UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2001

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission File Number: 0-20725

SIEBEL SYSTEMS, INC.



|Delaware                                                       | 94-3187233                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number)

2207 Bridgepointe ParkwaySan Mateo, CA     94404

(650) 477-5000(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  Common Stock, $0.001 par value per share







Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K. [  ]

The aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the closing sale price of the Registrant's Common Stock on
February 1, 2002, as reported on the Nasdaq National Market was
approximately $15,281,988,000. Shares of Common Stock held by each current
executive officer and director and by each person who is known by the
registrant to own 5% or more of the outstanding Common Stock have been
excluded from this computation in that such persons may be deemed to be
affiliates of the Registrant. Share ownership information of certain persons
known by the Registrant to own greater than 5% of the outstanding common
stock for purposes of the preceding calculation is based solely on
information on Schedule 13G filed with the Commission and is as of
December 31, 2001. This determination of affiliate status is not a
conclusive determination for other purposes.

The number of shares outstanding of the registrant's Common Stock, par
value $0.001 per share, as of  February 1, 2002, was 470,840,978.







TABLE OF CONTENTS



|Part I.    |                                                                                       | Page
|---------- | ------------------------------------------------------------------------------------- | ----
|Item 1.    | Business                                                                              | 1   
|Item 2.    | Properties                                                                            | 10  
|Item 3.    | Legal Proceedings                                                                     | 10  
|Item 4.    | Submission of Matters to a Vote of Security Holders                                   | 10  
|Part II.   |                                                                                       |     
|Item 5.    | Market for Registrant's Common Equity and Related Stockholder Matters                 | 10  
|Item 6.    | Selected Financial Data                                                               | 11  
|Item 7.    | Management's Discussion and Analysis of Financial Condition and Results of Operations | 12  
|Item 7a.   | Quantitative and Qualitative Disclosures About Market Risks                           | 31  
|Item 8.    | Financial Statements and Supplementary Data                                           | 32  
|Item 9.    | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | 32  
|Part III.  |                                                                                       |     
|Item 10.   | Directors and Executive Officers of the Registrant                                    | 32  
|Item 11.   | Executive Compensation                                                                | 33  
|Item 12.   | Security Ownership of Certain Beneficial Owners and Management                        | 34  
|Item 13.   | Certain Relationships and Related Transactions                                        | 34  
|Part IV.   |                                                                                       |     
|Item 14.   | Exhibits, Financial Statements and Reports on Form 8-K                                | 34  
|SIGNATURES |                                                                                       | 62  

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Documents Incorporated By Reference

Portions of the registrant's Proxy Statement for its 2002 Annual Meeting
of Stockholders are incorporated by reference in Part III hereof.

---

The statements contained in this annual report that are not
historical are forward-looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include,
without limitation, statements regarding the extent and timing of future revenues and expenses and
customer demand, statements regarding the deployment of our products, and statements regarding
reliance on third parties.  All forward-looking statements included in this annual report are based
on information available to us as of the date of this annual report.  We assume no obligation to
update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise, unless we are required to do so by law.  We have based these forward-looking
statements on our current expectations and projections about future events.  These forward-looking
statements are not guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those in the section entitled "Risk Factors."



PART I

Item 1.  Business

Overview

Siebel Systems, Inc. (sometimes referred to as "we,"
"us," "our," "Siebel" or the "Company") is the world's
leading provider of eBusiness applications software.  Siebel eBusiness Applications are a
family of leading Web applications software that enables an organization to better manage its most
important relationships: its customer, partner and employee relationships.  Siebel eBusiness
Applications are designed to meet the information system requirements needed to
manage these relationships for organizations of all sizes, from small businesses to the largest
multinational organizations and government agencies.  Our customer relationship management
applications enable an organization to sell to, market to, and service its customers across multiple
channels, including the Web, call centers, field, resellers, retail and dealer networks.  Our
partner relationship management applications seamlessly unite the organization's partners, resellers
and customers in one global information system to facilitate greater collaboration and increased
revenues, productivity, and customer satisfaction.  Our employee relationship management
applications enable an organization to drive employee and organizational performance and increase
employee satisfaction through the support of each stage of the employee life cycle.  By deploying
the comprehensive functionality of Siebel eBusiness Applications to better manage their
customer, partner and employee relationships, our customers achieve high levels of satisfaction from
these constituencies and continue to be competitive in their markets.



Siebel eBusiness Applications for customer and partner relationship
management are available in 20 industry applications designed for specific segments within multiple
industries, including financial services, communications, travel and transportation, energy, the
consumer sector, life sciences, the industrial sector and the public sector.  Providing best-of-class
eBusiness functionality, Siebel eBusiness Applications enable organizations to create a
single source of customer information that sales, service and marketing professionals can use to
tailor product and service offerings to meet each of their customers' unique needs.  By using Siebel
eBusiness Applications, organizations can develop new customer relationships; profitably
serve existing customers; and integrate their systems with those of their partners, suppliers and
customers, regardless of location.



Siebel eBusiness Applications for employee relationship management include
Siebel Employee Relationship Management, or Siebel ERM, a family of Web applications that enables
our customers to drive organizational and employee performance, reduce operating costs and improve
bottom-line results. Targeted for use by every employee in an organization, Siebel ERM provides
employees with a single point of access to information, applications and other organizational
resources, while providing managers with a comprehensive performance management system to measure,
monitor and track organizational and workforce performance.



We are principally engaged in the design, development, marketing and support
of the above family of Siebel eBusiness Applications.  Substantially all of our revenues are
derived from a perpetual license of these software products and the related professional services
and customer support (maintenance) services.  We license our software in multiple element
arrangements in which the customer purchases a combination of software, maintenance and/or
professional services (i.e., training, implementation services, etc.).  First-year maintenance,
which includes technical support and product updates, is typically sold with the related software
license and is renewed on an annual basis thereafter.  Our Global Services Organization provides
professional services, which include a broad range of implementation services, training and
technical support, to our customers and implementation partners.  Our Global Services Organization
has significant product and implementation expertise and is committed to supporting customers and
partners through every phase of the eBusiness transformation cycle.  Substantially all of our
professional service arrangements are on a time and materials basis.  Payment terms for the above
arrangements are negotiated with our customers and determined based on a variety of factors,
including the customer's credit standing and our history with the customer.



Our customers are known for delivering the highest levels of quality in their
products and services and for their commitment to maintaining the highest levels of customer and
employee satisfaction.  Spanning diverse industries and locations, customers of Siebel
eBusiness Applications represent organizations of all sizes in both the private and public
sectors.



Through global strategic alliances with industry-leading organizations, we
continue to enhance Siebel eBusiness Applications, ensuring that we continue to fully support
our customers' rapidly evolving technology requirements and industry best practices, today and in
the future.



Products

Released in the fourth quarter of 2001, Siebel 7 is the
latest version of our eBusiness software.  We believe that Siebel 7 is the industry's most
comprehensive suite of Web-based eBusiness software applications, with more than 200 applications
for sales, marketing, service, interactive selling, analytics, partner relationship management and
employee relationship management.  Siebel eBusiness Applications enable organizations: (i) to
gain a consolidated view of each customer across multiple distribution channels including the Web,
call center, field sales and service, resellers, partners and dealer channels; (ii) to seamlessly
unite the organization's partners, resellers and customers in one global information system; and
(iii) to manage every aspect of their employee relationships, including the ability to improve the
alignment of employee/corporate goals and to accelerate, centralize and simplify the employees'
access to critical information, training and best practices.

Siebel 7 marks the fourth generation of Siebel Industry Applications.  We offer
proven, out-of-the-box industry applications as well as significant functionality to support
segment-specific requirements within industries. As a pioneer of the industry-specific application
model, we recognize that each industry has different business processes, competitive challenges and
information systems requirements, which cannot be addressed with a "one size fits all"
eBusiness approach.  As such, Siebel 7 provides customers with 20 industry-specific applications to
address the unique business requirements in the following industries:

|Consumer Sector
Apparel and Footwear
Consumer Goods
Retail | Communications
Wireless
Wireline
Media                                                    
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------
|Energy
Chemicals
Energy
Oil & Gas                          | Financial Services
Institutional Finance
Retail Banking and Brokerage
Insurance
Healthcare
|Industrial
Automotive
High Technology                      | Life Sciences
Clinical
Medical Products
Pharmaceuticals                                   
|Public Sector
Public Sector                                | Travel and Transportation
Travel and Hospitality                                          

With the release of Siebel 7, Siebel resets the standard for technology
leadership in eBusiness applications.  Siebel 7 introduces the Siebel Smart Web Architecture, the
industry's first and only zero-footprint Web architecture that provides high levels of interactivity
previously available only from desktop applications.  Siebel 7 provides our customers with the cost
savings associated with rapidly deploying a zero-install Web application, along with the rich,
interactive, intuitive user experience available only from a desktop application.  As with the six
prior releases of Siebel eBusiness Applications, Siebel 7 offers a clear and easy upgrade
path for customers, including automated upgrade functionality, resulting in reduced deployment times
and the lowest total cost of ownership.

Siebel Sales

Siebel Sales allows our customers' selling organizations to grow revenues
more quickly, predictably and profitably by focusing our customers on the right deals at the right
time.  This core application includes the Opportunity and Pipeline Management, Account Management,
Contact Management, Activity Management, Revenue Management, Message Broadcasting, Quotas and
Incentives modules.

Siebel Sales options, as of December 31, 2001, include Siebel Forecasting, Siebel
Proposals and Presentations, Siebel Target Account Selling, Siebel Enterprise Selling Process,
Siebel Strategic Selling, Siebel Incentive Compensation, Siebel Sales Handheld and Siebel Sales
Wireless.

Siebel Interactive Selling



Siebel Interactive Selling is a comprehensive suite of Web applications that
support the entire online selling process, including needs analysis and education, product
customization and configuration, personalized pricing and online ordering.  Siebel Interactive
Selling allows organizations to more effectively engage and better serve the customer across
multiple channels, including the Web, telesales, direct sales force and dealer networks.  By
interacting with customers through the selling process, Siebel Interactive Selling enables greater
customer acquisition and retention as well as increasing the effectiveness of direct and indirect
sales forces.



Siebel Interactive Selling options, as of December 31, 2001, include Siebel
eSales, Siebel eCatalog, Siebel eAdvisor, Siebel eAuction, Siebel
ePricer, Siebel eConfigurator, Siebel Orders and Siebel Quotes.

Siebel Marketing

Siebel Marketing is a comprehensive suite of applications for the
planning, management and execution of multichannel marketing programs.  Siebel Marketing supports
the entire closed-loop marketing process with response management; list management; data quality and
personalization capabilities; and integrated analytic campaign management and execution across
phone, fax, email, direct mail and pager.



Siebel Marketing options, as of December 31, 2001, include Siebel Campaigns,
Siebel eEvents Manager, Siebel eEvents, Siebel Marketing Manager, Siebel Marketing
Server and Siebel eMarketing.



Siebel Service

Siebel Service enables teams of customer service, sales and marketing
professionals to help ensure complete customer satisfaction by using closed-loop service request
management capabilities.  The base application includes Service Request Management, Account
Management, Asset Tracking, Contact Management, Activity Tracking, Message Broadcasting, Solution
Management and Global Time Zone and Audit Trail functionality.

Siebel Service options, as of December 31, 2001, include Siebel Quality
Management and Siebel Contracts.

Siebel Call Center

Siebel Call Center combines Siebel Sales and Siebel Service functionality to
enable call center agents to effectively manage service, support and sales interactions across
multichannel global call centers.  With the ability to view integrated sales and service histories
for each customer, call center agents can turn every service request into an additional sales
opportunity.  The base application includes Opportunity and Pipeline Management, Service
Request/Trouble Ticket Management, Account and Contact Management, Activity Management, Problem
Resolution, Customer Dashboard, Message Broadcasting and Global Time Zone Support.

Siebel Call Center options, as of December 31, 2001, include Siebel CTI, Siebel
CTI Connect, Siebel eCollaboration, Siebel Universal Queuing and Siebel Web Collaboration
API.

Siebel Field Service

Siebel Field Service extends upon Siebel's customer service solution and provides
field engineers with service functionality for entitlement/contracts management, integration with
other customer-facing departments, dispatch and scheduling, parts management and repair center
operations.  Siebel Field Service provides a complete solution for the mobile technician as well as
the connected service agent.  The base application includes Service Request Management; Account
Management; Asset and Configuration Tracking; Contact Management; Activity Tracking; Field Engineers
and Field Engineer Activities Management; Service Parts Definition; Message Broadcasting; Solution
Management; and Orders, RMA/Returns, Inventory, Global Time Zone and Audit Trail functionality.



Siebel Field Service options, as of December 31, 2001, include Siebel Logistics
Manager, Siebel Repair, Siebel Preventive Maintenance and Siebel Scheduling.

Siebel Web Service

Through Web- and email-based service automation, Siebel eService and
Siebel eMail Response allow organizations to manage the entire service process and to provide
world-class customer service and support via the Internet.



Siebel Professional Services Automation

Siebel Professional Services Automation, or Siebel PSA, connects project
tasks with deliverables, project risks, subcontractor relationships, contracts, and time and
expenses, while supporting complex resource allocation based on skills and billing rates.  The base
application includes Project Management, Resource Management, Project Planning and Change Request,
Time and Expense Management and Reporting.



The Siebel PSA option, as of December 31, 2001, includes Siebel Consultant's
Package.

Siebel Partner Relationship Management

Siebel Partner Relationship Management, or Siebel PRM, includes our Siebel
eChannel product.  Siebel eChannel delivers a global, enterprise-wide Internet partner
management platform that enables organizations to more effectively manage their relationships with
channel and alliance partners, distributors, resellers, agents, brokers, and dealers.  Siebel
eChannel automates and streamlines the business processes between organizations and their
partners, therefore facilitating collaboration to increase revenues, productivity, and customer
satisfaction while reducing partner management costs.  Siebel eChannel consists of three
major components with greatly expanded functionality: Siebel eChannel Partner Manager, Siebel
eChannel Partner Portal, and Siebel Partner Analytics.



Siebel PRM options, as of December 31, 2001, include Siebel eChannel
Partner Commerce, Siebel Advanced Search, Siebel eBriefings, SiebeleChannel Wireless,
Siebel eReports Server, Siebel eTraining, Siebel Forecasting, Siebel Incentive
Compensation, Siebel Proposals and Presentations, Siebel eAdvisor, Siebel eAuction,Siebel eConfigurator, Siebel ePricer, Siebel Campaigns, Siebel Smart Answer and
Siebel eSmartScript.

Siebel Analytics

Siebel Analytics is a comprehensive next-generation analytics solution that
enables organizations to empower all users throughout the extended enterprise with up-to-the-moment,
actionable customer and business insight.  Siebel Analytics includes an open and extensible
analytics platform, the Siebel Analytics Server, which allows organizations to leverage existing
investments in data warehouses and business intelligence tools.  Organizations can leverage the
valuable data collected in Siebel eBusiness Applications, combine this data with information
from any internal or external source, and provide any user with a comprehensive view of a customer's
behavior and preferences, along with the performance of sales, marketing and customer service.

Siebel Analytics options, as of December 31, 2001, include Siebel Answers, Siebel
Sales Analytics, Siebel Service Analytics, Siebel Marketing Analytics and Siebel Partner
Analytics.

Siebel Employee Relationship Management

Siebel Employee Relationship Management, or Siebel ERM, is a suite of
applications that enables organizations to improve the alignment of each employee's objectives with
strategic corporate goals.  Siebel ERM accelerates, centralizes and simplifies employee access to
critical information, training and best practices.  Siebel ERM includes Siebel Assignment Manager,
Siebel Calendar, Siebel Company Events, Siebel Content Management, Siebel Encyclopedia, Siebel
Portal Platform, Siebel Replication Manager, Siebel Search and Siebel Workflow.

Siebel ERM options, as of December 31, 2001, include Siebel Advanced Search,
Siebel Customer Content, Siebel Distance Learning, Siebel eTraining, Siebel Incentive
Compensation, Siebel Performance Management, Siebel Quality Management, Siebel Reports Server,
Siebel Sync, Siebel Teams, and Siebel Time and Expense Reporting.

Siebel eBusiness Applications,MidMarket Edition

Siebel eBusiness Applications, MidMarket Edition is a family of
multichannel sales, marketing and customer service applications.  Siebel eBusiness
Applications, MidMarket Edition helps small and medium-size companies create a single source of
customer information that makes it easier to sell to, market to and service customers across
multiple channels, including the Web, call centers, field sales and reseller networks.  Designed for
fast deployment, Siebel eBusiness Applications, MidMarket Edition helps small and medium-size
companies increase their productivity.

General Product Options



General product options are typically available on any of the Siebel
eBusiness base applications and as of December 31, 2001, include:

- Siebel Reports Server:  The Siebel Reports Server allows users to schedule,
run and distribute reports using an easy-to-use and intuitive user interface.  Reports can be run in
both batch and interactive modes.
- Siebel Time and Expense Reporting:  Siebel Time and Expense Reporting helps
consultants, project managers, field service and call center representatives, and other employees
capture, report and manage all of their billable time and expenses on the projects, accounts or
opportunities in which they work.
- Siebel Orders:  Siebel Orders (formerly named Siebel eOrder) provides
order entry and return material authorization capabilities that are integrated into other critical
Siebel operations such as quote generation, campaigns and service request management.
- Siebel eSmartScript:  Siebel eSmartScript provides partner
sales and service agents with diagnostic and troubleshooting instructions through a series of
questions that dynamically change based on the answers to previous questions.
- Siebel Remote Client:  Siebel Remote Client enables mobile computing by
providing a complete bi-directional exchange of information between laptops and corporate
servers.
- Siebel Anywhere:  Siebel Anywhere distributes and installs upgrade kits for
Siebel mobile clients.
- Siebel Data Quality Matching:  Siebel Data Quality Matching enables customers
to identify duplicate account, contact and prospect records by comparing account and contact names,
postal addresses, email addresses and other fields that customers can define for themselves.
- Siebel Advanced Search:  Siebel Advanced Search enhances the base Siebel
Search capabilities by locating documents using term proximity, word stemming, advanced thesaurus,
term inflection, and other advanced searching features.
- Siebel Connector for Firstlogic Libraries:  The Siebel Connector for
Firstlogic Libraries offers out-of-the-box connectivity to the data matching and cleansing software
of Firstlogic.
- Siebel Dun & Bradstreet Integration Solution:  The Siebel Dun &
Bradstreet Integration Solution enables customers to access Dun & Bradstreet's marketing data,
which covers more than 31 million organizations around the world, and business and credit reports
from within Siebel eBusiness Applications.
- Siebel eBriefings:  Siebel eBriefings is a knowledge management
solution that enables employees and partners to more effectively acquire and retain customers by
providing them with information that is customized to their needs.
- Siebel Sync:  Siebel Sync allows users to export contacts and accounts from
Siebel eBusiness base applications to various software and hardware applications, including
Outlook, Notes, Palm and GroupWise, and allows for synchronization of these applications with the
Calendars and Activities modules in Siebel eBusiness Applications.





