<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION 
                            WASHINGTON, D.C. 20549
 
                                _______________
 
 
                                   FORM 10-Q
 

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

               For the quarterly period ended September 30, 1997

                                      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.

            (Exact name of registrant as specified in its charter)

           DELAWARE                               94-3187233
 (State or other jurisdiction of       (I.R.S. Employer Identification No.)
  incorporation or organization)


                            1855 SOUTH GRANT STREET
                              SAN MATEO, CA 94402
         (Address of principal executive offices, including zip code)


                                (650) 295-5000
             (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 [ ]

The number of shares outstanding of the registrant's common stock, par value
           $.001 per share, as of November 3, 1997, was 34,580,137.
<PAGE>
 
                             SIEBEL SYSTEMS, INC.

                                   FORM 10-Q

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                                                 <C>
Part I.    Financial Information                                                                     Page
                                                                                                     ----
           Item  1.               Financial Statements

           a)   Consolidated Balance Sheets
                as of September 30, 1997 and December 31, 1996....................................     3

           b)   Consolidated Statements of Operations
                for the three and nine months ended September 30, 1997 and 1996...................     4

           c)   Consolidated Statements of Cash Flows
                for the nine months ended September 30, 1997 and 1996.............................     5

           d)   Notes to Consolidated Financial Statements........................................     6

           Item 2.  Management's Discussion and Analysis of Financial Condition and
                    Results of Operations.........................................................     8

Part II.   Other Information

     Item 1.    Legal Proceedings.................................................................    15

     Item 2.    Changes in Securities and Use of Proceeds.........................................    15

     Item 6.    Exhibits and Reports on Form 8-K..................................................    16


Signature.........................................................................................    17

</TABLE> 

                                       2
<PAGE>
 
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

<TABLE> 
<CAPTION> 

                                                       SIEBEL SYSTEMS, INC.

                                                    CONSOLIDATED BALANCE SHEETS
                                               (In thousands, except per share data)

                                                                                        September 30,   December 31,
                                                                                           1997            1996
                                                                                           ----            ----
                                Assets
                                ------
                                                                                        (unaudited)
<S>                                                                                    <C>             <C> 
Current assets:
        Cash and cash equivalents                                                       $ 22,631        $22,671
        Short-term investments                                                            53,362         49,716
        Accounts receivable, net                                                          31,330         12,855
        Deferred income taxes                                                              1,067          1,067      
        Prepaids and other                                                                 5,676          4,258
                                                                                        --------        ------- 
                Total current assets                                                     114,066         90,567

Property and equipment, net                                                               10,701          8,310
Other assets                                                                               1,103            624
                                                                                        --------        ------- 
                Total assets                                                            $125,870        $99,501
                                                                                        ========        =======
                                Liabilities and Stockholders' Equity
                                ------------------------------------

Current liabilities:
        Accounts payable                                                                $  1,638        $ 3,107
        Accrued expenses                                                                  17,831          6,768
        Income taxes payable                                                               1,050          2,018
        Deferred revenue                                                                   8,200          6,212
                                                                                        --------        -------         
                Total current liabilit1es                                                 28,719         18,105

        Deferred income taxes                                                                205            205
                                                                                        --------        ------- 
                Total liabilities                                                         28,924         18,310

Stockholders' equity:
        Common stock;  $.001 par value;  100,000 shares authorized;
         34,502 and 33,604 shares issued and outstanding, respectively                        35             34
        Additional paid-in-capital                                                        80,081         77,359
        Notes receivable from stockholders                                                  (406)          (508)
        Deferred compensation                                                               (625)        (1,035)
        Retained earnings                                                                 17,861          5,341
                                                                                        --------        ------- 
                Total stockholders' equity                                                96,946         81,191
                                                                                        --------        ------- 
                Total liabilities and stockholders' equity                              $125,870        $99,501
                                                                                        ========        =======
</TABLE> 

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

<TABLE> 
<CAPTION> 

                                                       SIEBEL SYSTEMS, INC.

