted the company to put its estimated $2.2 billion to work in increasing shareholder value. But that option had been considered unlikely because the company had never taken such a measure before.

In a letter to investors posted on the company's Web site on Wednesday morning, George T. Shaheen, Siebel's recently appointed chief executive, explained why the board, of which he is a member, decided that the time was right to create a stock dividend. The letter described Siebel's current business plans, which are focused on reviving its growth in the market for software designed to help with customer relationship management, or CRM. It's a market that Siebel helped create, but one in which the company has seen rivals such as SAP and Salesforce.com take away its leadership role.

"This dividend program reflects our board of directors' confidence in Siebel Systems' long-term record of positive cash flow generation, strong future growth opportunities and substantial commitment and ability to return capital to shareholders over time," Shaheen said in a statement. "We believe it is the best way to increase long-term shareholder value, while preserving the financial strength and flexibility we need to take full advantage of growth opportunities."
Shaheen's appointment in April created some controversy. He was tapped to replace former CEO Michael Lawrie, who had led the company for less than a year. Some stock analysts who cover Siebel have previously pointed out that despite being on Siebel's board for roughly a decade, Shaheen has never bought a good deal of the software maker's stock.

In late May, Siebel announced an employee retention program aimed at keeping workers from jumping ship amid rumors of a potential buyout.

In his letter, Shaeheen said that Siebel will in fact be on the lookout for companies to buy, and indicated that the company will try to keep enough money on hand to make such acquisitions.

Shaheen also announced in the letter that Siebel will look to add two independent members to its board in the coming year, thereby raising its number of directors from eight to 10.