Since we introduced the first versions of our products, we have released a
number of product enhancements in the six subsequent major releases.  Our competitive position has
developed to a large extent because of our emphasis on research and development. To continue our
focus on improving our products and enhancing customer satisfaction, during 2001 we significantly
increased our investment in product development.  In the fourth quarter of 2001, we released Siebel
7, which we believe resets the standard for technology leadership in eBusiness applications.  During
1999, 2000 and 2001, we invested approximately $81.1 million, $145.5 million, and $198.6 million,
respectively, in additional product development.   We currently expect that most of our development
of new products and enhancements to existing and future products will be developed internally or
through acquisitions.  We rely primarily on a combination of patent, copyright, trade secret and
trademark laws, confidentiality procedures and contractual provisions to protect our proprietary
rights.  Please see "Risk Factors - We may not be able to protect our proprietary
information" for further discussion of proprietary technology and intellectual property.



Our past development efforts have resulted in leading software applications
for managing customer, partner and employee relationships. We believe that our current and future
product development efforts will continue this history of leading software; however, we cannot
assure you that existing and future development efforts will be completed within our anticipated
schedules or that, if completed, the products will have the features or quality necessary to make
them successful in the marketplace.  We test all of our products prior to their general release and
only release our products after the products have equaled or exceeded our high standards.  Despite
our vigorous testing, software products may contain errors or failures, especially when first
introduced or when new versions are released, and could be affected by viruses.  Please see
"Risk Factors - Software errors or defects in our products could reduce revenues" for
further discussion of risks associated with product development.

Professional Services

We provide implementation consulting and other technical services to software
license customers through our worldwide Global Services Organization.  Our Global Services
Organization has significant product and implementation expertise and is committed to supporting
customers and partners through every phase of the eBusiness transformation cycle.  While our
customers frequently rely on third-party systems integrators for a substantial portion of
implementation and other global services, we perform some of these services in connection with the
services provided by our global alliance partners to ensure that our customers receive the full
array of services necessary to install, integrate, customize and deploy Siebel eBusiness
Applications.

Customer Support and Training

We offer a comprehensive, multitiered, integrated family of global support
programs designed to ensure successful implementation and customer satisfaction.  These programs
include maintenance, technical support, professional services and customer communications, as well
as extensive educational offerings.  Our educational offerings include technical training, end user
training and advanced sales training.

Marketing and Sales

Our sales and service professionals are located in 33 countries, with 71
offices in the United States and 70 offices outside of the United States.  Our ability to achieve
revenue growth will depend in large part on how successfully we recruit, train and retain sufficient
direct sales, technical and global services personnel and how well we continue to establish and
maintain relationships with our strategic partners.  We believe that the complexity of our products
and the large scale deployments anticipated by our customers will require a number of highly trained
global services personnel.

Our marketing and sales strategy is composed of the following key elements:

Target Customers in a Broad Range of Industries and the Public Sector

Our customer base consists of a significant number of organizations of
all sizes, from small businesses to the largest multinational organizations and government agencies.
Siebel eBusiness Applications' Web architecture supports the complex needs of the largest
global organizations.  We intend to leverage our experience and continue to target sales and
marketing activities through our direct sales force and partners to expand worldwide market
acceptance of Siebel eBusiness Applications.



Maintain and Extend Advanced Technology Position

We provide what we believe to be the industry's most comprehensive family
of multichannel eBusiness applications, enabling organizations to sell to, market to and service
customers across multiple channels, including the Web, call centers, field, resellers, retail and
dealer networks.  Siebel eBusiness Applications enable organizations to manage, synchronize
and coordinate their customer touchpoints.  Utilizing advanced information technology, Siebel
eBusiness Applications are built on a component-based architecture that provides a broad
range of functionality for eBusiness applications deployments.

We intend to continue investing substantial resources in technological research
and developments, such as:



Proven, Component-Based Architecture:  The Siebel eBusiness
architecture includes Siebel Remote, one of the industry's most scalable data synchronization
technologies for mobile clients and server-to-server replication; Siebel Workflow Manager, which
allows organizations to visually model business processes and apply workflow automation rules across
all channels of distribution; Siebel Tools, a visual development toolset that allows organizations
to customize their user interface, business rules and data; and Siebel eBusiness Application
Integration, which provides pre-built integration with leading middleware products and
industry-specific back office products.



Support for Multiple Computing Platforms:To enable immediate access
to key customer information, Siebel eBusiness Applications can operate on multiple computing
platforms used by organizations, including mobile clients, connected clients, thin clients, wireless
clients and handheld clients.

Smart Web Architecture:  The Siebel eBusiness Applications product
architecture is entirely Web-based and designed for high interactivity, performance and scalability.
Siebel eBusiness Applications are capable of operating within a standard Web browser as thin
clients, with no Siebel software installed on the client-computing device.  This technology
contributes to a dramatic reduction of the costs of deploying Siebel eBusiness Applications
by nearly eliminating client software distribution costs.



Application Network:  Siebel 7 is built from the ground up to
operate in a heterogeneous environment and reduce the total cost of ownership by supporting
integration via an "application network."  An application network allows corporations to
weave their information systems investments together using an "information bus," which
acts as the backbone for inter- and intra-enterprise data synchronization and business process
execution.  As a result, corporations can support customer-centric, end-to-end business processes
that span multiple systems of record and business logic.  Siebel 7 acts as a "good
citizen" in an application network, giving organizations maximum latitude in configuring
best-of-class solutions.  Siebel 7 has received broad support from more than 100 third-party software
providers who have announced their intent to certify their solutions on Siebel 7.



Full Life Cycle Management:  Siebel eBusiness Applications'
technology makes it easier for organizations to manage the full application deployment life cycle.
Automatic Siebel application upgrades and remote software distribution contribute to a dramatic
reduction of the costs associated with deploying software and help to ensure the success of the
deployment.



The Siebel eBusiness Applications product architecture enables
organizations to configure their Siebel eBusiness Applications once and then deploy that same
configuration to all their users.  Once an organization makes customizations to the underlying
objects, the customizations can operate automatically across nearly all types of client computing
devices.  This technology is designed to provide significant cost savings in deployment and
implementation costs and assures consistency across customer-facing channels.



Global Market Support: We designed and built Siebel
eBusiness Applications to support global deployments, including most major European and Asian
languages.  Siebel eBusiness Applications support single and double byte characters, multiple
currencies, automatic currency conversions including the EMU standards for supporting the euro and
real-time interfaces to accept new exchange rates from leading online services.

Siebel eBusiness Applications provide support for multiple
organizations, allowing companies to define different organizational structures to manage data
visibility, security and business processes across both centralized and decentralized deployment
locations.

Siebel's global strategic partners and strategic partners as of December 31,
2001, include the following industry leaders:

|System Integrator

Accenture
American Management Systems, Inc.
Cap Gemini Ernst & Young
Deloitte Consulting
IBM Corporation
KPMG Consulting
PricewaterhouseCoopers
Siemens Business Services GmbH & Co.
SYNAVANT, Inc.
Unisys Corporation | Platform

Compaq Computer Corporation
Fujitsu Siemens Computers B.V.
IBM Corporation
Microsoft Corporation
Nokia Corporation
Palm, Inc.
Sprint PCS Group
Sun Microsystems, Inc.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Support Successful Customer Implementations



Our success depends on our customers' successful implementations of
Siebel eBusiness Applications.  As a result, we actively support the customer's deployment
efforts by providing Internet and telephone technical support and comprehensive instructor-led
training and by assigning an account management team to each customer that consists of a sales
representative, a technical account manager and an executive sponsor.



Expand Global Sales Capabilities

We currently have offices in Argentina, Australia, Austria, Belgium, Brazil,
Canada, China, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy,
Japan, Korea, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal, Scotland, Singapore,
South Africa, Spain, Sweden, Switzerland, Taiwan, the United Kingdom and the United States and have
introduced localized versions of Siebel eBusiness Applications for major European and Asian
markets. We intend to further expand our global sales and marketing capabilities by increasing the
size of our direct sales and marketing organizations in major markets and by continuing to develop
our channel partner relationships.  As market conditions warrant, we intend to increase our direct
sales and marketing activities worldwide.



During each of 1999, 2000 and 2001, no individual customer accounted
for more than 10% of our revenues.  International license revenues for 1999, 2000 and 2001 were
$157.7 million, $447.9 million and $479.3 million, respectively.  This represented 31%, 40% and 45%
of total license revenues in 1999, 2000 and 2001, respectively.  Total international revenues for
1999, 2000 and 2001 were $207.5 million, $633.0 million and $825.4 million, respectively.  This
represented 26%, 35% and 40% of total revenues in 1999, 2000 and 2001, respectively.  Please refer
to Note 9 to the accompanying consolidated financial statements for further discussion of our
geographic operations.



Our international operations are subject to a variety of risks, including:
(i) foreign currency fluctuations; (ii) economic or political instability; (iii) shipping delays;
and (iv) various trade restrictions.  Please see "Risk Factors - Our international operations
involve unique risks" for further discussion of risks related to foreign operations.



Competition

Our products target the eBusiness systems market.  This market is highly
competitive, rapidly changing and significantly affected by new product introductions and other
market activities of industry participants.  Our products are targeted at the emerging market for
customer, partner and employee relationship information systems.  We face competition primarily from
our customers' internal information technology departments and systems integrators, as well as other
application software providers that offer a variety of products and services designed to address
this market.  We believe that most customer deployments have been the result of large internal
development projects, custom solutions from systems integrators or the application of personal and
departmental productivity tools to the global enterprise.  We may not be able to compete
successfully against such internal development efforts.  We believe that the market for global
eBusiness information systems has historically not been well served by the application software
industry.  We have been able to capitalize on this inability and, as a result, we believe we have
become the leading provider of eBusiness applications that manage customer, partner and employee
relationships.  Please see "Risk Factors - To be successful, we must effectively compete in the
eBusiness systems market."

Internal Development

Many of our customers and potential customers have in the past attempted to
develop sales, marketing, customer service and employee relationship information systems in-house,
either alone or with the help of systems integrators.  Internal information technology departments
have staffed projects to build their own systems utilizing a variety of tools.  In some cases, such
internal development projects have been successful in satisfying the needs of an organization.  The
competitive factors in this area require that we produce a product that conforms to the customer's
information technology standards, scales to meet the needs of large enterprises, operates globally
and costs less than the result of an internal development effort.  We cannot assure you that we will
be able to compete effectively against such internal development efforts.

Custom System Integration Projects

We also face competition from systems integrators engaged to build a custom
development application.  The introduction of a systems integrator typically increases the
likelihood of success for the customer.  To successfully compete in this area, we must demonstrate
to the customer the cost savings and advantages of a configurable, upgradeable and commercially
supported product developed by a dedicated professional software organization.

We frequently rely on systems consulting and systems integration firms for a
substantial portion of implementation and other global services, as well as recommendations of our
products during the evaluation stage of the purchase process.  Although we seek to maintain close
relationships with these service providers, many of them have similar and often more established
relationships with our competitors.  If we are unable to develop and retain effective, long-term
relationships with these third parties, our competitive position could be materially and adversely
affected.  Further, many of these third parties have significantly greater resources than we do and
may market software products that compete with us in the future or may otherwise reduce or
discontinue their relationships with or support of us and our products.

Other Competitors

A large number of personal, departmental and other products exist in the
eBusiness applications market. Companies such as Amdocs Limited; Chordiant Software, Inc.; Dendrite
International, Inc.; E.piphany, Inc.; FrontRange Solutions, Inc.; Interact Commerce Corporation;
Kana Software, Inc.; ONYX Software Corporation; Oracle Corporation; PeopleSoft, Inc.; Pivotal
Corporation; Salesforce.com, Inc.; and SAP AG are among the many firms in this market segment.  Some
of these competitors have longer operating histories; significantly greater financial, technical,
marketing and other resources; significantly greater name recognition; and a larger installed base
of customers than we do.  In addition, many competitors have well-established relationships with our
current and potential customers.  As a result, these competitors may be able to respond more quickly
to new or emerging technologies and changes in customer requirements or to devote greater resources
to the development, promotion and sale of their products than we can.  We believe that we compete
favorably in this marketplace based on the following competitive advantages: a breadth and depth of
functionality, a modern and enduring Web-based product architecture, tailored industry-specific
design, an ability to manage all customer interactions support across multiple channels,
configurable business objects, support for the global enterprise, scalability allowing support for
large user communities and strategic alignments with industry leaders.  In general, we have priced
our products at or above those of our competitors, and we believe this pricing is justified by the
scope of functionality delivered and the performance characteristics afforded by our products.

There are many factors that may increase competition in the eBusiness systems
market, including: (i) entry of new competitors; (ii) alliances among existing competitors; (iii)
consolidation in the software industry; and (iv) technological changes or changes in the use of the
Internet.  Increased competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially and adversely affect our business, operating results and
financial condition.  We cannot assure you that we will be able to compete successfully against
current and future competitors or that competitive pressures faced by us will not materially and
adversely affect our business, operating results and financial condition.

Employees

As of December 31, 2001, we had a total of 7,403 employees, of which
2,464 were engaged in sales and marketing; 1,275 were engaged in product development; 2,946 were
engaged in global services; and 718 were engaged in finance, administration and operations.  Our
future performance depends in significant part upon the continued service of our key technical,
sales and senior management personnel, particularly Thomas M. Siebel, our Chairman and Chief
Executive Officer, none of whom is bound by an employment agreement.  The loss of the services of
one or more of our key employees could have a material adverse effect on our business, operating
results and financial condition.  Our future success also depends on our continuing ability to
attract, train and retain highly qualified technical, sales and managerial personnel.  Competition
for such personnel is intense, and we cannot assure you that we can retain our key technical, sales
and managerial personnel in the future.  None of our employees are represented by a labor union.  We
have not experienced any work stoppages and consider our relations with our employees to be
good.



Item 2.  Properties

Our principal administration, sales, marketing, support and research
and development facilities are located in San Mateo, California, pursuant to leases that expire
between December 2004 and December 2015, and Emeryville, California, pursuant to a lease that
expires in March 2013.  We currently also occupy a number of domestic and international sales and
support offices pursuant to leases that expire between 2002 and 2022.



We believe that our current facilities are adequate for our current needs and
suitable additional or substitute space will be available as needed to accommodate expansion of our
operations.  See Note 4 to the Consolidated Financial Statements for information regarding our lease
obligations.

Item 3.  Legal Proceedings



We are subject to legal proceedings and claims, either asserted or
unasserted, that arise in the ordinary course of business.  While the outcome of these proceedings
and claims cannot be predicted with certainty, management does not believe that the outcome of any
of these legal matters will have a material adverse effect on our consolidated financial position,
results of operations or cash flows.



Item 4.  Submission of Matters to a Vote of Security Holders



No matters were submitted to a vote of our security holders during the fourth
quarter of the fiscal year ended December 31, 2001.



PART II



Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

(a) Our common stock is traded on the Nasdaq National Market under
the symbol "SEBL."  The following high and low sales prices were reported by Nasdaq in
each quarter during the last two years.  All amounts give retroactive effect to the Company's stock
split, which was effective September 8, 2000.

`High      Low  
                                                     -------  -------
Quarter Ended March 31, 2000....................... $ 87.56  $ 32.75
Quarter Ended June 30, 2000........................   85.13    37.69
Quarter Ended September 30, 2000...................  118.44    66.00
Quarter Ended December 31, 2000....................  119.88    55.75
Quarter Ended March 31, 2001.......................   84.50    24.14
Quarter Ended June 30, 2001........................   55.90    22.95
Quarter Ended September 30, 2001...................   50.91    12.32
Quarter Ended December 31, 2001....................   31.06    12.24`

As of December 31, 2001, we had approximately 1,610 holders of record of our
common stock.  Our policy has been to reinvest earnings to fund future growth and, accordingly, we
have never paid any cash dividends on our common stock and do not expect to pay any such dividends
in the foreseeable future.  The last reported sale price of our common stock on March 14, 2002, was
$33.91 per share.



(b) The effective date of our first registration statement, filed on Form S-1
under the Securities Act of 1933, as amended (No. 333-12061), relating to the initial public
offering of our Common Stock, was June 27, 1996.  We have applied all of the proceeds generated by
our initial public offering to our operations.

Item 6.  Selected Financial Data

The following selected financial data should be read in conjunction
with our Consolidated Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in this annual
report.  The selected financial data for each of the years in the three-year period ended December
31, 2001, and as of December 31, 2000 and 2001, is derived from our consolidated financial
statements that have been included in this annual report.  The selected financial data as of
December 31, 1997, 1998 and 1999, and the years ended December 31, 1997 and 1998, is derived from
consolidated financial statements that have not been included in this annual report.



For each of the periods presented our financial data has been restated to
reflect the acquisitions of Scopus Technology, Inc. in 1998; OnTarget, Inc. in 1999; and OpenSite
Technologies, Inc., OnLink Technologies, Inc. and Janna Systems Inc. in 2000; all of which have been
accounted for as poolings-of-interests.