                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (In thousands, except per share data; unaudited)

                                                                   Three Months Ended               Nine Months Ended
                                                                      September 30,                   September 30,
                                                                      ------------                    ------------
                                                                  1997            1996            1997            1996
                                                                  ----            ----            ----            ----
<S>                                                             <C>            <C>             <C>             <C>  
Revenues:
        Software                                                $27,969         $10,235         $65,365         $21,373
        Maintenance, consulting and other                         4,648             936          11,251           2,053
                                                                -------         -------         -------         -------
                Total revenues                                   32,617          11,171          76,616          23,426

Cost of revenues:
        Software                                                    723              20           1,166              56
        Maintenance, consulting and other                         1,666             525           4,877           1,290
                                                                -------         -------         -------         -------

                Total cost of revenues                            2,389             545           6,043           1,346
                                                                -------         -------         -------         -------
                Gross margin                                     30,228          10,626          70,573          22,080

Operating expenses:
        Product development                                       3,352           1,685           8,774           3,836
        Sales and marketing                                      15,950           5,443          36,778          12,049
        General and administrative                                2,456           1,395           6,930           2,823
                                                                -------         -------         -------         -------

                Total operating expenses                         21,758           8,523          52,482          18,708
                                                                -------         -------         -------         -------

                Operating income                                  8,470           2,103          18,091           3,372

Other income, net                                                   726             442           2,103             671
                                                                -------         -------         -------         -------
                Income before income taxes                        9,196           2,545          20,194           4,043

Income tax expense                                                3,494             952           7,674           1,551
                                                                -------         -------         -------         -------
                Net income                                      $ 5,702         $ 1,593         $12,520         $ 2,492
                                                                =======         =======         =======         =======
Net income per share                                            $  0.14         $  0.04         $  0.31         $  0.06
                                                                =======         =======         =======         =======
Shares used in net income per share computation                  40,702          39,982          39,820          38,920
                                                                =======         =======         =======         =======
</TABLE> 
Note:  All share and per share amounts for the periods ended September 30, 1996
       have been restated to reflect a two-for-one stock split (effected in the 
       form of a stock dividend) which was effective December 19, 1996.


          See accompanying notes to consolidated financial statements

                                       4
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                       SIEBEL SYSTEMS, INC.

                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (In thousands)
                                                            (unaudited)
                                                                                                  Nine Months Ended
                                                                                                    September 30,
                                                                                                    ------------
                                                                                                1997            1996
                                                                                                ----            ----
<S>                                                                                      <C>              <C> 
Cash flows from operating activities:
        Net income                                                                         $  12,520       $   2,492 
        Adjustments to reconcile net income to net cash provided by
          operating activities:
              Compensation related to stock options                                              155             171
              Depreciation and amortization                                                    2,733             624
              Loss on disposal of property and equipment                                         297             155
              Provision for doubtful accounts                                                    383             112
              Software licenses exchanged for equipment and prepaid assets                         -          (1,156)
              Changes in operating assets and liabilities:
                  Accounts receivable                                                        (18,858)         (1,551)  
                  Prepaids and other                                                          (1,418)         (3,194)
                  Accounts payable                                                            (1,469)          1,591
                  Accrued expenses                                                            11,063           4,862
                  Income taxes payable                                                          (193)            222
                  Deferred revenue                                                             1,988           1,499
                                                                                           ---------       ---------
                                        Net cash provided by operating activities             7,201           5,827
                                                                                           ---------       ---------
Cash flows from investing activities:                                                         
        Purchases of property and equipment                                                   (5,421)         (4,638)
        Purchases of short-term investments                                                  (27,989)        (25,210)
        Maturities of short-term investments                                                  24,343               -
        Other assets                                                                            (479)           (363)
                                                                                           ---------       ---------
                                        Net cash used in investing activities                 (9,546)        (30,211)
                                                                                           ---------       ---------
Cash flows from financing activities:          
        Proceeds from issuance of common stock                                                 2,203          63,212
        Proceeds from issuance of preferred stock                                                  -           1,532
        Issuance of stockholder notes                                                              -            (507)
        Repayment of stockholder notes                                                           102              12
                                                                                           ---------       ---------
                                        Net cash provided by financing activities              2,305          64,249
                                                                                           ---------       ---------
Change in cash and cash equivalents                                                              (40)         39,865
Cash and cash equivalents, beginning of period                                                22,671          11,391
                                                                                           ---------       ---------
Cash and cash equivalents, end of period                                                   $  22,631       $  51,256
                                                                                           =========       =========
Supplemental disclosure of cash flows information:          
                Cash paid for income taxes                                                 $   7,867       $   1,280
                                                                                           =========       =========
        Noncash investing and financing activities:
                Conversion of preferred stock into common stock                            $       -       $      10
                                                                                           =========       =========
                Tax benefit from exercise of stock options                                 $     775       $       -
                                                                                           =========       =========
                Exercise of common stock options in exchange for
                        stockholder notes receivable                                       $       -       $     507
                                                                                           =========       =========
</TABLE> 
          See accompanying notes to consolidated financial statements