`Year Ended December 31,
                                           -----------------------------------------------------------
                                             1997        1998         1999         2000         2001
                                           ---------   ---------    ---------   ----------   ----------
                                                (in thousands, except per share data and employees)
Operating Data:
   Total revenues.......................  $ 226,221   $ 417,861    $  813,461   $1,795,384   $2,048,401
   Operating income.....................  $   8,394   $  64,469    $  161,187   $  322,535   $  357,882
   Net income...........................  $     560   $  42,290    $  110,025   $  221,899   $  254,575
   Net income available to
    common stockholders(1)..............  $     560   $  41,926    $   56,861   $  123,144   $  254,575
   Diluted net income per common share..  $    0.00   $    0.10    $     0.12   $     0.24   $     0.49
   Basic net income per common share....  $    0.00   $    0.11    $     0.15   $     0.29   $     0.56
   Total assets.........................  $ 275,592   $ 464,063    $1,275,601   $2,161,741   $2,744,844
   Convertible subordinated debentures..  $      --   $      --    $  300,000   $  300,000   $  300,000
   Mandatorily redeemable convertible
    preferred stock.....................  $      --   $   4,818    $   80,459   $       --   $       --
   Total stockholders' equity...........  $ 213,532   $ 299,068    $  644,670   $1,279,946   $1,836,102
   Employees............................      1,030       1,655         3,604        7,389        7,403`

(1) Net income has been reduced by the accretion of OpenSite's mandatorily
redeemable convertible preferred stock to determine net income available to common stockholders.
The accounting for OpenSite's mandatorily redeemable convertible preferred stock required non-cash
accretion to the then current fair value of the common stock into which the mandatorily redeemable
convertible preferred stock was convertible.  This resulted in a non-cash charge to accretion and
offsetting credit to mandatorily redeemable convertible preferred stock for each of the years ended
December 31, 1998, 1999 and 2000, the only periods in the above table in which the mandatorily
redeemable convertible preferred stock was outstanding.  The amount of accretion for a statement of
operations period was dependent upon how much the fair value of OpenSite's common stock fluctuated
during that period.  In connection with our acquisition of OpenSite, the holders of the mandatorily
redeemable convertible preferred stock converted their shares pursuant to their existing terms on a
one-for-one basis into shares of OpenSite's common stock.  Accordingly, we stopped recording
accretion on the mandatorily redeemable convertible preferred stock on May 17, 2000.

---



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations



Overview of the Company's Operations

Siebel is the world's leading provider of eBusiness applications software.
Siebel eBusiness Applications are a family of leading Web applications software that enable
an organization to better manage its most important relationships: its customer, partner and
employee relationships.  Siebel eBusiness Applications are designed to meet the information
system requirements needed to manage these relationships for organizations of all sizes, from small
businesses to the largest multinational organizations and government agencies.  Our customer
relationship management applications enable an organization to sell to, market to, and service its
customers across multiple channels, including the Web, call centers, field, resellers, retail and
dealer networks.  Our partner relationship management applications seamlessly unite the
organization's partners, resellers and customers in one global information system to facilitate
greater collaboration and increased revenues, productivity and customer satisfaction.  Our employee
relationship management applications enable an organization to drive employee and organizational
performance and increase employee satisfaction through the support of each stage of the employee
life cycle.  By deploying the comprehensive functionality of Siebel eBusiness Applications to
better manage their customer, partner and employee relationships, our customers achieve high levels
of satisfaction from these constituencies and continue to be competitive in their markets.



Siebel recognizes that each industry has different business processes,
competitive challenges and information systems requirements, which cannot be addressed with a
"one size fits all" eBusiness approach.  Accordingly, Siebel eBusiness Applications
are available in 20 industry applications designed for specific segments within multiple industries,
including financial services, communications, travel and transportation, energy, the consumer
sector, life sciences, the industrial sector and the public sector.  Providing best-of-class
eBusiness functionality, Siebel eBusiness Applications enable organizations to create a
single source of customer information that sales, service and marketing professionals can use to
tailor product and service offerings to meet each of their customers' unique needs.  By using Siebel
eBusiness Applications, organizations can develop new customer relationships, profitably
serve existing customers and integrate their systems with those of their partners, suppliers and
customers, regardless of location.



The Company and its subsidiaries are principally engaged in the design,
development, marketing and support of the above family of Siebel eBusiness Applications.
Substantially all of the Company's revenues are derived from a perpetual license of these software
products and the related professional services and customer support (maintenance) services.  The
Company licenses its software in multiple element arrangements in which the customer purchases a
combination of software, maintenance and/or professional services (i.e., training, implementation
services, etc.).  First-year maintenance, which includes technical support and product updates, is
typically sold with the related software license and is renewable at the option of the customer on
an annual basis thereafter.  The Company's Global Services Organization provides professional
services, which include a broad range of implementation services, training and technical support, to
the Company's customers and implementation partners.  The Company's Global Services Organization has
significant product and implementation expertise and is committed to supporting customers and
partners through every phase of the eBusiness transformation cycle.  Substantially all of the
Company's professional service arrangements are on a time and materials basis.  Payment terms for
the above arrangements are negotiated with the Company's customers and determined based on a variety
of factors, including the customer's credit standing and the Company's history with the customer.



Overview of 2001 Results



The Company believes that its financial performance in 2001 was strong,
especially in light of the then-current economic conditions, having improved many of its key
operating metrics and strengthened its financial position compared to 2000.  The Company solidified
its ongoing technological leadership through increased investment in product development and the
release of Siebel 7 in the fourth quarter of 2001.  From a financial perspective, the Company
continued its history of revenue growth and cash positive, profitable operation.  As discussed
further below, the Company was able to achieve strong financial results during challenging economic
times by identifying the impending weakness in the overall economy early in the year and taking
quick, decisive action.  As a result of management's actions in 2001, the Company enters 2002 in a
strong financial and product position.



During 2001 the Company faced significant challenges to its continued growth of
revenues and net income, most significantly from the progressive weakening of the global economy,
particularly that of the United States, throughout the year.  Specifically, according to industry
reports, estimated worldwide spending on information technology remained flat in 2001, compared to
16% growth in 2000.  Economic conditions deteriorated further following the terrorist attacks on the
United States late in the third quarter of 2001 and subsequent hostilities involving the United
States.  The Company's revenue growth and profitability depends on overall global economic and
business conditions, particularly in markets where the Company offers industry-specific versions of
its products.  The majority of the Company's revenues are from major corporate customers in the high
technology, telecommunications, financial services (including insurance), pharmaceutical, utilities
and consumer packaged goods industries.  As a result, the Company's business depends on the economic
and business conditions of these industries.



In early 2001, through the use of the Company's software, management
determined that the Company's customers and potential customers were reducing their capital
expenditure budgets and thus delaying, reducing or canceling information technology investments.
When management identified the slowdown in the economy midway through the first quarter of 2001, the
Company set four broad objectives, which guided management's decisions during 2001: (i) operate a
cash positive, profitable business; (ii) maintain and increase customer satisfaction levels; (iii)
maintain and increase the Company's market share in the various product categories in which it
operates; and (iv) maintain the Company's technology leadership in the customer relationship
management market, including releasing the Company's latest version of its products, Siebel 7.



With these broad objectives as a guide, the Company revised its revenue
forecast and adjusted the Company's operating structure to match its revised revenue projections.
Throughout the year, the Company updated its revenue forecast using its software and then adjusted
its planned operating expenses to maintain a cash positive, profitable business.  Some of the
actions the Company took were as follows:



- The Company assessed the revenue pipeline by industry and determined that
certain industries, such as high technology, financial services and telecommunications, were
beginning to delay, reduce or cancel information technology investments.  As a result of this
analysis, the Company was able to focus its efforts on the transactions within these industries with
the highest probability of success and identify other industries, such as the pharmaceutical
industry, which were showing signs of strengthening.  As a result, the Company was able to limit the
decrease in software license revenues to 4% compared to 2000.
- The Company continued to grow its professional services, maintenance and
other revenues over the prior years by: (i) increasing the number of new customers receiving
maintenance; and (ii) ensuring that the Company maintained high renewal rates of maintenance
agreements from existing customers.  The Company's professional services revenues were impacted by
the downturn in the economy to a lesser extent than software license revenues, as these services
generally lag software license revenues by three to six months.
- The Company implemented cost controls by making virtually all costs variable
with revenue, with the exception of depreciation, amortization and facilities expenditures.
Specifically, management reduced advertising expenditures, reduced chief executive officer
compensation to zero, decreased senior executive compensation by 20%, reduced or eliminated
incentive compensation, deferred merit compensation increases, and reduced other discretionary
expenditures, such as travel and recruiting.
- The Company reduced headcount and closed offices in certain geographic
regions that were not producing adequate revenues per employee. However, as compared to historical
levels the Company retained a higher ratio of employees to revenues, resulting in lower revenue per
employee.  The Company allowed revenue per employee to decrease in order to: (i) maintain its
technological leadership through continued investment in product development, resulting in the
release of Siebel 7 in the fourth quarter; and (ii) prepare for a return to positive software
license growth in 2002.
- The Company enhanced its cost controls by requiring
competitive bids, where appropriate, and by requiring chief executive officer approval for all
significant purchases and all hiring.



As a result of these actions, the Company was able to operate a cash
positive, profitable business in challenging economic times; maintain the Company's customer
satisfaction levels; maintain or increase the Company's market share in the various product
categories in which it operates; and continue its technology leadership in the customer relationship
management market.  In addition, the Company achieved the following financial results:



- Total revenues increased by 14% from $1,795.4 million in 2000 to $2,048.4
million in 2001.  Professional services, maintenance and other revenue increased by 44% from $680.6
million in 2000 to $982.8 million in 2001, and software license revenue decreased by 4% from
$1,114.8 million in 2000 to $1,065.6 million in 2001.
- Quarterly operating expenses decreased during 2001 by 20%, from $481.3
million in the first quarter to $386.8 million in the fourth quarter.
- Operating margins were approximately 18% during 2001 and operating income
remained comparable to levels in 2000, with operating income, excluding merger-related expenses, of
$359.0 million in 2000 compared to operating income of $357.9 million in 2001.
- Net income increased by 15%, from $221.9 million in 2000 to $254.6 million in
2001.
- Cash and short-term investments increased by $504.1 million, or 44%, from
$1,152.6 million as of December 31, 2000, to $1,656.7 million as of December 31, 2001, representing
approximately 53% and 61% of total assets, respectively.  Since December 31, 1999, the Company has
increased cash and short-term investments by $971.5 million, primarily through
operations.
- Cash flows from operations increased by 35%, from $438.6 million in 2000 to
$593.0 million in 2001.
- Days sales outstanding decreased from 81 days as of December 31, 2000, to 72
days as of December 31, 2001.
- Deferred revenue, which consists primarily of deferred maintenance revenue,
increased by 19%, from $202.5 million as of December 31, 2000, to $241.0 million as of December 31,
2001.



As a result of current economic uncertainties and concerns regarding the
accounting practices of publicly traded companies, the Company believes that three specific factors
will become important measures of a company's overall performance and value: (i) positive cash flows
from operations; (ii) positive earnings that are reported in accordance with both the form and the
intent of generally accepted accounting principles; and (iii) a strong balance sheet.  Since
shipment of its first product in the fourth quarter of 1994, the Company's operations have produced
positive cash flows and earnings, both of which have increased in each of the last five years.  The
Company believes that its financial position is strong, with total assets of $2,744.8 million, cash
and short-term investments of $1,656.7 million, working capital of $1,581.4 million, and deferred
revenue of $241.0 million.  The Company's capital structure of $2,136.1 million is simple and
transparent, comprised of convertible debt of $300.0 million and stockholders' equity of $1,836.1
million.



The Company believes that the application of accounting standards are as
important as the reported financial position, results of operations and cash flows.  The Company
believes that its accounting policies are prudent and provide a clear view of the Company's
financial performance.  The Company utilizes its internal audit department to help ensure that it
follows these accounting policies and maintains its internal controls.  The Company reviews its
annual and quarterly results, along with key accounting policies, with its audit committee prior to
the release of financial results.  In order to ensure that the Company provides a clear view of its
financial performance, the Company has avoided some of the accounting practices currently in
question, such as disclosing operating results on a "pro forma" basis that excludes
amortization of intangibles and/or stock-based compensation.  In addition, the Company has not
entered into any significant transactions with related parties.  The Company does not use
off-balance-sheet arrangements with unconsolidated related parties, nor does it use other forms of
off-balance-sheet arrangements such as research and development arrangements.



Use of Estimates and Critical Accounting Policies



The accompanying discussion and analysis of the Company's financial condition
and results of operations are based upon the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States.  The
preparation of these financial statements requires that the Company make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.  On an ongoing basis, the Company evaluates its
estimates, including those related to revenue recognition, provision for doubtful accounts and
returns, fair value of investments, fair value of acquired intangible assets, useful lives of
intangible assets and property and equipment, income taxes, and contingencies and litigation, among
others.  The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources.  Actual results could differ from the estimates made by management with respect
to these and other items that require management's estimates.



In addition to these estimates and assumptions that are utilized in
preparation of historical financial statements, the inability to properly estimate the timing and
amount of future revenues could significantly impact the Company's future operations.  While the
Company's proprietary software allows the Company to track its potential revenues with a high degree
of visibility and aids in its ability to manage the size of its operations, management must make
assumptions and estimates as to the timing and amount of future revenue.  Specifically, the
Company's sales personnel monitor the status of all proposals, such as the date when they estimate
that a transaction will close and the potential dollar amount of such transaction.  The Company
aggregates these estimates periodically in order to generate a sales pipeline and then evaluates the
pipeline at various times to look for trends in the Company's business.  This pipeline analysis and
the related estimates of revenue may not consistently correlate to revenues in a particular
reporting period as the estimates and assumptions made by management were made using the best
available data at the time, but that data is subject to change.  Specifically, the slowdown in the
global economy, along with the recent terrorist attacks, has caused and may continue to cause
customer purchasing decisions to be delayed, reduced in amount or canceled, all of which have
reduced and could continue to reduce the rate of conversion of the pipeline into contracts.  A
variation in the pipeline or in the conversion rate of the pipeline into contracts could cause the
Company to plan or budget improperly and thereby could adversely affect the Company's business,
financial condition or results of operations.  In addition, because a substantial portion of the
Company's license revenue contracts close in the latter part of a quarter, management may not be
able to adjust the Company's cost structure to respond to a variation in the conversion of the
pipeline in a timely manner, and thereby the delays may adversely affect the Company's business,
financial condition or results of operations.



The Company believes that there are several accounting policies that are
critical to understanding the Company's historical and future performance, as these policies affect
the reported amounts of revenue and the more significant areas involving management's judgments and
estimates. These significant accounting policies relate to revenue recognition, the provision for
doubtful accounts, other-than-temporary declines in the market value of investments, impairments of
long-lived assets and the provision for income taxes.  These policies, and the Company's procedures
related to these policies, are described in detail below and under specific areas within the
discussion and analysis of the Company's financial condition and results of operations.   In
addition, please refer to Note 1 to the accompanying financial statements for further discussion of
the Company's accounting policies.



The Company's software arrangements typically include: (i) an end user
license that provides for an initial fee in exchange for a customer's use of the Company's products
in perpetuity based on a specified number of users; (ii) a maintenance arrangement that provides for
technical support and product updates over a period of 12 months; and (iii) a professional service
arrangement on a time and materials basis.



The Company recognizes software revenue using the residual method pursuant to
the requirements of Statement of Position No. 97-2 "Software Revenue Recognition"
("SOP 97-2"), as amended by Statement of Position No. 98-9, "Software Revenue
Recognition with Respect to Certain Arrangements."  Under the residual method, revenue is
recognized when Company-specific objective evidence of fair value exists for all of the undelivered
elements in the arrangement (i.e., professional services and maintenance), but does not exist for
one or more of the delivered elements in the arrangement (i.e., the software product).  The Company
allocates revenue to each undelivered element based on its respective fair value, with the fair
value determined by the price charged when that element is sold separately.  The Company determines
the fair value of the maintenance portion of the arrangement based on the ultimate renewal price of
the maintenance charged to the customer based on full deployment of the licensed software products
and the fair value of the professional services portion of the arrangement based on the hourly rates
that the Company charges for these services when sold independently from a software license.  If
evidence of fair value cannot be established for the undelivered elements of a license agreement,
the entire amount of revenue from the arrangement is deferred and recognized over the period that
these elements are delivered.



A customer typically prepays maintenance for the first 12 months and the
related revenue is deferred and recognized over the term of the initial maintenance contract.



For substantially all of the Company's software arrangements, the Company
defers revenue for the fair value of the maintenance and professional services to be provided to the
customer and recognizes revenue for the software license when persuasive evidence of an arrangement
exists and delivery has occurred, provided the fee is fixed or determinable, and collection is
deemed probable.  The Company evaluates each of these criteria as follows:



- Evidence of an arrangement: The Company considers a non-cancelable agreement
signed by the Company and the customer to be evidence of an arrangement.



- Delivery: Delivery is considered to occur when media containing the licensed
programs is provided to a common carrier or, in the case of electronic delivery, the customer is
given access to the licensed programs.  The Company's typical end user license agreement does not
include customer acceptance provisions.



- Fixed or determinable fee: The Company considers the fee to be fixed or
determinable if the fee is not subject to refund or adjustment.  If the arrangement fee is not fixed
or determinable, the Company recognizes the revenue as amounts become due and payable.



- Collection is deemed probable: The Company conducts a credit review for all
significant transactions at the time of the arrangement to determine the credit worthiness of the
customer.  Collection is deemed probable if the Company expects that the customer will be able to
pay amounts under the arrangement as payments become due.  If the Company determines that collection
is not probable, the Company defers the revenue and recognizes the revenue upon cash
collection.



Please see Note 1 to the accompanying financial statements under
"Revenue Recognition" for a detailed description of the Company's revenue recognition
policies.