                                       5
<PAGE>
 
                             SIEBEL SYSTEMS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
on substantially the same basis as the audited consolidated financial
statements, and in the opinion of management include all adjustments, consisting
only of normal recurring adjustments, necessary for their fair presentation.
The interim results presented are not necessarily indicative of results for any
subsequent quarter or for the year ending December 31, 1997.

For information as to the significant accounting policies followed by the
Company and other financial and operating information, see the Company's Annual
Report on Form 10-K, filed with the Securities and Exchange Commission on March
7, 1997 (the "Form 10-K").  These consolidated financial statements should be
read in conjunction with the consolidated financial statements included in that
Annual Report.

The Financial Accounting Standards Board recently issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information."  These new accounting standards are
not expected to have a material effect on the Company's consolidated financial
statements.

2.  NET INCOME PER SHARE

Net income per share is computed based on the weighted average number of common
and preferred (on an "as if converted" basis) shares outstanding and is adjusted
for shares issuable upon the exercise of stock options (unless antidilutive)
using the treasury stock method.

The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").  SFAS No.
128 requires the presentation of basic earnings per share ("EPS") and, for
companies with potentially dilutive securities, such as options, diluted EPS.
SFAS No. 128 is effective for annual and interim periods ending after December
15, 1997.  Had SFAS No. 128 been effective for the quarter ended September 30,
1997, basic EPS and diluted EPS would have been $0.17 and $0.14 per share,
respectively.

3.  CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

The Company considers all highly liquid investments with an original maturity of
90 days or less to be cash equivalents.  Short-term investments generally
consist of highly liquid municipal securities with original maturities in excess
of 90 days.

The Company has classified its investments in certain debt and equity securities
as "available for sale."  Such investments are carried at fair value, with gross
unrealized gains and losses reported as a separate component of stockholders'
equity.  As of September 30, 1997, gross unrealized gains and losses have not
been material.
<TABLE>
<CAPTION>
 
                                September 30,                   December 31,
(In thousands)                      1997                            1996 
-----------------------------------------------------------------------------
                                 (unaudited)

<S>                              <C>                             <C>
 
Certificates of deposit           $     -                         $ 1,325
Municipal securities               53,362                          48,391
------------------------------------------------------------------------------
 
                                  $53,362                         $49,716
------------------------------------------------------------------------------
</TABLE>

                                       6
<PAGE>
 
4.  SUBSEQUENT EVENTS

In October 1997, the Company purchased privately held InterActive WorkPlace,
Inc. ("Interactive"), a developer of intranet-based business intelligence
software technology. The transaction is valued at approximately $15 million and
will be accounted for as a purchase. The Company expects to record a substantial
portion of the purchase price as a charge for acquired in-process technology in
the fourth quarter of 1997. Under the terms of the agreement, InterActive's
securityholders received or will receive up to approximately 428,000 shares of
the Company's common stock in exchange for all outstanding shares in
Interactive. Additionally, Interactive optionees will receive options to
purchase an aggregate of approximately 32,000 shares of common stock in exchange
for their options to purchase Interactive common stock.

In November 1997, the Company purchased privately held Nomadic Systems, Inc.
("Nomadic"), a provider of innovative business solutions to pharmaceutical sales
forces.  The transaction is valued at approximately $11 million and will be
accounted for as a purchase.  The Company expects to record a substantial
portion of the purchase price as a charge for acquired in-process technology in
the fourth quarter of 1997.  Under the terms of the agreement, Nomadic's
securityholders received approximately 300,000 shares of the Company's common
stock in exchange for all outstanding shares of Nomadic.

                                       7
<PAGE>
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN AND
UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--RISK FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM
10-K.  ANY SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE SUCH
STATEMENTS ARE MADE AND THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE
THE RESULTS OF ANY REVISION TO THESE FORWARD-LOOKING STATEMENTS.

OVERVIEW

Siebel Systems, Inc. ("Siebel" or the "Company") is the global market leader in
enterprise-class sales, marketing, and customer service information systems for
global organizations focused on increasing sales and service effectiveness in
field sales, service organizations, telesales, telemarketing, call centers, and
third-party resellers.  The Company designs, develops, markets, and supports
Siebel Enterprise Applications, a leading Internet-enabled, object oriented
client/server application software product family designed to meet the sales,
marketing and customer service information system requirements of even the
largest multi-national organizations.

The Company currently expects that license revenues from Siebel Enterprise
Applications will continue to account for a substantial majority of the
Company's revenues for the remainder of 1997 and for the foreseeable future.  As
a result, factors adversely affecting the pricing of or demand for Siebel
Enterprise Applications could have a material adverse effect on the Company's
business, operating results and financial condition. Most of the Company's
revenues to date have been derived from one-time license fees from customers who
have received a perpetual license to the Company's products.  The Company's
remaining revenues are primarily attributable to lower margin maintenance and
other revenues, including consulting and training revenues.

A relatively small number of customers account for a significant percentage of
the Company's license revenues. For the fiscal year ended 1996 and the first
nine months of 1997, sales to the Company's ten largest customers accounted for
59% and 51% of total revenues, respectively.  The Company expects that licenses
of its products to a limited number of customers will continue to account for a
large percentage of revenue for the foreseeable future.  The license of the
Company's software products is often an enterprise-wide decision by prospective
customers and generally requires the Company to provide a significant level of
education to prospective customers regarding the use and benefits of the
Company's products.  In addition, the implementation of the Company's products
involves a significant commitment of resources by prospective customers and is
commonly associated with substantial reengineering efforts which may be
performed by the customer or third-party system integrators.  The cost to the
customer of the Company's product is typically only a portion of the related
hardware, software, development, training and integration costs of implementing
a large-scale sales, marketing and customer service information system. For
these and other reasons, the sales and implementation cycles associated with the
license of the Company's products is often lengthy (ranging to date from between
two and twenty-four months from initial contact to product implementation) and
is subject to a number of significant delays over which the Company has little
or no control. Given these factors and the expected customer concentration, the
loss of a major customer or any reduction or delay in sales to or
implementations by such customers could have a material adverse effect on the
Company's business, operating results, and financial condition.

As of September 30, 1997, many of the Company's customers were in the pilot
phase of implementation of Siebel Enterprise Applications. Several of the
Company's customers have completed a significant portion of their enterprise-
wide development and deployment of Siebel Enterprise Applications, however, many
have only recently commenced such development and deployment. As a result, the
Company's products are currently being used by only a limited number of sales,
marketing and customer service professionals. If any of the Company's customers
are not able to customize and deploy Siebel Enterprise Applications successfully
and on a timely basis to the number of anticipated users, the Company's
reputation could be significantly damaged, which could have a material adverse
effect on the Company's business, operating results and financial condition.


                                       8
<PAGE>
 
The Company markets its products in the United States through its direct sales
force and internationally through its sales force and distributors in Japan.
International revenues accounted for 11% and 31% of total revenues in the fiscal
year ended 1996 and the first nine months of 1997, respectively.  The Company is
increasing its international sales force and is seeking to establish
distribution relationships with appropriate strategic partners and expects
international revenues will continue to account for a substantial portion of
total revenues in the future. As a result, failure to cost-effectively maintain
or increase international sales could have a material adverse effect on the
Company's business, operating results and financial condition.

The Company's limited operating history makes the prediction of future operating
results difficult.  Prior growth rates in the Company's revenue and net income
should not be considered indicative of future operating results.  Future
operating results will depend upon many factors, including the demand for the
Company's products, the level of product and price competition, the length of
the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the Company's
relationships with systems integrators, the Company's success in expanding its
direct sales force, indirect distribution channels and customer support
organization, the timing of new product introductions and product enhancements,
the mix of products and services sold, levels of international sales, activities
of and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates, the costs of establishing and maintaining international
operations, the ability of the Company to develop and market new products and
control costs and the ability to attract and retain key personnel.  There can be
no assurance that the Company's business or strategies will be successful or
that the Company will be able to sustain profitability on a quarterly or annual
basis.