Results of Operations

The following table sets forth the consolidated statement of operations data
for each of the years in the three-year period ended December 31, 2001, expressed as a percentage of
total revenues:

`Year Ended December 31,
                                                  -------------------------
                                                   1999     2000     2001
                                                  -------  -------  -------
Revenues:
    Software....................................    62.8 %   62.1 %   52.0 %
    Professional services, maintenance and other    37.2     37.9     48.0
                                                  -------  -------  -------
        Total revenues..........................   100.0    100.0    100.0
                                                  -------  -------  -------
Cost of revenues:
    Software....................................     1.0      1.0      0.5
    Professional services, maintenance and other    21.9     23.7     27.9
                                                  -------  -------  -------
        Total cost of revenues..................    22.9     24.7     28.4
                                                  -------  -------  -------
        Gross margin............................    77.1     75.3     71.6
                                                  -------  -------  -------
Operating expenses:
    Product development.........................    10.0      8.1      9.7
    Sales and marketing.........................    38.2     38.4     35.8
    General and administrative..................     9.1      8.8      8.6
    Merger-related expenses.....................      --      2.0       --
                                                  -------  -------  -------
        Total operating expenses................    57.3     57.3     54.1
                                                  -------  -------  -------
        Operating income........................    19.8     18.0     17.5
Other income, net...............................     1.8      3.4      2.2
                                                  -------  -------  -------
        Income before income taxes..............    21.6     21.4     19.7
Income taxes....................................     8.1      9.1      7.3
                                                  -------  -------  -------
        Net income..............................    13.5 %   12.3 %   12.4 %
                                                  =======  =======  =======`

For Each of the Years Ended December 31, 1999, 2000 and 2001



Revenues

Software.  License
revenues increased by 118% from $510.9 million for the year ended December 31, 1999, to $1,114.8
million for the year ended December 31, 2000, and decreased by 4% to $1,065.6 million for the year
ended December 31, 2001.  The increase in software license revenues from 1999 to 2000 was primarily
due to an increase in the number of licenses of Siebel applications sold to new and existing
customers, along with licenses of new modules, released with the latest version of Siebel
applications, to existing users of Siebel base applications.  The decrease in software license
revenues from 2000 to 2001 was primarily due to the progressive weakening of the global economy
throughout 2001.  This caused many of the Company's customers, especially in industries such as high
technology, telecommunications and financial services, to reduce their capital expenditure budgets,
which in turn led to the Company's customers delaying their purchasing decisions.  Despite the
weaker economic conditions during 2001, the Company's customers have continued to express a strong
interest in the Company's products, thus limiting the decrease in software license revenues.



Software license revenues as a percentage of total revenues were 63% in 1999
and 62% in 2000 as compared to 52% in 2001.  Software license revenues as a percentage of total
revenues decreased from the percentages in 1999 and 2000 primarily due to the growth of the
Company's professional services business to meet the demand for the implementation of the Company's
products and the decrease in the Company's software license revenues as described above.  The
Company's customers have continued to express a strong interest in its products; therefore, the
Company anticipates that the Company's software license revenues will return to positive growth in
the second half of 2002. Accordingly, the Company currently believes that software license revenues,
both in terms of absolute dollars and as a percentage of total revenues, will increase from the
levels achieved in 2001.



The Company markets its products in the United States through its direct
sales force and internationally through its direct sales force and to a limited extent through
distributors, primarily in Europe, Asia Pacific, Japan and Latin America.  International license
revenues accounted for 31%, 40% and 45% of license revenues in 1999, 2000 and 2001, respectively.
The Company expects international software license revenues will continue to account for a
significant portion of total software license revenues in the future.



Professional Services, Maintenance and
Other.Professional services are typically provided over a period of three
to six months subsequent to a software license arrangement.  Professional services, maintenance and
other revenues increased from $302.6 million and $680.6 million for the years ended December 31,
1999 and 2000, respectively, to $982.8 million for the year ended December 31, 2001.  As a
percentage of total revenues, professional services, maintenance and other revenues were 37% in 1999
and 38% in 2000 as compared to 48% in 2001.  The increases in the absolute dollar amount of revenues
in each of the years were primarily due to growth in the Company's installed base of customers
receiving maintenance and the growth of the Company's consulting and training services.  The
increase in professional services, maintenance and other revenues as a percentage of total revenues
was due to the growth in the Company's consulting and training services, the growth in the number of
customers receiving maintenance and the decrease in the Company's software license revenues.



The continued growth of the Company's professional services revenues depends
in large part on the growth of the Company's software license revenues, while the growth of the
Company's maintenance revenues depends on the growth of the Company's software license revenues
coupled with the renewals of maintenance agreements by the Company's existing customer base.
Professional services, maintenance and other revenues increased by 44% over 2000 due to the
significant growth in software license revenues in 2000 and early 2001 and the continued high
renewal rate by the Company's customers of their maintenance agreements.  Professional services and
other revenues declined sequentially each quarter in the second half of 2001 due to sequential
declines in software license revenues in each of the first three quarters of 2001; however,
maintenance revenues continued to increase as a result of the Company's expanding customer base.
The Company expects that professional services, maintenance and other revenues will return to
positive sequential growth by the second half of 2002 due to the return of the growth of software
license revenue in the fourth quarter of 2001 and the anticipated stabilization of the global
economy.  The Company expects to manage this growth to ensure that the Company's professional
services organization does not compete with its implementation partners.  Accordingly, the Company
expects that 2002 professional services, maintenance and other revenues, in terms of absolute
dollars, will remain comparable to the levels obtained during 2001.  With the expected growth of the
Company's software license revenues in 2002, the Company expects professional services, maintenance
and other revenues as a percentage of total revenues to decrease from the levels of 2001.



Cost of Revenues

Software.



Professional Services, Maintenance and
Other.

Operating Expenses

Product Development.Product development
expenses include expenses associated with the development of new products, enhancements of existing
products and quality assurance activities and consist primarily of employee salaries, benefits,
consulting costs and the cost of software development tools.  The Company considers technological
feasibility of its software products to have been reached upon completion of a working model that
has met certain performance criteria.  The period between achievement of technological feasibility
and general release of a software product is typically very short, and development costs incurred
during that period have not been material.  Accordingly, the Company has not capitalized any
software development costs to date.  Product development expenses increased from $81.1 million and
$145.5 million for the years ended December 31, 1999 and 2000, respectively, to $198.6 million for
the year ended December 31, 2001, and as a percentage of total revenues, product development expense
was 10%, 8% and 10% in 1999, 2000 and 2001, respectively.



The increase in product development expense was primarily attributable to
costs of additional personnel in the Company's product development operations, including additional
personnel to support the development and testing of the Company's latest software release, Siebel 7.
Due in part to efficiencies achieved related to the Company's acquisitions (see Notes 10 and 11 to
the consolidated financial statements) and the significant growth of the Company's total revenues in
2000, product development expenses as a percentage of total revenues decreased in 2000 from the
levels in 1999.  Product development as a percentage of total revenues increased during 2001 from
2000 as a result of the Company's increased investment in new product development.  The Company
anticipates that it will continue to devote substantial resources to product development as it
develops new products, new versions of its existing products and additional modules for its existing
products.  Accordingly, the Company expects product development expenses to continue to increase in
absolute dollar amount, but remain comparable to the percentage of total revenues obtained in 2001.



Sales and Marketing.



In response to the weakening global economy, the Company reduced its
expenditures during 2001, thus limiting the increase in sales and marketing expense and resulting in
a decrease in sales and marketing expense as a percentage of total revenues.  These cost controls
included: (i) decreased or eliminated incentive compensation and reduced executive compensation;
(ii) deferral of merit compensation increases; (iii) reduced advertising, travel and other
discretionary expenditures; (iv) reduced headcount in the second half of 2001; and (v) operating
efficiencies obtained from combining the operations of OpenSite, OnLink and Janna with the Company.
While the Company expects to continue to closely monitor discretionary expenditures and to continue
its cost control initiatives, the Company expects that sales and marketing expenses, in terms of
absolute dollars and as a percentage of total revenues, will increase in 2002 compared to 2001.



General and Administrative.General and administrative expenses consist primarily of salaries and occupancy costs for
administrative, executive and finance personnel.  In addition, general and administrative expenses
also include amortization of goodwill and intangibles, along with bad debt expense.  General and
administrative expenses increased from $73.6 million and $158.5 million for the years ended December
31, 1999 and 2000, respectively, to $176.2 million for the year ended December 31, 2001, and as a
percentage of total revenues were 9% in each of the years in the three-year period ended December
31, 2001.  The increases in the absolute dollar amount of general and administrative expenses were
primarily due to increased staffing and associated expenses necessary to manage and support the
Company's increased size of its operations, partially offset by management's cost control
initiatives and reductions in incentive compensation and the provision for doubtful accounts.



For each of the years in the three-year period ended December 31, 2001, the
Company's provision for doubtful accounts in the accompanying consolidated financial statements has
ranged between approximately 1% and 2% of total revenues.  The Company initially records its
provision for doubtful accounts based on its historical experience of write-offs and then adjusts
this provision at the end of each reporting period based on a detailed assessment of its accounts
receivable and allowance for doubtful accounts.  In estimating the provision for doubtful accounts,
management considers the age of the accounts receivable, the Company's historical write-offs, the
credit worthiness of the customer, the economic conditions of the customer's industry, and general
economic conditions, among other factors.  Should any of these factors change, the estimates made by
management will also change, which could impact the level of the Company's future provision for
doubtful accounts.  Specifically, if the financial condition of the Company's customers were to
deteriorate, affecting their ability to make payments, additional provision for doubtful accounts
may be required.



As more fully described below under "Recent Accounting Standards,"
new accounting pronouncements were issued in July 2001 that eliminate the requirement that the
Company amortize its goodwill as of January 1, 2002.  However, identifiable intangible assets will
continue to be amortized.  The Company expects that the elimination of goodwill amortization will
result in a reduction in general and administrative expense of approximately $20.0 million during
2002 compared to 2001.  However, this decrease will be partially offset by increases of other
general and administrative expenses as a result of the continued expansion of the Company's
administrative staff and facilities to support growing operations.  As a result of the elimination
of the requirement to amortize goodwill, the Company currently anticipates that general and
administrative expenses, in terms of absolute dollars and as a percentage of total revenues, will
decrease from the levels experienced in 2001.



Merger-Related Expenses.  The
Company did not incur any significant merger-related costs during 1999 or 2001.  During 2000, the
Company expensed an aggregate of $36.5 million of direct merger-related expenses, of which $10.0
million related to OpenSite, $9.0 million related to OnLink and $17.5 million related to Janna.
These costs primarily consisted of investment banker fees; compensation expense associated with the
acceleration of stock options in accordance with their existing terms; integration charges related
to duplicate facilities and equipment; legal, accounting and other professional fees; and other
miscellaneous expenses.  As of December 31, 2001, the Company had $0.6 million of merger-related
costs remaining to be paid and has reflected the remaining liability in accrued liabilities.  The
remaining liabilities consist primarily of legal and lease termination fees.  The Company expects to
settle the remaining liabilities in 2002.



In addition to reviewing assets obtained through acquisition for impairment,
the Company evaluates all of its long-lived assets, including intangible assets, for impairment
whenever events or changes in circumstances indicate that the carrying value of an asset may not be
recoverable based on expected undiscounted cash flows attributable to that asset.  Should events
indicate that any of the Company's assets are impaired, the amount of such impairment will be
measured as the difference between the carrying value and the fair value of the impaired asset and
recorded in earnings during the period of such impairment.



Operating Income and Operating Margin

Operating income increased from $161.2 million for the year ended
December 31, 1999, and $322.5 million for the year ended December 31, 2000, to $357.9 million for
the year ended December 31, 2001, and operating margin was 20% in 1999 as compared to 18% in both
2000 and 2001.  Excluding merger-related expenses, operating income was $161.2 million and $359.0
million for the years ended December 31, 1999 and 2000, respectively, compared to $357.9 million for
the year ended December 31, 2001, and operating margin was 20% in both 1999 and 2000, as compared to
18% in 2001.  Operating margins, excluding merger-related expenses, decreased in 2001 primarily due
to: (i) the decrease in software license revenues on a year-over-year basis as a result of the
weakening global economy and the recent terrorist attacks upon the United States; (ii) the increase
as a percentage of total revenues of professional services, maintenance and other revenues, which
are at lower margins than software license revenues; and (iii) the increase in the Company's
investment in product development to support the release of Siebel 7.  Management's cost control
initiatives and efficiencies obtained from integrating OpenSite, OnLink and Janna partially offset
these factors that contributed to the decline in operating margins.



Other Income, Net

For 1999, 2000 and 2001, other income, net was comprised of the following
(in thousands):

`1999       2000       2001
                                                      ---------  ---------  ---------

Interest income..................................... $  18,086  $  56,766  $  67,332
Interest expense....................................    (6,100)   (17,909)   (18,326)
Losses from equity method investee (Sales.com)......        --     (7,481)        --
Charitable contributions............................    (6,000)   (30,705)    (1,404)
Net gains on investments and
  marketable equity securities......................    12,343     60,901      3,399
Write-down of cost-method investments to fair value.        --         --     (3,073)
Other, net..........................................    (3,239)       303     (1,726)
                                                      ---------  ---------  ---------
                                                     $  15,090  $  61,875  $  46,202
                                                      =========  =========  =========`

Interest income represents earnings on the Company's cash, cash equivalents
and short-term investments and has continued to increase due to the increased balances of cash, cash
equivalents and short-term investments, partially offset by a decline in interest rates.  Interest
expense for all periods presented primarily represents interest on the Company's $300.0 million of
convertible subordinated debentures issued in September 1999.  In December 1999, the Company sold a
controlling interest in Sales.com and therefore accounted for this investment under the equity
method during 2000.  In January 2001, the Company reacquired the outstanding interest in Sales.com
and, accordingly, the Company consolidated the activities of Sales.com subsequent to its
acquisition.



Net gains on investments and marketable equity securities were primarily the
result of gains from sales of the Company's short-term investments during 1999 and gains from sales
of the Company's investment in USinternetworking, Inc. during 2000.  During 2001, net gains on
investments and marketable equity securities resulted primarily from sales of certain short-term
investments, partially offset by a net write-down of $2.4 million of one of the Company's marketable
equity securities to fair value, as the decline was determined to be other-than-temporary.  During
2001 the Company also wrote down certain investments accounted for under the cost method to fair
value as the decline in these investments was deemed to be other-than-temporary.  Total
other-than-temporary impairments were $5.5 million for the year ended December
31, 2001.  There were no other-than-temporary impairments during the years ended December 31, 1999
and 2000.



The Company holds several minority interests, included in
other assets, in companies having operations or technology in areas within its strategic focus.  The
Company records an investment impairment charge when it determines an investment has experienced a
decline in value that is other-than-temporary.  In order to make this determination,
the Company reviews the carrying value of its short-term investments and
marketable equity securities, along with investments accounted for under the cost method, at the end
of each reporting period to determine if any investments are impaired.  This review includes an
evaluation of historical and projected financial performance, expected cash needs and recent funding
events.  Other-than-temporary impairments are recognized in earnings if the market value of the
investment is below its current carrying value for an extended period or the issuer has experienced
significant financial declines or difficulties in raising capital to continue operations.Future adverse changes in market conditions or poor operating results of
underlying investments could result in an inability to recover the carrying value of the
investments, thereby possibly requiring an impairment charge in the future.



Charitable contributions during 1999 were to various charitable
organizations, while 2000 contributions were primarily comprised of the Company's contribution of a
portion of the investment in USinternetworking, Inc. to various educational foundations.  Charitable
contributions during 2001 primarily relate to cash contributions made to charities assisting with
the September 11, 2001 disaster relief efforts.  Other, net for all periods presented is primarily
comprised of banking fees and foreign currency transaction gains or losses.



Provision for Income Taxes



Income taxes totaled $66.3 million, $162.5 million and $149.5 million for
the years ended December 31, 1999, 2000 and 2001, respectively.  Income taxes as a percentage of
pretax income decreased from 38% and 42% in 1999 and 2000, respectively, to 37% in 2001.  The
Company's effective tax rate for 2000 was higher than the rates in 1999 and 2001 primarily due to
non-deductible items related to acquisitions.  The Company anticipates that its effective tax rate
will continue to decrease as the Company anticipates deriving a higher percentage of its taxable
income from more favorable tax jurisdictions in 2002.  The Company currently expects its effective
tax rate to be approximately 36% in 2002.



As of December 31, 2001, the Company's valuation
allowance on its deferred tax assets pertains to certain tax credits and net operating loss
carryforwards resulting from the exercise of certain employee stock options.  The valuation
allowance will be reduced in the period in which the Company realizes a benefit on its tax return
from a reduction of income taxes payable from the utilization of these credits and losses.  When
realized, the tax benefit of these credits and losses will be accounted for as a credit to
shareholders' equity rather than as a reduction of income tax expense.  While the Company has
considered future taxable income and the existence of prudent and feasible tax planning strategies
in assessing the need for an additional valuation allowance on its remaining deferred tax assets, in
the event the Company were to determine that it would not be able to realize all or part of its net
deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to
income in the period such determination was made.



Net Income and Net Income Available to Common Stockholders

The Company had net income of $110.0 million, $221.9 million and $254.6
million for the years ended December 31, 1999, 2000 and 2001, respectively.  Net income available to
common stockholders was $56.9 million, $123.1 million and $254.6 million for the years ended
December 31, 1999, 2000 and 2001, respectively.  Diluted net income available per common share was
$0.12, $0.24 and $0.49 in 1999, 2000 and 2001, respectively.  For the years ended December 31, 1999
and 2000, net income has been reduced by accretion on OpenSite's mandatorily redeemable convertible
preferred stock to determine net income available to common stockholders.  The accounting for
OpenSite's mandatorily redeemable convertible preferred stock required non-cash accretion to the
then-current fair value of the common stock into which the mandatorily redeemable convertible
preferred stock was convertible.  This resulted in a non-cash charge to accretion and offsetting
credit to mandatorily redeemable convertible preferred stock.  The amount of accretion for an income
statement period was dependent upon how much the fair value of OpenSite's common stock fluctuated
during that period.  In connection with the Company's acquisition of OpenSite, the mandatorily
redeemable convertible preferred stock was converted into shares of OpenSite's common stock,
pursuant to their existing terms, on a one-for-one basis.  Accordingly, the Company ceased recording
accretion on the mandatorily redeemable convertible preferred stock on May 17, 2000.

Adoption of Accounting Standards



On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133").  There was not a cumulative transition adjustment upon adoption.  SFAS 133
establishes accounting and reporting standards for derivative instruments and hedging activities.
SFAS 133 requires that all derivatives be recognized as either assets or liabilities at fair value.
Derivatives or portions of derivatives that are not designated as hedging instruments are adjusted
to fair value through earnings and are recognized in the period of change in their fair value.  The
Company does not believe that the application of SFAS 133 will significantly alter the Company's
hedging strategies.  However, its application may increase the volatility of other income and
expense and other comprehensive income.



On July 1, 2001, the Company adopted certain provisions of SFAS No. 141
"Business Combinations" ("SFAS 141") and SFAS No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142"), as permitted.  There was not a cumulative transition
adjustment upon adoption of these provisions.  As further described under "Recent Accounting
Standards" in Note 1 to the accompanying consolidated financial statements, SFAS 141 and 142
prescribe new accounting guidance for business combinations and acquired intangible assets,
including goodwill.  SFAS 141 is effective for all purchase business combinations completed after
June 30, 2001, and for all business combinations "initiated" after June 30, 2001, as
defined.  For goodwill and intangible assets acquired in business combinations completed after June
30, 2001, the Company follows the amortization and impairment provisions of SFAS 142.



Recent Accounting Standards



As described above, the Financial Accounting Standards Board ("FASB")
issued SFAS 141 and SFAS 142 in July 2001 and the Company adopted all permitted provisions of these
pronouncements as of July 1, 2001.   The Company adopted the remaining provisions of SFAS 141 and
SFAS 142 as of January 1, 2002.  In accordance with SFAS 142, the Company will perform an evaluation
of the Company's identifiable intangible assets and goodwill as of January 1, 2002, to reassess the
lives of identifiable intangible assets and to determine whether any of the Company's goodwill is
impaired.  If the Company determines that a portion of the goodwill is impaired as of the date of
adoption, the impairment will be recorded as a "cumulative effect of a change in accounting
principle" on January 1, 2002.  Upon full adoption of SFAS 142, the Company will no longer
amortize goodwill related to acquisitions completed prior to July 1, 2001, and, accordingly, the
Company will not incur any future amortization expense related to goodwill.  Goodwill will be
subject to periodic tests for impairment in accordance with SFAS 142.  Goodwill amortization expense
totaled approximately $20.0 million during the year ended December 31, 2001.



In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"), which is effective for fiscal years
beginning after December 15, 2001.  SFAS 144 supersedes certain provisions of APB Opinion No. 30
"Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" and
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."  The Company does not expect the adoption of SFAS 144 to have a
material effect on its consolidated financial position, results of operations or cash flows.



In December 2001, the FASB staff issued Topic No. D-103 "Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred"
("Topic D-103"), which is effective for fiscal years beginning after December 15, 2001.
Topic D-103 requires that certain out-of-pocket expenses rebilled to customers be recorded as
revenue versus an offset to the related expense.  Comparative financial statements for prior periods
must be conformed to this presentation.  The Company currently records rebilled out-of-pocket
expenses as an offset to the related expense and, accordingly, effective January 1, 2002, the
Company will change its presentation to reflect rebilled expenses as revenue and conform the
presentation for prior periods.  This change will have no effect on operating income or
net income for any period presented.

Liquidity and Capital Resources

The Company derives its liquidity and capital resources primarily from
the Company's cash flows from operations and from working capital, which was $1,581.4 million as of
December 31, 2001.  The Company's cash, cash equivalents and short-term investments increased from
$1,152.6 million as of December 31, 2000, to $1,656.7 million as of December 31, 2001, representing
approximately 53% and 61% of total assets, respectively.  The Company's days sales outstanding in
accounts receivable was 81 days as of December 31, 2000, compared with 72 days as of December 31,
2001.  The Company's liquidity could be negatively impacted by a decrease in demand for the
Company's products, which are subject to rapid technological changes, or a reduction of capital
expenditures by the Company's customers as a result of a downturn in the global economy, among other
factors.  The Company does not have any off-balance-sheet arrangements with unconsolidated entities
or related parties and, accordingly, the Company's liquidity and capital resources are not subject
to off-balance-sheet risks from unconsolidated entities.



As of December 31, 2001, the Company's future fixed commitments for cash
payments primarily related to obligations under non-cancelable operating leases and the Company's
convertible subordinated debentures.  The Company leases facilities under non-cancelable operating
leases expiring between 2002 and 2022.  Future minimum lease payments under operating leases as of
December 31, 2001, consisted of $110.9 million due within one year, $471.4 million due between one
and five years and $1,315.1 million due after five years.  In addition, as of December 31, 2001, the
Company had $300.0 million of convertible subordinated debentures outstanding.  These debentures
mature on September 15, 2006; bear interest at a rate of 5.50%; and are convertible at the option of
the holder into 12.9 million shares of the Company's common stock at any time prior to maturity, at
a conversion price of $23.32 per share, subject to adjustment under certain conditions.  The Company
may redeem the notes, in whole or in part, at any time on or after September 15, 2002.  The
redemption price will range from $309.4 million to $302.4 million if the notes are redeemed between
September 15, 2002, and September 14, 2006.  Any redemption made on or after September 15, 2006,
will be at $300.0 million.  The Company will pay accrued interest to the redemption date.



Cash provided by operating activities was $89.7 million, $438.6 million and
$593.0 million for 1999, 2000 and 2001, respectively.  The Company's cash provided from operations
in each of the years in the three-year period ended December 31, 2001, was primarily derived from
the Company's earnings prior to non-cash expenses such as depreciation, amortization and bad debt.
Also contributing to cash flows from operations is the tax benefit related to the exercise of
employee stock options, which reduces the Company's cash outlay for income tax expense, and changes
in the Company's working capital. The Company's cash provided by operating activities has continued
to increase each year primarily as the result of the increases in revenues and operating income.



Cash used in investing activities was $90.5 million, $384.3 million and
$699.4 million for 1999, 2000 and 2001, respectively.  During each of the years in the three-year
period ended December 31, 2001, the Company's investment activities primarily related to the
purchase of additional property and equipment and the reinvestment of the Company's cash into
short-term investments.  For 1999, 2000 and 2001, the Company reinvested its cash flows from operations
into short-term investments in net amounts of $35.5 million, $197.8 million and $445.0 million,
respectively, and had net purchases of property and equipment, including leasehold improvements, of
$32.3 million, $162.2 million and $251.3 million, respectively.  The Company's investing activities
in each of the years in the three-year period ended December 31, 2001, also included purchases of
non-operating assets and acquired businesses, partially offset by proceeds from the sale of
marketable equity securities and changes in advances to an affiliate.  These net expenditures were
$22.8 million, $24.3 million and $3.1 million during 1999, 2000 and 2001, respectively.



During 2001, the Company increased its capital expenditures primarily as a
result of: (i) expansion of the Company's infrastructure to support the development and testing of
Siebel 7; (ii) purchases of tenant improvements and furniture and fixtures for leased space as
certain facilities were converted from month-to-month leases of full-serviced office suites; and
(iii) purchases of tenant improvements and furniture and fixtures for new leased facilities.  This
transition to leased space has involved build-out of tenant improvements, acquisition of furniture
and fixtures and other capital costs, which were not incurred in connection with the use of fully
serviced office suites.  The Company may purchase land and buildings in the future to meet its
facilities' needs.



Cash provided by financing activities was $396.5 million, $208.9 million and
$157.4 million for 1999, 2000 and 2001, respectively.  For 1999, 2000 and 2001, the Company's
financing activities consisted primarily of net proceeds of $76.2 million,
$189.2 million and $156.2 million, respectively, from the issuance of common stock pursuant to the
exercise of stock options and the Company's employee stock purchase plan.  During 1999, the
Company also received net proceeds of $291.3 million from the issuance of the subordinated
convertible debentures, offset by net repayments of debt of $2.1 million and subchapter S
distributions by OnTarget of $2.1 million prior to its acquisition.  The Company's remaining
financing activities during 1999 and 2000 consisted of proceeds from the issuance of preferred stock
by OpenSite and OnLink prior to their acquisition in the amounts of $33.1 million and $20.0 million,
respectively.



While the Company believes that the anticipated cash flows from operations,
along with cash, cash equivalents and short-term investments, will be adequate to meet its cash
needs for daily operations and capital expenditures for at least the next 12 months, the Company may
elect to raise additional capital through a public offering in the future, depending upon market
conditions.

Risk Factors



In addition to the risks discussed in "Business" or
"Management's Discussion of Financial Condition and Results of Operations," our business
is subject to the risks set forth below.



Our total revenue and operating results may fluctuate.

We may experience a shortfall in revenue or earnings or otherwise fail to
meet public market expectations, which could materially and adversely affect our business and the
market price of our common stock.  Our total revenue and operating results may fluctuate
significantly because of a number of factors, many of which are outside of our control.  These
factors include:

- Changes in the domestic and international economic and business conditions
and foreign currency exchange rates;
- Level of product and price competition;
- Length of our sales cycle and customer licensing patterns;
- Size and timing of individual license transactions;
- Delay or deferral of customer implementations of our products;
- Success in expanding our Global Services Organization, direct sales force and
indirect distribution channels;
- Timing of new product introductions and product enhancements;
- Appropriate mix of products licensed and services sold;
- Levels of international transactions;
- Activities of and acquisitions by competitors;
- Timing of new hires and the allocation of our resources;
- Increases in the cost of software and professional services; and
- Our ability to develop and market new products and control
costs.

One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our net revenue and operating results
to fluctuate significantly.  Based upon the preceding factors, we may experience a shortfall in
revenue or earnings or otherwise fail to meet public market expectations, which could materially and
adversely affect our business, financial condition, results of operations and the market price of
our common stock.

Our quarterly operating results may fluctuate.

Our total revenue and operating results may vary drastically from quarter
to quarter.  The main factors that may affect these fluctuations are:

- Domestic and international economic and business conditions;
- The discretionary nature of our customers' purchase and budget
cycles;
- The size and complexity of our license transactions;
- The potential delays in recognizing revenue from license
transactions;
- The timing of new product releases;
- Seasonal variations in operating results; and
- Variations in the fiscal or quarterly cycles of our customers.

Each customer's decision to implement our products and services is discretionary,
involves a significant commitment of resources and is subject to its budget cycles.  In addition,
the timing of license revenue is difficult to predict because of the length of our sales cycle,
which has ranged to date from one to twenty-four months.  We base our operating expenses on
anticipated revenue trends.  Because a high percentage of these expenses are relatively fixed, a
delay in recognizing revenue from license transactions could cause significant variations in
operating results from quarter to quarter and could result in operating losses.  If these expenses
precede, or are not subsequently followed by, increased revenues, our business, financial condition
or results of operations could be materially and adversely affected.

As a result of these and other factors, revenues for any quarter are subject to
significant variation, and we believe that period-to-period comparisons of our results of operations
are not necessarily meaningful.  You should not rely on these comparisons as indications of future
performance.  Our future quarterly operating results from time to time may not meet the expectations
of market analysts or investors, which would likely have an adverse effect on the price of our
common stock.



Economic conditions could adversely affect our revenue growth and ability to
forecast revenue.

The revenue growth and profitability of our business depends on the overall
demand for eBusiness applications software and services, particularly within the industries that we
offer specific versions of our products.  Because our sales are primarily to major corporate
customers in the high technology, telecommunications, financial services (including insurance),
pharmaceutical, utilities and consumer packaged goods industries, our business depends on the
overall economic conditions and the economic and business conditions within these industries.  The
general weakening of the global economy and the weakening of the business conditions within the
above industries has caused a decrease in our software license revenues in 2001.  A softening of
demand for computer software caused by a continued weakening of the economy, domestically or
internationally, may result in a continued decrease in revenues and growth rates.  In addition, the
financial, political, economic and other uncertainties following the recent terrorist attacks upon
the United States have led to a further weakening of the global economy.  Subsequent terrorist acts
and/or the threat of future outbreak or continued escalation of hostilities involving the United
States or other countries could adversely affect the growth rate of the Company's software license
revenue and have an adverse effect on our business, financial condition or results of operations.



Our revenue pipeline estimates may not consistently correlate to actual revenues
in a particular quarter or over a longer period of time.  A slowdown in the economy, domestically
and internationally, has caused and may continue to cause customer purchasing decisions to be
delayed, reduced in amount or canceled, all of which have reduced and could continue to reduce the
rate of conversion of the pipeline into contracts.  A variation in the pipeline or in the conversion
of the pipeline into contracts could cause us to plan or budget improperly and thereby could
adversely affect our business, financial condition or results of operations.  In addition, primarily
due to a substantial portion of our license revenue contracts closing in the latter part of a
quarter, management may not be able to adjust our cost structure in response to a variation in the
conversion of the pipeline into contracts in a timely manner, thereby adversely affecting our
business, financial condition or results of operations.

We need to successfully integrate acquisitions and manage growth.

Our business strategy includes pursuing opportunities to grow our
business, both internally and through selective acquisitions, investments, joint ventures and
strategic alliances.  Our ability to implement this strategy depends, in part, on our success in
making such acquisitions, investments, joint ventures and strategic alliances on satisfactory terms
and successfully integrating them into our operations.  Implementation of our growth strategy may
impose significant strains on our management, operating systems and financial resources.  Failure to
manage this growth, or unexpected difficulties encountered during expansion, could have an adverse
effect on our business, financial condition or results of operations.

We rely on strategic relationships with systems integrators, distributors,
resellers and technology vendors.

Failure to maintain existing strategic relationships with systems
integrators, distributors, resellers and technology vendors, or to establish new relationships in
the future, could have a material adverse effect on our business.  We have established strategic
relationships with a number of organizations that we believe are important to our sales, marketing
and support activities and the implementation of our products.  We believe that our relationships
with these organizations provide marketing and sales opportunities for our direct sales force and
expand the distribution of our products.  These relationships allow us to keep pace with the
technological and marketing developments of major software vendors and provide us with technical
assistance for our product development efforts.

In particular, we have established non-exclusive strategic relationships with
Accenture, Cap Gemini Ernst & Young, Deloitte Consulting, IBM Global Services, and
PricewaterhouseCoopers, among others.  A significant portion of our revenues has historically been
derived from customers that have engaged systems integrators with which we have a relationship.  Any
deterioration of our relationship with these significant third-party systems integrators could have
a material adverse effect on our business, financial condition or results of operations.  We also
have relationships with technology vendors such as IBM Corporation; Compaq Computer Corporation;
Microsoft Corporation; and Sun Microsystems, Inc., among others.  Failure to maintain existing
relationships on terms equally favorable to us, or to establish new relationships in the future,
could have a material adverse effect on our business, financial condition or results of
operations.

Our current and potential customers may also rely on third-party systems
integrators to develop, deploy or manage Siebel eBusiness Applications.  If we do not
adequately train a sufficient number of systems integrators, or if these integrators do not have, or
do not devote, the resources necessary to implement our products, our business, financial condition
or results of operations could be materially and adversely affected.



We may not be able to compete effectively in the Internet-related products and
services market.

Siebel eBusiness Applications communicate through public and
private networks over the Internet.  The success of our products may depend, in part, on our ability
to continue developing products that are compatible with the Internet.  We cannot predict with any
assurance whether the demand for Internet-related products and services will increase or decrease in
the future.  The increased commercial use of the Internet could require substantial modification and
customization of our products and the introduction of new products.

Critical issues concerning the commercial use of the Internet, including
security, privacy, demand, reliability, cost, ease of use, accessibility, quality of service and
potential tax or other government regulation, remain unresolved and may affect the use of the
Internet as a medium to support the functionality of our products and distribution of our software.
If these critical issues are not favorably resolved, our business, financial condition or results of
operations could be materially and adversely affected.

We operate in a competitive and rapidly changing market.

If the Web-based applications market fails to grow or grows more slowly
than we currently anticipate, our business, operating results and financial condition could be
materially and adversely affected.  The market for Web-based applications software is relatively
new, highly competitive and rapidly changing.  We market our products only to customers who have
migrated or are in the process of migrating their enterprise computing systems to Web-based
computing environments.  Our future financial performance will partly depend on the continued growth
of organizations successfully adopting Web-based computing environments.

Our customers may not successfully implement our products.

If existing customers have difficulty deploying Siebel eBusiness
Applications or for any other reason are not satisfied with Siebel eBusiness Applications,
our business, operating results and financial condition could be materially and adversely affected.
Many of our customers purchase and implement our products in phases.  Our customers frequently
deploy our products to large numbers of sales, marketing and customer service personnel.  These end
users may not accept our products.  Our products are also being deployed on a variety of computer
hardware platforms and used with a number of third-party software applications and programming
tools.  This use may present significant technical challenges, particularly as large numbers of
personnel attempt to use our products concurrently.

A limited number of products provide

A substantial majority of our license revenues are attributable to sales
of Siebel Sales, Siebel Service, Siebel Call Center, Siebel Interactive Selling and related
products.  In addition, we offer industry-specific versions of these products.  We expect that these
products and related consulting, maintenance and training services will continue to account for a
majority of our future revenues.  Our success depends in part on our ability to market and maintain
the industry-specific versions of our products.  Factors adversely affecting the cost and pricing
of, or demand for, these products, such as competition or technological change, could have a
material adverse effect on our business, financial condition or results of operations.

The length of time required to engage a client and to implement our
products may be lengthy and unpredictable.

The timing of the sales and implementation of our products and services
is lengthy and not predictable with any degree of accuracy.  Prior sales and implementation cycles
should not be relied upon as any indication of future cycles.

The license of our software products is often an enterprise-wide decision by
prospective customers and generally requires us to provide a significant level of education to
prospective customers regarding the use and benefits of our products.  In addition, the
implementation of our products involves a significant commitment of resources by prospective
customers and is commonly associated with reengineering efforts that may be performed by the
customer or third-party systems integrators.  The cost to the customer of our product is typically
only a portion of the related hardware, software, development, training and integration costs of
implementing a large-scale eBusiness software system.  For these and other reasons, the period
between initial contact and the implementation of our products is often lengthy and is subject to a
number of factors that may cause significant delays, over many of which we have little or no
control.  These factors include the size and complexity of the overall project and delays in our
customers' implementation of Web-based computing environments.  A delay in the sale or
implementation of even a limited number of license transactions could have a material adverse effect
on our business, financial condition or results of operations and cause our operating results to
vary significantly from quarter to quarter.



Our success will require us to manage the size of our employee base, particularly
our direct sales force and global support staff.