The Company's sales generally reflect a relatively high amount of revenue per
order.  The loss or delay of individual orders, therefore, can have a
significant impact on the revenues and quarterly results of the Company.  The
timing of license revenue is difficult to predict because of the length of the
Company's sales cycle, which to date has ranged from two to eighteen months from
initial contact to the execution of a license agreement.  Because the Company's
operating expenses are based on anticipated revenue trends and because a high
percentage of the Company's expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in losses. To the extent such expenses precede, or are not subsequently
followed by, increased revenues, the Company's operating results would be
materially adversely affected.  As a result of these and other factors, revenues
for any quarter are subject to significant variation, and the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.  It is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be adversely
affected.

To date, the Company has not experienced significant seasonality of operating
results.  The Company expects that future revenues for any period may be
affected by the fiscal or quarterly budget cycles of its customers.

RECENT DEVELOPMENTS

In October 1997, the Company purchased privately-held InterActive WorkPlace,
Inc. ("Interactive"), a developer of intranet-based business intelligence
software technology. The transaction is valued at approximately $15 million and
will be accounted for as a purchase. The Company expects to record a substantial
portion of the purchase price as a charge for acquired in-process technology in
the fourth quarter of 1997. Under the terms of the agreement, InterActive's
securityholders received or will receive up to approximately 428,000 shares of
the Company's common stock in exchange for all outstanding shares in
Interactive. Additionally, Interactive optionees will receive options to
purchase an aggregate of approximately 32,000 shares of common stock in exchange
for their options to purchase Interactive common stock.

In November 1997, the Company purchased privately held Nomadic Systems, Inc.
("Nomadic"), a provider of innovative business solutions to pharmaceutical sales
forces. The transaction is valued at approximately $11 million and will be
accounted for as a purchase. The Company expects to record a substantial portion
of the purchase price as a charge for acquired in-process technology in the
fourth quarter of 1997. Under the terms of the agreement, Nomadic's
securityholders received approximately 300,000 shares of the Company's common
stock in exchange for all outstanding shares of Nomadic.


                                       9
<PAGE>
 
RESULTS OF OPERATIONS

REVENUES

Software.  License revenues increased to $27,969,000 for the three months ended
September 30, 1997 from $10,235,000 for the three months ended September 30,
1996 and decreased as a percentage of total revenues to 86% in the fiscal 1997
period from 92% in the fiscal 1996 period.  For the nine months ended September
30, 1997, license revenues increased to $65,365,000 from $21,373,000 for the
nine months ended September 30, 1996 and decreased as a percentage of total
revenues to 85% in the fiscal 1997 period from 91% in the fiscal 1996 period.
License revenues increased in absolute dollar amount during these periods from
the respective prior year periods due to an increase in the number of licenses
of Siebel Enterprise Applications to new and existing customers.  This increase
in the number of licenses was primarily due to continued demand by new and
existing customers for products in the Siebel Enterprise Applications family
both in the United States and internationally.  In December 1996, the Company
introduced Siebel Service Enterprise, its customer service applications suite.
Increases in revenues during the 1997 periods were due in part to new and
existing customers licensing Siebel Service Enterprise to manage their customer
service functions.  The decrease in license revenues as a percentage of total
revenues was primarily due to increased levels of maintenance, consulting and
other revenues as discussed below.

Maintenance, Consulting and Other.  Maintenance, consulting and other revenues
increased to $4,648,000 for the three months ended September 30, 1997 from
$936,000 for the three months ended September 30, 1996 and increased as a
percentage of total revenues to 14% in the fiscal 1997 period from 8% in the
fiscal 1996 period.  For the nine months ended September 30, 1997, maintenance,
consulting and other revenues increased to $11,251,000 from $2,053,000 for the
nine months ended September 30, 1996 and increased as a percentage of total
revenues to 15% in the fiscal 1997 period from 9% in the fiscal 1996 period.
These increases in absolute dollar amount and as a percentage of total revenues
were due to the widespread licensing of products to customers pursuant to
agreements with a maintenance component, maintenance renewals from products
licensed in prior periods and one customer obtaining implementation services for
the Siebel Enterprise Application through the Company.  The Company expects that
maintenance, consulting and other revenues will remain the same or increase as a
percentage of total revenues due to maintenance components of new and existing
license agreements.