The majority of our expenses are personnel-related costs such as employee
compensation and benefits, along with the cost of the infrastructure (occupancy and equipment) to
support our employee base.  The failure to adjust our employee base, particularly our direct sales
force and technical and global services staff, to the appropriate level to support our revenues
could materially and adversely affect our business, operating results and financial condition.  In
addition, expansion of the distribution of our products may place new and increased demands on our
direct sales force and technical and sales support staff.  Although we currently invest sufficient
resources in our direct sales force and our technical and global services staff, there are only a
limited number of qualified personnel in these areas.  Our ability to achieve expanded distribution
and revenue growth in the future will depend, in part, on our success in recruiting and training
sufficient direct sales, technical and global services personnel.  We may not be able to expand our
direct sales force and technical support staff as necessary to support our growing operations.

Our expanding distribution channels may create additional risks.

Failure to minimize channel conflicts could materially and adversely
affect our business, operating results and financial condition.  We have a number of relationships
with resellers, which assist us in obtaining broad market coverage.  We have generally avoided
exclusive relationships with resellers of our products.  Discount policies and reseller licensing
programs are intended to support each distribution channel with a minimum level of channel
conflicts.

Our revenue is concentrated in a relatively small number of customers.

Our success depends on gaining new customers and maintaining
relationships with our existing customers.  From quarter to quarter, a relatively small number of
customers generally account for a significant percentage of our revenues.  We expect that licenses
of our products to a limited number of customers will continue to account for a significant
percentage of revenue in an individual quarter for the foreseeable future; however, because the top
ten customers vary from quarter to quarter, we anticipate that license revenues from the top ten
customers for an entire fiscal year will be less significant.  For 2001, license revenues from our
ten largest customers accounted for approximately 23% of total software license revenues.  The
failure to successfully market our products to new customers or to new industries, or the loss of a
small number of customers or any reduction or delay in orders by any such customer, could have a
material adverse effect on our business, financial condition or results of operations.

Our continued success will require us to keep pace with technological
developments, evolving industry standards and changing customer needs.

The software market in which we compete is characterized by: (i) rapid
technological change; (ii) frequent introductions of new products; (iii) changing customer needs;
and (iv) evolving industry standards.  To keep pace with technological developments, evolving
industry standards and changing customer needs, we must support existing products and develop new
products (e.g., Siebel 7, which was released in the fourth quarter of 2001).  We may not be
successful in developing, marketing and releasing new products or new versions of Siebel
eBusiness Applications that respond to technological developments, evolving industry
standards or changing customer requirements.  We may also experience difficulties that could delay
or prevent the successful development, introduction and sale of these enhancements.  In addition,
these enhancements may not adequately meet the requirements of the marketplace and may not achieve
any significant degree of market acceptance.  If release dates of any future products or
enhancements to Siebel eBusiness Applications are delayed, or if these products or
enhancements fail to achieve market acceptance when released, our business, operating results and
financial condition could be materially and adversely affected.  In addition, new products or
enhancements by our competitors may cause customers to defer or forego purchases of our products,
which could have a material adverse effect on our business, financial condition or results of
operations.

To be successful, we must effectively compete in the eBusiness systems
market.

Our products target the eBusiness systems market.  This market is highly
competitive, rapidly changing and significantly affected by new product introductions and other
market activities of industry participants.  Our products are targeted at the emerging market for
customer, partner and employee relationship information systems.  We face competition primarily from
our customers' internal information technology departments and systems integrators, as well as from
other application software providers that offer a variety of products and services designed to
address this market.  We believe that most customer deployments have been the result of large
internal development projects, custom solutions from systems integrators or the application of
personal and departmental productivity tools to the global enterprise.  We may not be able to
compete successfully against such internal development efforts.

We frequently rely on a number of systems consulting and systems integration
firms for a substantial portion of implementation and other global services, as well as for
recommendations of our products during the evaluation stage of the purchase process.  Although we
seek to maintain close relationships with these service providers, many of them have similar and
often more established relationships with our competitors.  If we are unable to develop and retain
effective, long-term relationships with these third parties, our competitive position could be
materially and adversely affected.  Further, many of these third parties have significantly greater
resources than we do and may market software products that compete with us and may otherwise reduce
or discontinue their relationships with or support of us and our products.

A large number of personal, departmental and other products exist in the
eBusiness applications market. Companies such as Amdocs Limited; Chordiant Software, Inc.; Dendrite
International, Inc.; E.piphany, Inc.; FrontRange Solutions, Inc.; Interact Commerce Corporation;
Kana Software, Inc.; ONYX Software Corporation; Oracle Corporation; PeopleSoft, Inc.; Pivotal
Corporation; Salesforce.com, Inc.; and SAP AG are among the many firms in this market segment.  Some
of these competitors have longer operating histories; significantly greater financial, technical,
marketing and other resources; significantly greater name recognition; and a larger installed base
of customers than we do.  In addition, many competitors have well-established relationships with our
current and potential customers.  As a result, these competitors may be able to respond more quickly
to new or emerging technologies and changes in customer requirements or to devote greater resources
to the development, promotion and sale of their products than we can.

There are many factors that may increase competition in the eBusiness systems
market, including: (i) entry of new competitors; (ii) alliances among existing competitors; (iii)
consolidation in the software industry; and (iv) technological changes or changes in the use of the
Internet.  Increased competition may result in price reductions, reduced gross margins or loss of
market share, any of which could materially and adversely affect our business, operating results and
financial condition.  We cannot assure you that we will be able to compete successfully against
current and future competitors or that competitive pressures faced by us will not materially and
adversely affect our business, financial condition or results of operations.

If we do not maintain our relationships with third-party vendors,
interruptions in the supply of our products may result.

We may not be able to replace the functionality provided by the third-party
software currently offered with our products if that software becomes obsolete or incompatible
with future versions of our products or is not adequately maintained or updated.  Portions of our
products incorporate software that was developed and is maintained by third-party software
developers.  Although we believe there are other sources for these products, any significant
interruption in the supply of these products could adversely impact our sales unless and until we
can secure another source.  We depend in part on these third parties' abilities to enhance their
current products, to develop new products on a timely and cost-effective basis and to respond to
emerging industry standards and other technological changes.  The absence of or any significant
delay in the replacement of functionality provided by third-party software in our products could
materially and adversely affect our sales.

Software errors or defects in our products could reduce revenues.

Software products frequently contain errors or failures, especially when
first introduced or when new versions are released, and could be affected by viruses.  We have, in
the past, been forced to delay the commercial release of products until the correction of software
problems.  We could lose revenues as a result of software viruses, errors or defects, including
defects in third-party products with which our products work.  Our products are intended for use in
applications that may be critical to a customer's business.  As a result, we expect that our
customers and potential customers will have a greater sensitivity to product defects than the market
for software products generally.  Testing errors may also be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in market acceptance,
damage to our reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon our business, financial condition or results of operations.

If we do not successfully manage our growth, our business may be negatively
impacted.

If we fail to manage our growth effectively, our business, financial
condition or results of operations could be materially and adversely affected.  Our business has
grown rapidly in recent years.  This growth has placed a significant strain on our management
systems and resources.  In addition, this growth may require us to implement new systems or upgrade
current systems, and the failure to successfully implement such new or improved systems could
materially and adversely affect our business.  To manage future growth, we must continue to: (i)
implement and improve our financial, operational and management controls; reporting systems; and
procedures on a timely basis; and (ii) expand, train and manage our employee work force.



Integration of personnel and operations relating to our previous or future
acquisitions may disrupt our business and management.

We acquired two companies within the past year, nQuire Software, Inc. and
Sales.com, Inc., and may not be able to successfully assimilate the additional personnel,
operations, acquired technology and products into our business.  In particular, we will need to
assimilate and retain key professional services, sales, engineering and marketing personnel.  Key
personnel from the acquired companies have in certain instances decided, and they may in the future
decide, to pursue other opportunities.  In addition, it may be necessary to integrate products of
these companies with our technology, and it is uncertain whether we may accomplish this easily or at
all.  These integration difficulties could disrupt our ongoing business, distract management and
employees or increase expenses.  Acquisitions are inherently risky, and we may also face unexpected
costs, which may adversely affect operating results in any quarter.

Due to these and other factors, we may not meet expectations of securities
analysts or investors with respect to revenues or other operating results of the combined company,
which could adversely affect our stock price.

If we acquire additional companies, products or technologies, we may face
risks similar to those faced in our other acquisitions.

We may continue to make other investments in complementary companies,
products or technologies.  We may not realize the anticipated benefits of any other acquisition or
investment.  If we acquire another company, we will likely face the same risks, uncertainties and
disruptions as discussed above with respect to our other acquisitions.  In addition, our
profitability may suffer because of acquisition-related costs or amortization costs for acquired
intangible assets.

Rising energy costs and power system shortages in California may result in
increased operating expenses and reduced net income and harm to our operations due to power
loss.

In 2001, the western United States (and California in particular)
experienced significant power shortages, and such shortages may continue or worsen in the near
future.  As a result, energy costs in California, including natural gas and electricity, may rise
significantly relative to the rest of the United States.  Because our principal operating facilities
are located in California, our operating expenses may increase significantly if this shortage
recurs.  In addition, certain of our operations or facilities may be subject to "rolling
blackouts" or other unscheduled interruptions of electrical power.  A sustained or frequent
power failure could disrupt our operations and the operations of our third-party service providers,
which would limit our ability to provide our products and services to our customers, harming our
customer relationships and having an adverse effect on our business, financial condition or results
of operations.

The loss of key personnel could negatively affect our performance.

Our performance depends on the continued service of our key
technical, sales and senior management personnel, particularly Thomas M. Siebel, our Chairman and
Chief Executive Officer.  None of our key employees has entered into an employment agreement with
us.  The loss of the services of one or more of our executive officers could have a material adverse
effect on our business, operating results and financial condition.  On May 24, 2001, we announced
the appointment of William R. McDermott as our Executive Vice President, Worldwide Sales Operations.
He replaced Thomas E. Hogan, who resigned in March of 2001.  To integrate into our company, new
senior personnel must spend a significant amount of time learning our business model and management
system, in addition to performing their regular duties.  Accordingly, until these individuals have
become familiar with our business model and systems, their integration may result in some disruption
to our ongoing operations.



Catastrophic events could negatively affect our
information technology infrastructure.

The efficient operation of our business, and ultimately our operating
performance, depends on the uninterrupted use of our critical business and information technology
systems.  Many of these systems require the use of specialized hardware and other equipment that is
not readily available.  A significant portion of these critical business and information technology
systems are concentrated at or near the same location.  In the event of a natural disaster, a fire
or other catastrophic event, such as the recent terrorist attacks upon the United States, at these
locations that results in the destruction of these systems, the replacement of these systems and
restoration of the archived data and normal operation of our business could take several days to
several weeks.  During the intervening period when our critical business and information technology
systems are inoperable, our ability to conduct normal business operations could be significantly and
adversely impacted and as a result our business, financial condition or results of operations could
be adversely affected.



Leverage and debt service obligations may adversely affect our cash flow.

As of December 31, 2001, we have $300.0 million of convertible
subordinated notes outstanding, bearing interest at 5.50% and due September 15, 2006 (see Note 3 to
the consolidated financial statements).  While our current cash and short-term investments are
sufficient to pay our current outstanding indebtedness, we cannot assure you that any future
financing arrangements will be available, or if available, on terms acceptable to us.  Our current
or future leverage could have negative consequences, including:

- Increasing our vulnerability to general adverse economic and industry
conditions;
- Limiting our ability to obtain additional financing;
- Requiring the dedication of a substantial portion of our expected cash flow
from operations to service our indebtedness, thereby reducing the amount of our expected cash flow
available for other purposes, including capital expenditures;
- Limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- Placing us at a competitive disadvantage compared to less leveraged
competitors and competitors that have better access to capital resources.

We may not be able to protect our proprietary information.

We rely primarily on a combination of patent, copyright, trade secret and
trademark laws; confidentiality procedures; and contractual provisions to protect our proprietary
rights.  We also believe that the technological and creative skills of our personnel, new product
developments, frequent product enhancements, name recognition and reliable product maintenance are
essential to establishing and maintaining a technology leadership position.  We seek to protect our
software, documentation and other written materials under patent, trade secret and copyright laws,
which afford only limited protection.  Any patents issued to us may be invalidated, circumvented or
challenged.  Any of our pending or future patent applications, whether or not being currently
challenged, may not be issued with the scope of the claims we seek, if at all.  Furthermore, others
may develop technologies that are similar or superior to our technology or design around our
patents.

Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we regard as
proprietary.  Policing unauthorized use of our products is difficult.  In addition, the laws of some
foreign countries do not protect our proprietary rights as fully as do the laws of the United
States.  Our means of protecting our proprietary rights in the United States or abroad may not be
adequate.  We have entered into agreements with substantially all of our customers that require us
to place Siebel eBusiness Applications source code into escrow.  Such agreements generally
provide that such parties will have a limited, non-exclusive right to use such code if: (i) there is
a bankruptcy proceeding by or against us; (ii) we cease to do business; or (iii) we fail to meet our
support obligations.

Although we do not believe that we are infringing any proprietary rights of
others, third parties may claim that we have infringed their intellectual property rights.
Furthermore, former employers of our former, current or future employees may assert claims that such
employees have improperly disclosed to us the confidential or proprietary information of such former
employers.  Any such claims, with or without merit, could: (i) be time consuming to defend; (ii)
result in costly litigation; (iii) divert management's attention and resources; (iv) cause product
shipment delays; and (v) require us to pay monetary damages or enter into royalty or licensing
agreements.  A successful claim of product infringement against us and our failure or inability to
license or create a workaround for such infringed or similar technology may materially and adversely
affect our business, financial condition or results of operations.

We license certain software from third parties.  These third-party software
licenses may not continue to be available to us on acceptable terms.  The loss of, or inability to
maintain, any of these software licenses could result in shipment delays or reductions.  This could
materially and adversely affect our business, financial condition or results of operations.

Our international operations involve unique risks.

Our revenues are primarily derived from large multinational companies.
To service the needs of these companies, we must provide worldwide product support services.  We
have expanded and intend to continue expanding our international operations and enter additional
international markets.  This will require significant management attention and financial resources
that could adversely affect our operating margins and earnings.  We may not be able to maintain or
increase international market demand for Siebel eBusiness Applications.  If we do not, our
international sales will be limited and our business, financial condition or results of operations
could be materially and adversely affected.

Our international operations are subject to a variety of risks, including: (i)
foreign currency fluctuations; (ii) economic or political instability; (iii) shipping delays; and
(iv) various trade restrictions.  Any of these risks could have a significant impact on our ability
to deliver products on a competitive and timely basis.  Significant increases in the level of
customs duties, export quotas or other trade restrictions could also have an adverse effect on our
business, financial condition or results of operations.  In situations where direct sales or
purchases are denominated in foreign currency, any fluctuation in the exchange rate may adversely
affect our business, financial condition or results of operations.  We manage our foreign currency
exchange rate risk by entering into contracts to sell or purchase foreign currency at the time a
foreign currency receivable or payable is generated.  When the foreign currency asset or liability
is extinguished, the contract is liquidated, and the resulting gain or loss on the contract
mitigates the exchange rate risk of the associated asset or liability.  In certain instances, we
have not hedged foreign currency receivables and payables when the forward contracts in the relevant
currency were not readily available or were not cost effective.

Some of our stockholders may be able to exercise control over matters
requiring stockholder approval.

Our current officers, directors and entities affiliated with us together
beneficially owned a significant portion of the outstanding shares of common stock as of December
31, 2001.  While these stockholders do not hold a majority of our outstanding common stock, they
will be able to exercise significant influence over matters requiring stockholder approval,
including the election of directors and the approval of mergers, consolidations and sales of our
assets.  This may prevent or discourage tender offers for our common stock.

Our stock price may continue to be volatile.

Our stock price has fluctuated substantially since our initial public
offering in June 1996.  The trading price of our common stock is subject to significant fluctuations
in response to variations in quarterly operating results; the gain or loss of significant orders;
changes in earning estimates by analysts; announcements of technological innovations or new products
by us or our competitors; changes in the domestic and international economic, political and business
conditions; general conditions in the software and computer industries; and other events or factors.
In addition, the stock market in general has experienced extreme price and volume fluctuations that
have affected the market price for many companies in industries similar or related to ours and that
have been unrelated to the operating performance of these companies.  These market fluctuations have
adversely affected and may continue to adversely affect the market price of our common stock.

Provisions in our charter documents may prevent certain corporate
actions.

Our Board of Directors is authorized to issue up to 2,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further approval by our stockholders.  One of
these shares has been designated Series A-1 Preferred Stock, which was issued in connection with the
acquisition of Janna Systems Inc.  Please see Note 10 to the consolidated financial statements for a
more detailed description of this transaction.  Preferred stock could be issued with voting,
liquidation, dividend and other rights superior to those of the common stock.  The rights of the
holders of common stock will be subject to and may be adversely affected by the rights of the
holders of any preferred stock that may be issued in the future.  The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire a majority of our outstanding
voting stock.  We have a classified Board of Directors.  This and certain other provisions of our
certificate of incorporation and certain provisions of our bylaws and of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The tables below provide information about our derivative financial
instruments and financial instruments that are subject to market risk.  The first table includes our
foreign currency contracts used to minimize the impact of changes in currency rates on existing
foreign currency receivables, payables and intercompany balances, which are subject to exchange rate
risk.  The second table includes our available-for-sale short-term investments, which are subject to
interest rate risk.

We manage our foreign currency exchange rate risk by entering into contracts
to sell or buy foreign currency at the time a foreign currency receivable or payable is generated.
When the foreign currency asset or liability is extinguished, the contract is liquidated, and the
resulting gain or loss on the contract mitigates the exchange rate risk of the associated asset or
liability.

The following summarizes as of December 31, 2001, our foreign currency
forward contracts, by currency.  All of our foreign currency forward contracts mature within a year.
Contract amounts are representative of the expected payments to be made under these instruments (in
thousands):

`Contract                  Fair Value at
                                          Amount       Contract    December 31,
                                      (Local Currency)  Amount      2001 (US$)
                                      ---------------  ---------   ------------
Australian dollars ("AUD") (contracts
  to pay AUD/receive US$)............     (AUD) 8,014   US$4,170  $         98

British pounds ("GBP") (contracts to
  pay GBP/receive EUR)...............     (GBP) 1,586  EUR 2,058  $       (487)

Canadian dollars ("CAD") (contracts
  to pay CAD/receive US$)............     (CAD) 9,389   US$6,057  $        171

Japanese yen ("YEN") (contracts to
  pay Yen/receive US$)............... (YEN) 1,993,297  US$16,032  $        864

Mexican peso ("MXN") (contracts
  to pay MXN/receive US$)............    (MXN) 18,410   US$1,984  $        (29)

Singapore dollars ("SGD") (contracts
  to pay SGD/receive US$)............       (SGD) 994     US$561  $         25

Euro ("EUR") (contracts to receive
  EUR/pay US$).......................    (EUR) 92,621  US$82,507  $       (612)

Swedish krona ("SEK") (contracts to
  receive SEK/pay EUR)...............    (SEK) 12,470  EUR 1,318  $         --

Swiss Franc ("CHF") (contracts to
  receive CHF/pay EUR)...............     (CHF) 6,212  EUR 4,210  $        (21)`

The following summarizes our short-term investments and the weighted average
yields, as of December 31, 2001 (in thousands):

`Expected maturity date
                         ---------------------------------------------------------------
                                                                        There-
                           2002     2003     2004     2005      2006    after    Total
                         -------- -------- -------- --------- -------- -------- --------
US Treasury and Agency
  securities............ $ 88,819  $116,967  $21,698   $14,430  $ 2,747     --  $244,661
Wtd. Avg. Yld...........     2.37%     3.19%    3.35%     4.14%    4.33%

Corporate bonds......... $147,991  $108,069  $76,867   $47,766  $38,481     --  $419,174
Wtd. Avg. Yld...........     2.56%     3.31%    4.08%     5.01%    5.14%

Asset-backed securities. $ 12,316  $ 84,744  $69,791   $16,132  $10,747     --  $193,730
Wtd. Avg. Yld...........     2.41%     4.02%    4.21%     4.78%    5.12%`

As of December 31, 2001, we had an investment portfolio
of fixed income securities, excluding those classified as cash and cash equivalents, of $857.6
million.  These securities, like all fixed income instruments, are subject to interest rate risk and
will fall in value if market interest rates increase.  If market interest rates were to increase
immediately and uniformly by 100 basis points from levels as of December 31, 2001, the fair value of
the portfolio would decline by approximately $14.1 million.



We manage our interest rate risk by maintaining an investment portfolio with
debt instruments of high credit quality and relatively short average maturities.  We also manage
interest rate risk by maintaining sufficient cash and cash equivalent balances such that we are
typically able to hold our investments to maturity.



We are exposed to equity price risks on marketable equity securities.  These
investments are in publicly traded companies in the high technology industry sector.  We typically
do not attempt to reduce or eliminate our market exposure on these securities.  A 10% adverse change
in the equity price would result in an approximate $0.8 million decrease in the fair value of our
marketable equity securities as of December 31, 2001.



The fair value of our convertible subordinated debenture fluctuates based
upon changes in the price of our common stock,changes in interest rates and changes in our credit worthiness.  The fair market value of the
convertible subordinated debenture as of December 31, 2001, was $421.2 million.

Item 8.  Financial Statements and Supplementary Data

Our consolidated financial statements, together with related notes and
the report of KPMG LLP, our independent auditors, are set forth on the pages indicated in Item
14.

Item 9.  Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

Not applicable.



PART III



Certain information required by Part III is omitted from this annual
report as we will file a definitive Proxy Statement for our 2002 Annual Meeting of Stockholders,
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, not later than 120
days after the end of the fiscal year covered by this Report, and certain information included in
the Proxy Statement is incorporated herein by reference.

Item 10.  Directors and Executive Officers of the Registrant

(a)	Executive Officers

The executive officers of the Company as of February 1, 2002, and their ages as of such
date, are as follows:

|Name
Thomas M. Siebel
Patricia A. House
Paul Wahl
R. David Schmaier
William R. McDermott
Kenneth A. Goldman
Bruce Cleveland
Mark D. Hanson
Karen M. Riley
David C. Schwartz | Age
49
47
49
38
40
52
43
41
48
37 | Position
Chairman and Chief Executive Officer
Vice Chairman, Co-Founder and Vice President, Strategic Planning
President and Chief Operating Officer
Executive Vice President
Executive Vice President, Worldwide Sales Operations
Senior Vice President, Finance and Administration and Chief Financial Officer
Senior Vice President, Marketing
Senior Vice President, Corporate Development
Senior Vice President, Global Services
Senior Vice President, Engineering
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Thomas M. Siebel has served as the Company's Chairman and Chief
Executive Officer since its inception in July 1993.



Patricia A. House has been with the Company since its inception in
July 1993 and has served as the Company's Vice Chairman, Co-Founder and Vice President, Strategic
Planning since January 2001.  From February 1996 to January 2001, she served as the Company's
Co-Founder and Executive Vice President and from July 1993 to February 1996 as Co-Founder and Senior
Vice President, Marketing.



Paul Wahlhas served as President and Chief Operating Officer of the
Company since April 1999.  From November 1998 to April 1999, he served as Chief Executive Officer
and President of TriStrata, an Internet security company.  From January 1996 to September 1998, Mr.
Wahl served as Chief Executive Officer of SAP America, Inc. and was an Executive Board Member of SAP
AG, a software company.  From June 1991 to December 1995, Mr. Wahl served as Executive Vice
President of SAP AG.



R. David Schmaier has served as Executive Vice President since January
2001 and served as Senior Vice President, Products from 1998 to January 2001.  Mr. Schmaier joined
the Company in 1994 as Vice President, Product Marketing.



William R. McDermott has served as the Company's Executive Vice
President, Worldwide Sales Operations since May 2001.  From April 2000 to May 2001, Mr. McDermott
served as President of Gartner, Inc., where he led Gartner's worldwide sales and client service
organizations, along with Gartner's research, consulting, measurement, software, executive programs,
events, and interactive businesses.  From August 1983 to April 2000, Mr. McDermott held several
sales, marketing, and executive management positions at Xerox Corporation, the most recent of which
he served as Division President and Corporate Officer.  While at Xerox Corporation, Mr. McDermott
served on the Board of Directors for two of Xerox's subsidiaries, and he currently sits on the Board
of Directors of the Welfare To Work Partnership, a Washington-based organization that promotes
career opportunities for former welfare recipients.



Kenneth A. Goldman has served as the Company's Senior Vice President,
Finance and Administration and Chief Financial Officer since August 2000.  From July 1996 to July
2000, Mr. Goldman served as Senior Vice President of Finance and Chief Financial Officer of
Excite@Home, Inc.  From 1992 to 1996, Mr. Goldman served as Senior Vice President of Finance and
Chief Financial Officer of Sybase, Inc.  Mr. Goldman is an advisory council member of the Financial
Accounting Standards Board and serves on the Board of Directors of Legato Systems, Inc. and Hyperion
Solutions Corporation.



Bruce Cleveland has served as the Company's Senior Vice President,
Marketing since January 2001.  From 1996 to January 2001 Mr. Cleveland served as the Company's Vice
President, Marketing and Vice President, Alliances.  Mr. Cleveland has served in a variety of
marketing and technical management positions in the high technology industry, including positions at
AT&T, Oracle and Apple Computer.



Mark D. Hanson has served as the Company's Senior Vice President,
Corporate Development since January 2001.  From December 1998 to January 2001, Mr. Hanson served as
the Company's Vice President, Corporate Development.  From 1984 to March 1998, Mr. Hanson served in
a variety of senior management positions in the high-tech industry, including positions at Visigenic
Software, Inc.; Sybase, Inc.; Macromedia, Inc.; and Informix Software.



Karen M. Rileyhas served as Senior Vice President, Global Services since July 2000 and served as Vice
President, Global Services from May 1999 to June 2000.  From 1979 to April 1999, Ms. Riley served in
a variety of software development, product management and services executive positions at IBM.  Ms.
Riley's last position at IBM was the General Manager of Global CRM and Business Process
Outsourcing.



David C. Schwartz has served as the Company's Senior Vice President,
Engineering since June 2000.  From 1994 to June 2000, Mr. Schwartz served in a variety of
engineering positions within the Company.  From 1986 to 1994, Mr. Schwartz served in a variety of
software development, product management and services management positions for Oracle Corporation.

Our current officers, directors and entities affiliated with us together
beneficially owned a significant portion of the outstanding shares of our common stock as of
December 31, 2001.  While these stockholders do not hold a majority of our outstanding common stock,
they will be able to exercise significant influence over matters requiring stockholder approval,
including the election of directors and the approval of mergers, consolidations and sales of our
assets.  This may prevent or discourage tender offers for our common stock.



(b) 	Directors



The information required by this Item is incorporated by reference to the
section entitled "Election of Directors" in the Proxy Statement.



Item 11.  Executive Compensation

The information required by this Item is incorporated by reference to the
section entitled "Executive Compensation" in the Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the
section entitled "Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement.

Item 13.  Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.



PART IV

Item 14.  Exhibits, Financial Statements and Reports on Form 8-K

(a) The following documents are filed as part of this Report:

1. 	Financial Statements



|                                                  | Page
|------------------------------------------------- | ----
|Independent Auditors' Report                      | 36  
|Consolidated Financial Statements:                |     
|Balance Sheets                                    | 37  
|Statements of Operations and Comprehensive Income | 38  
|Statements of Stockholders' Equity                | 39  
|Statements of Cash Flows                          | 40  
|Notes to Consolidated Financial Statements        | 41  

2. 	Financial Statement Schedule



|Schedule II - Valuation and Qualifying Accounts | 61
|----------------------------------------------- | --

3. 	Exhibits



|Exhibit Number | Description of Document                                                                                                                                                                          
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            | Agreement and Plan of Merger and Reorganization, dated March 1, 1998, among the Registrant,
Syracuse Acquisition Sub, Inc. and Scopus Technology, Inc. (1)                                       
|2.2            | Agreement and Plan of Merger and Reorganization dated November 17, 1999, among the
Registrant, SE Acquisition Corp. and OnTarget, Inc. (2)                                                       
|2.3            | Agreement and Plan of Merger and Reorganization dated April 5, 2000, among the Registrant,
OS Acquisition Corp., OpenSite Technologies, Inc. and Alan Taetle as Stockholders' Agent. (3)         
|2.4            | Agreement and Plan of Merger and Reorganization dated August 3, 2000, among the Registrant,
Ocelot Acquisition Corp., OnLink Technologies, Inc. and Cornell P. French as Stockholders' Agent. (4)
|2.5            | Arrangement Agreement dated September 11, 2000 among the Registrant, certain indirectly
wholly owned subsidiaries of the Registrant, and Janna Systems Inc. (5)                                  
|3.1            | Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. (6)                                                                                                     
|3.2            | Bylaws of the Registrant. (7)                                                                                                                                                                    
|4.1            | Reference is made to Exhibit 3.1 and Exhibit 3.2.                                                                                                                                                
|4.2            | Specimen Stock Certificate. (7)                                                                                                                                                                  
|4.3            | Restated Investor Rights Agreement, dated December 1, 1995, between the Registrant and certain
investors, as amended April 30, 1996 and June 14, 1996. (7)                                       
|4.4            | Certificate of Designation of Series A1 Preferred Stock of the Registrant. (5)                                                                                                                   
|10.1           | Registrant's 1996 Equity Incentive Plan, as amended. (8)                                                                                                                                         
|10.2           | Registrant's Employee Stock Purchase Plan, as amended. (9)                                                                                                                                       
|10.3           | Form of Indemnity Agreement entered into between the Registrant and its officers and directors. (7)                                                                                              
|10.4           | Registrant's Deferred Compensation Plan, dated January 10, 1997. (10)                                                                                                                            
|10.5           | Master Alliance Agreement, dated March 17, 1995, between the Registrant and
Andersen Consulting LLP. (7)(11)                                                                                     
|10.6           | Assignment Agreement, dated September 20, 1995, by and between the Registrant
and Thomas M. Siebel. (7)                                                                                          
|10.7           | Lease Agreement, dated June 4, 1996, by and between the Registrant and Crossroad Associates
and Clocktower Associates. (7)                                                                       
|10.8           | Lease Agreement, dated March 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (12)                                                                                 
|10.8.1         | First Amendment to Lease  dated June 11, 1999 and Second Amendment to Lease dated
July 31, 1999. (13)                                                                                            
|10.9           | Lease Agreement, dated March 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (12)                                                                                 
|10.9.1         | First Amendment to Lease  dated June 11, 1999 and Second Amendment to Lease dated
July 31, 1999. (13)                                                                                            
|10.10          | Lease Agreement, dated June 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (12)                                                                                  
|10.10.1        | First Amendment to Lease  dated September 23, 2000. (13)                                                                                                                                         
|10.11          | Lease Agreement, dated August 24, 1994, by and between the Registrant and Watergate Tower
Associates. (12)                                                                                       
|10.12          | Lease Agreement, dated August 16, 1999, by and between the Registrant and Spieker
Properties, L.P. (12)                                                                                          
|10.13          | Lease Amendment 10, dated April 8, 1999, by and between the Registrant and Spieker
Properties, L.P. (12)                                                                                         
|10.14          | Lease Amendment 11, dated August 13, 1999, by and between the Registrant and Spieker
Properties, L.P. (12)                                                                                       
|10.15          | Lease Amendment 12, dated October 28, 1999, by and between the Registrant and Spieker
Properties, L.P. (12)                                                                                      
|10.16          | Registrant's 1998 Equity Incentive Plan, as amended. (14)                                                                                                                                        
|21.1           | Subsidiaries of the Registrant. (15)                                                                                                                                                             
|23.1           | Independent Auditors' Report and Consent. (15)                                                                                                                                                   

__________________



(1)	Incorporated by reference to Exhibit 99.1 of the Registrant's Current
Report on Form 8-K filed on March 16, 1998.
                   (2) 	Incorporated by reference the Registrant's Current Report on Form 8-K filed
on January 7, 2000.
                   (3) 	Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on June 1, 2000.
                   (4) 	Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on October 10, 2000.
                   (5) 	Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on November 27, 2000.
                   (6) 	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001.
                   (7) 	Incorporated by reference to the Registrant's Registration Statement on Form
S-1 (No. 333-03751), as amended.
                   (8) 	Incorporated by reference to the Registrant's Definitive Proxy Statement on
Schedule 14A filed on September 17, 1999.
                   (9) 	Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (No. 333-07983), as amended.
                   (10) 	Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
                   (11) 	Confidential treatment has been granted with respect to portions of this
exhibit.
                   (12) 	Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1999.
                   (13) 	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000.
                   (14) 	Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (No. 333-72218), as amended.
                   (15) 	Filed herewith.









(b) Reports on Form 8-K



None.

---



INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
                   Siebel Systems, Inc.:



We have audited the accompanying consolidated balance sheets of Siebel
Systems, Inc. and subsidiaries (the "Company") as of December 31, 2000 and 2001, and the
related consolidated statements of operations and comprehensive income, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31, 2001.  These
consolidated financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial statements based on our
audits.



We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Siebel Systems, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.



/s/ KPMG LLP

Mountain View, California
                   January 21, 2002

---

SIEBEL SYSTEMS, INC.

                Consolidated Balance Sheets
         (in thousands, except per share data)

`December 31,
                                                                --------------------------
                                                                    2000          2001
                                                                ------------  ------------

                            Assets                                                        

Current assets:
   Cash and cash equivalents.................................. $    751,384  $    799,090
   Short-term investments.....................................      401,200       857,565
   Marketable equity securities...............................       14,285         8,254
   Accounts receivable, net...................................      521,358       386,569
   Deferred income taxes......................................       61,825        58,131
   Prepaids and other.........................................       92,825        80,494
                                                                ------------  ------------
          Total current assets................................    1,842,877     2,190,103

Property and equipment, net...................................      189,610       353,242
Goodwill, net.................................................       42,809        72,869
Intangible assets, net........................................        2,008        19,000
Other assets..................................................       52,729        56,905
Deferred income taxes.........................................       31,708        52,725
                                                                ------------  ------------
          Total assets........................................ $  2,161,741  $  2,744,844
                                                                ============  ============

             Liabilities and Stockholders' Equity                                         

Current liabilities:
   Accounts payable........................................... $     24,113  $     14,395
   Accrued expenses...........................................      355,159       353,330
   Deferred revenue...........................................      202,523       241,017
                                                                ------------  ------------
          Total current liabilities...........................      581,795       608,742

Convertible subordinated debentures...........................      300,000       300,000
                                                                ------------  ------------
          Total liabilities...................................      881,795       908,742
                                                                ------------  ------------

Commitments and contingencies

Stockholders' equity:
  Common stock; $0.001 par value; 800,000 and 2,000,000 shares
    authorized, respectively; 442,392 and 466,950 shares
    issued and outstanding, respectively......................          442           467
  Additional paid-in capital..................................    1,062,599     1,357,422
  Notes receivable from stockholders..........................       (1,623)         (422)
  Deferred compensation.......................................      (15,199)       (8,362)
  Accumulated other comprehensive income......................        7,479         6,174
  Retained earnings...........................................      226,248       480,823
                                                                ------------  ------------
          Total stockholders' equity..........................    1,279,946     1,836,102
                                                                ------------  ------------
          Total liabilities and stockholders' equity.......... $  2,161,741  $  2,744,844
                                                                ============  ============`

See accompanying notes to consolidated financial statements.

---

SIEBEL SYSTEMS, INC.

       Consolidated Statements of Operations and Comprehensive Income
               (in thousands, except per share data)

`Year Ended December 31,
                                                            ----------------------------------
                                                               1999        2000        2001
                                                            ----------  ----------  ----------
Revenues:
    Software.............................................. $  510,874  $1,114,753  $1,065,618
    Professional services, maintenance and other..........    302,587     680,631     982,783
                                                            ----------  ----------  ----------
        Total revenues....................................    813,461   1,795,384   2,048,401
                                                            ----------  ----------  ----------
Cost of revenues:
    Software..............................................      8,150      17,311       9,895
    Professional services, maintenance and other..........    178,113     426,458     570,899
                                                            ----------  ----------  ----------
        Total cost of revenues............................    186,263     443,769     580,794
                                                            ----------  ----------  ----------
        Gross margin......................................    627,198   1,351,615   1,467,607
                                                            ----------  ----------  ----------
Operating expenses:
    Product development...................................     81,053     145,514     198,629
    Sales and marketing...................................    311,337     688,612     734,908
    General and administrative............................     73,621     158,450     176,188
    Merger-related expenses...............................         --      36,504          --
                                                            ----------  ----------  ----------
        Total operating expenses..........................    466,011   1,029,080   1,109,725
                                                            ----------  ----------  ----------
        Operating income..................................    161,187     322,535     357,882
Other income, net.........................................     15,090      61,875      46,202
                                                            ----------  ----------  ----------
        Income before income taxes........................    176,277     384,410     404,084
Income taxes..............................................     66,252     162,511     149,509
                                                            ----------  ----------  ----------
        Net income........................................    110,025     221,899     254,575
Accretion of preferred stock..............................    (53,164)    (98,755)         --
                                                            ----------  ----------  ----------
        Net income available to common stockholders....... $   56,861  $  123,144  $  254,575
                                                            ==========  ==========  ==========

Diluted net income per common share....................... $     0.12  $     0.24  $     0.49
                                                            ==========  ==========  ==========
Basic net income per common share......................... $     0.15  $     0.29  $     0.56
                                                            ==========  ==========  ==========

Shares used in diluted share computation..................    467,907     522,321     522,970
                                                            ==========  ==========  ==========
Shares used in basic share computation....................    387,867     423,067     457,031
                                                            ==========  ==========  ==========
Comprehensive income:
      Net income.......................................... $  110,025  $  221,899  $  254,575
Other comprehensive income (loss), net of tax:
    Foreign currency translation adjustments..............      1,365       1,836      (3,238)
    Realized (gain) loss previously recognized
      in other comprehensive income.......................    (12,343)    (60,901)     (3,399)
    Unrealized gains (loss) on investments................     96,009     (17,444)      5,332
                                                            ----------  ----------  ----------
      Other comprehensive income (loss)...................     85,031     (76,509)     (1,305)
                                                            ----------  ----------  ----------
      Total comprehensive income.......................... $  195,056  $  145,390  $  253,270
                                                            ==========  ==========  ==========`

See accompanying notes to consolidated financial statements.

---

SIEBEL SYSTEMS, INC.

                Consolidated Statements of Stockholders' Equity

                                (in thousands)

`Notes                     Accumulated
                                                                 Preferred Stock     Common Stock      Additional   Receivable                     Other                    Total
                                                               ----------------- --------------------   Paid-in       from         Deferred    Comprehensive  Retained  Stockholders'
                                                                Shares   Amount   Shares     Amount     Capital    Stockholders  Compensation  Income (Loss)  Earnings     Equity
                                                               --------  ------- ---------  ---------  ----------  -----------   -----------    -----------  ---------  ------------
Balances, December 31, 1998...................................   1,786 $      2   375,227  $     375  $  252,355  $      (488)  $      (456)   $    (1,043)  $  48,323  $   299,068
Issuance of common stock under Employee Stock Option Plans....      --       --    21,505         22      59,341          (60)           --             --          --       59,303
Issuance of common stock under Employee Stock Purchase Plans..      --       --     1,666          2      15,735           --            --             --          --       15,737
Issuance of common stock, other...............................      --       --       448         --       4,202           --            --             --          --        4,202
Repurchase of common stock....................................      --       --      (569)        --      (2,822)          --            --             --          --       (2,822)
Termination of put provision of redeemable common
  stock warrants..............................................      --       --        --         --         323           --            --             --          --          323
Issuance of Series A and B convertible preferred stock........   1,033        1        --         --      10,661           --            --             --          --       10,662
Issuance of warrants in connection with license agreement.....      --       --        --         --           4           --            --             --          --            4
Tax benefit from stock options................................      --       --        --         --      91,679           --            --             --          --       91,679
Deferred compensation related to stock options................      --       --        --         --       4,274           --        (4,274)            --          --           --
Amortization of deferred compensation related to
  stock options...............................................      --       --        --         --          --           --         1,180             --          --        1,180
Change in net unrealized gain on short-term investments, net
  of taxes of $51,279.........................................      --       --        --         --          --           --            --         83,666          --       83,666
Currency translation adjustment, net of taxes
  of $837.....................................................      --       --        --         --          --           --            --          1,365          --        1,365
Subchapter S distributions by OnTarget........................      --       --        --         --          --           --            --             --      (2,080)      (2,080)
Conversion of convertible notes to common stock...............      --       --     1,290          1       6,918           --            --             --          --        6,919
Issuance of common stock related to acquisitions..............      --       --     3,212          3      18,600           --            --             --          --       18,603
Accretion of mandatorily redeemable convertible
  preferred stock.............................................      --       --        --         --          --           --            --             --     (53,164)     (53,164)
Net income....................................................      --       --        --         --          --           --            --             --     110,025      110,025
                                                               --------  ------- ---------  ---------  ----------  -----------   -----------    -----------  ---------  ------------
Balances, December 31, 1999...................................   2,819        3   402,779        403     461,270         (548)       (3,550)        83,988     103,104      644,670
Issuance of common stock under Employee Stock Option Plans....      --       --    29,498         29     147,382       (1,153)           --             --          --      146,258
Issuance of common stock under Employee Stock Purchase Plans..      --       --       885          1      40,088           --            --             --          --       40,089
Issuance of common stock, other...............................      --       --       379         --       2,842           --            --             --          --        2,842
Issuance of common stock for services rendered................      --       --        35         --       1,921           --            --             --          --        1,921
Repurchase of common stock which was subject
  to vesting..................................................      --       --       (24)        --         (16)          --            --             --          --          (16)
Issuance of Series C convertible preferred stock..............     697        1        --         --      19,974           --            --             --          --       19,975
Issuance of warrants in connection with license agreement.....      --       --        --         --       1,176           --            --             --          --        1,176
Tax benefit from stock options................................      --       --        --         --     185,613           --            --             --          --      185,613
Deferred compensation related to stock options................      --       --        --         --      24,307           --       (24,307)            --          --           --
Forfeiture of stock options issued below
  fair value..................................................      --       --        --         --      (1,167)          --         1,167             --          --           --
Amortization of deferred compensation related to
  stock options...............................................      --       --        --         --          --           --        11,491             --          --       11,491
Change in net unrealized gain on short-term investments, net
  of taxes of ($47,938).......................................      --       --        --         --          --           --            --        (78,345)         --      (78,345)
Currency translation adjustment, net of taxes
  of $1,125...................................................      --       --        --         --          --           --            --          1,836          --        1,836
Repayments of stockholder notes...............................      --       --        --         --          --           78            --             --          --           78
Conversion of mandatorily redeemable convertible
  preferred stock.............................................      --       --     5,324          5     179,209           --            --             --          --      179,214
Conversion of Series A, Series B, and Series C
  convertible preferred stock.................................  (3,516)      (4)    3,516          4          --           --            --             --          --           --
Accretion of mandatorily redeemable convertible
  preferred stock.............................................      --       --        --         --          --           --            --             --     (98,755)     (98,755)
Net income....................................................      --       --        --         --          --           --            --             --     221,899      221,899
                                                               --------  ------- ---------  ---------  ----------  -----------   -----------    -----------  ---------  ------------
Balances, December 31, 2000...................................      --       --   442,392        442   1,062,599       (1,623)      (15,199)         7,479     226,248    1,279,946
Issuance of common stock under Employee Stock Option Plans....      --       --    20,597         21     108,089           --            --             --          --      108,110
Issuance of common stock under Employee Stock Purchase Plans..      --       --     1,470          1      48,282           --            --             --          --       48,283
Repurchase of common stock which was subject to vesting.......      --       --      (143)        --        (237)          --            --             --          --         (237)
Tax benefit from stock options................................      --       --        --         --      53,800           --            --             --          --       53,800
Forfeiture of stock options issued below fair value...........      --       --        --         --      (2,953)          --         2,953             --          --           --
Amortization of deferred compensation related to stock options,
  net of reversal of amortization related to forfeitures......      --       --        --         --        (112)          --         5,281             --          --        5,169
Change in net unrealized gain on short-term investments, net
  of taxes of $1,185..........................................      --       --        --         --          --           --            --          1,933          --        1,933
Currency translation adjustment, net of taxes
  of ($1,985).................................................      --       --        --         --          --           --            --         (3,238)         --       (3,238)
Issuance of common stock related to the Sales.com acquisition.      --       --       374          1      26,899           --            --             --          --       26,900
Exchange of the Company's options for Sales.com options.......      --       --        --         --       1,335           --            --             --          --        1,335
Issuance of common stock related to the nQuire acquisition....      --       --     2,260          2      58,414           --            --             --          --       58,416
Exchange of the Company's options for nQuire options..........      --       --        --         --       1,306           --            --             --          --        1,306
Deferred compensation related to restricted stock and stock
  options issued in connection with the nQuire acquisition....      --       --        --         --          --           --        (1,397)            --          --       (1,397)
Repayments of stockholder notes...............................      --       --        --         --          --        1,201            --             --          --        1,201
Net income....................................................      --       --        --         --          --           --            --             --     254,575      254,575
                                                               --------  ------- ---------  ---------  ----------  -----------   -----------    -----------  ---------  ------------
Balances, December 31, 2001....................................     --  $    --   466,950  $     467  $1,357,422  $      (422)  $    (8,362)   $     6,174   $ 480,823  $ 1,836,102
                                                               ========  ======= =========  =========  ==========  ===========   ===========    ===========  =========  ============`

See accompanying notes to consolidated financial statements.

---

SIEBEL SYSTEMS, INC.

                     Consolidated Statements of Cash Flows
                           (in thousands)

`Year Ended December 31,
                                                                                     --------------------------------
                                                                                       1999       2000        2001
                                                                                     ---------  ---------  ---------- 
Cash flows from operating activities:
   Net income...................................................................... $ 110,025  $ 221,899  $  254,575
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Compensation related to stock options, net...................................     1,180     11,491       5,169
      Compensation related to stock warrants.......................................       269         --          --
      Depreciation and other amortization..........................................    19,334     35,352      93,179
      Amortization of goodwill.....................................................     4,529     14,713      20,041
      Amortization of identifiable intangible assets...............................       292      1,326       6,518
      Exchange of software for cost-method investments.............................        --    (13,068)       (971)
      Loss from equity method investee.............................................        --      7,481          --
      Deferred income taxes........................................................   (18,217)   (62,059)    (11,636)
      Tax benefit from exercise of stock options...................................    91,679    185,613      53,800
      Loss on disposal of property and equipment...................................       737         13          --
      Write-down of acquired companies' assets to be disposed of...................        --      2,298          --
      Write-down of cost-method investments to fair value..........................        --         --       3,073
      Net gains on short-term investments and marketable equity securities.........   (12,343)   (60,901)     (3,399)
      Charitable contribution of marketable equity securities......................        --     28,700          --
      Provision for doubtful accounts and returns..................................     8,111     39,385      26,403
      Changes in operating assets and liabilities:
         Accounts receivable.......................................................  (175,842)  (258,882)    109,368
         Prepaids and other........................................................   (16,705)   (58,464)     13,695
         Accounts payable and accrued expenses.....................................    40,745    230,807     (14,815)
         Deferred revenue..........................................................    35,952    112,864      38,002
                                                                                     ---------  ---------  ----------
           Net cash provided by operating activities...............................    89,746    438,568     593,002
                                                                                     ---------  ---------  ----------
Cash flows from investing activities:
   Proceeds from sale of marketable equity securities..............................        --     35,351         821
   Purchases of property and equipment.............................................   (45,604)  (162,186)   (251,326)
   Proceeds from disposal of property and equipment................................    13,284         25          --
   Purchases of short-term investments.............................................  (126,171)  (487,888) (1,113,004)
   Sales and maturities of short-term investments..................................    90,713    290,088     668,028
   Purchase consideration paid related to acquired businesses, net of cash received      (250)   (29,212)      8,555
   Other non-operating assets and non-marketable securities........................   (22,519)   (18,084)    (23,068)
   Repayments from (advances to) affiliate, net....................................        --    (12,362)     10,579
                                                                                     ---------  ---------  ----------
           Net cash used in investing activities...................................   (90,547)  (384,268)   (699,415)
                                                                                     ---------  ---------  ----------
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of repurchases......................    76,233    189,173     156,156
   Proceeds from issuance of preferred stock, net of repurchases...................    33,139     19,975          --
   Proceeds from issuance of convertible debt, net.................................   291,316         --          --
   Repayments on line of credit, net...............................................    (2,063)      (299)         --
   Subchapter S distributions......................................................    (2,080)        --          --
   Repayments of stockholder notes.................................................        --         78       1,201
                                                                                     ---------  ---------  ----------
           Net cash provided by financing activities...............................   396,545    208,927     157,357
                                                                                     ---------  ---------  ----------
Effect of exchange rate fluctuations on cash and cash equivalents..................       115      1,836      (3,238)
                                                                                     ---------  ---------  ----------
Change in cash and cash equivalents................................................   395,859    265,063      47,706
Cash and cash equivalents, beginning of period.....................................    90,462    486,321     751,384
                                                                                     ---------  ---------  ----------
Cash and cash equivalents, end of period........................................... $ 486,321  $ 751,384  $  799,090
                                                                                     =========  =========  ==========
Supplemental disclosures of cash flows information:
   Cash paid for interest.......................................................... $       7  $  16,324  $   17,029
                                                                                     =========  =========  ==========

   Cash paid for income taxes...................................................... $  14,545  $  15,434  $   18,837
                                                                                     =========  =========  ==========
Supplemental disclosures of non-cash activities:
   Purchase price payable to acquired companies.................................... $      --  $   3,000  $       --
                                                                                     =========  =========  ==========

   Conversion of preferred stock into common stock................................. $      --  $ 179,214  $       --
                                                                                     =========  =========  ==========

   Convertible notes issued for acquisitions....................................... $   6,918  $      --  $       --
                                                                                     =========  =========  ==========
   Common stock and stock options issued for acquisitions.......................... $  18,603  $      --  $   87,957
                                                                                     =========  =========  ==========`

See accompanying notes to consolidated financial statements.

---

SIEBEL SYSTEMS, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies
2. Financial Statement Details
3. Convertible Subordinated Debentures
4. Commitments and Contingencies
5. Stockholders' Equity
6. Convertible Preferred Stock and Mandatorily Redeemable Convertible
Preferred Stock
7. Income Taxes
8. Related Party Transactions
9. Segment and Geographic Information
10. Business Combinations
11. Acquisitions
12. Selected Quarterly Financial Data (unaudited)

The following table presents selected quarterly information for 2000 and
2001 (in thousands, except share data):
First     Second    Third     Fourth
                                                          quarter   quarter   quarter   quarter
                                                          --------  --------  --------  --------
  2000:
  Total revenues........................................ $319,691  $397,544  $496,515  $581,634
  Gross margin..........................................  241,830   294,856   369,625   445,304
  Net income............................................   35,313    39,599    67,503    79,484
  Net income (loss) available to common stockholders....  (41,735)   17,892    67,503    79,484
  Diluted net income (loss) per common share............    (0.10)     0.04      0.13      0.15
  Basic net income (loss) per common share..............    (0.10)     0.04      0.16      0.18

2001:
  Total revenues........................................ $588,741  $549,742  $428,487  $481,431
  Gross margin..........................................  423,092   397,761   291,214   355,540
  Net income............................................   76,921    76,557    35,197    65,900
  Net income available to common stockholders...........   76,921    76,557    35,197    65,900
  Diluted net income per common share...................     0.15      0.15      0.07      0.13
  Basic net income per common share.....................     0.17      0.17      0.08      0.14

---

Schedule II

Valuation and Qualifying Accounts

`Balance at  Charged to             Balance at
                                 beginning   costs and                end of
                                  of year    expenses   Deductions     year
                                 ----------  ---------  ----------  ----------
                                             (in thousands)                   
Allowance For Doubtful Accounts:
  Year ended December 31, 1999. $   10,588  $   8,111  $    5,531  $   13,168
  Year ended December 31, 2000. $   13,168  $  39,385  $    8,904  $   43,649
  Year ended December 31, 2001. $   43,649  $  26,403  $   23,381  $   46,671`

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SIEBEL SYSTEMS, INC.

Date:  March 25, 2002

By:	/s/ Kenneth A. Goldman
Kenneth A. Goldman

Senior Vice President, Finance and Administration
and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each of the
persons whose signature appears below hereby constitutes and appoints Thomas M.
Siebel and Kenneth A. Goldman, each of them acting individually, as his or her
attorney-in-fact, each with the full power of substitution, for him or her in
any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming our signatures as they
may be signed by our said attorney-in-fact and any and all amendments to this
Annual Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange
Act of 1934, this Annual Report on Form 10-K has been signed by the following
persons in the capacities and on the dates indicated.



|Signature                                            | Title                                                                                                                                           | Date          
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|/s/ Thomas M. SiebelThomas M. Siebel                 | Chairman, Chief  Executive
    Officer and Director
    (Principal Executive Officer)                                                           | March 25, 2002
|/s/ Kenneth A. GoldmanKenneth A. Goldman             | Senior Vice President Finance
       and Administration and Chief
       Financial Officer (Principal
   Financial and Accounting
     Officer) | March 25, 2002
|/s/ Patricia A. HousePatricia A. House               | Vice Chairman and Vice President,
Strategic Planning                                                                                            | March 25, 2002
|/s/ James C. GaitherJames C. Gaither                 | Director                                                                                                                                        | March 25, 2002
|/s/ Marc F. RacicotMarc F. Racicot                   | Director                                                                                                                                        | March 25, 2002
|/s/ Eric E. Schmidt, Ph.D.Eric E. Schmidt, Ph.D.     | Director                                                                                                                                        | March 25, 2002
|/s/ Charles R. SchwabCharles R. Schwab               | Director                                                                                                                                        | March 25, 2002
|/s/ George T. ShaheenGeorge T. Shaheen               | Director                                                                                                                                        | March 25, 2002
|/s/ A. Michael Spence, Ph.D.A. Michael Spence, Ph.D. | Director                                                                                                                                        | March 25, 2002

---