COST OF REVENUES

Software.  Cost of software license revenues includes product packaging,
documentation and production. Cost of license revenues through September 30,
1997 have averaged less than 2% of software license revenues. All costs incurred
in the research and development of software products and enhancements to
existing products have been expensed as incurred, and, as a result, cost of
license revenues includes no amortization of capitalized software development
costs.  These costs are expected to remain the same or increase as a percentage
of total revenues.

Maintenance, Consulting and Other. Cost of maintenance, consulting and other
revenues consists primarily of personnel, facility and systems costs incurred in
providing customer support. Cost of maintenance, consulting and other revenues
increased to $1,666,000 for the three months ended September 30, 1997 from
$525,000 for the three months ended September 30, 1996 and remained constant as
a percentage of total revenues at 5% in both the fiscal 1997 and the fiscal 1996
periods. For the nine months ended September 30, 1997, cost of maintenance,
consulting and other revenues increased to $4,877,000 from $1,290,000 for the
nine months ended September 30, 1996 and remained constant as a percentage of
total revenues at 6% in both the fiscal 1997 and the fiscal 1996 periods. The
increases in the absolute dollar amount reflect the effect of fixed costs
resulting from the Company's expansion of its maintenance and support
organization and the costs of one customer obtaining implementation services for
the Siebel Enterprise Application through the Company. The Company expects that
maintenance, consulting and other costs will continue to increase in absolute
dollar amount as the Company expands its customer support organization to meet
anticipated customer demands in connection with product implementation. These
costs are expected to remain the same or increase as a percentage of total
revenues.


                                      10
<PAGE>
 
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. Product
development expenses increased to $3,352,000 for the three months ended
September 30, 1997 from $1,685,000 for the three months ended September 30, 1996
and decreased as a percentage of total revenues to 10% in the fiscal 1997 period
from 15% in the fiscal 1996 period.  For the nine months ended September 30,
1997, product development expenses increased to $8,774,000 from $3,836,000 for
the nine months ended September 30, 1996 and decreased as a percentage of total
revenues to 11% in the fiscal 1997 period from 16% in the fiscal 1996 period.
The increases in the dollar amount of product development expenses were
primarily attributable to costs of additional personnel in the Company's product
development operations. The Company anticipates that it will continue to devote
substantial resources to product development. The Company expects product
development expenses to increase in absolute dollar amount but remain at a
similar percentage of total revenues as the first nine months of 1997.

Sales and Marketing.  Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, field
office expenses, travel and entertainment and promotional expenses. Sales and
marketing expenses increased to $15,950,000 for the three months ended September
30, 1997 from $5,443,000 for the three months ended September 30, 1996 and
remained constant as a percentage of total revenues at 49% in both the fiscal
1997 and the fiscal 1996 periods.  For the nine months ended September 30, 1997,
sales and marketing expenses increased to $36,778,000 from $12,049,000 for the
nine months ended September 30, 1996 and decreased as a percentage of total
revenues to 48% in the fiscal 1997 period from 51% in the fiscal 1996 period.
The increases in the dollar amount of sales and marketing expenses reflect
primarily the hiring of additional sales and marketing personnel and, to a
lesser degree, costs associated with expanded promotional activities. The
Company expects that sales and marketing expenses will continue to increase in
absolute dollar amount as the Company continues to expand its sales and
marketing efforts, establishes additional sales offices in the United States and
internationally and increases promotional activities. These expenses are
expected to remain at a similar percentage of total revenues as the first nine
months of 1997.

General and Administrative.  General and administrative expenses consist
primarily of salaries and occupancy costs for administrative, executive and
finance personnel. General and administrative expenses increased to $2,456,000
for the three months ended September 30, 1997 from $1,395,000 for the three
months ended September 30, 1996 and decreased as a percentage of total revenues
to 8% in the fiscal 1997 period from 12% in the fiscal 1996 period. For the nine
months ended September 30, 1997, general and administrative expenses increased
to $6,930,000 from $2,823,000 for the nine months ended September 30, 1996 and
decreased as a percentage of total revenues to 9% in the fiscal 1997 period from
12% in the fiscal 1996 period. 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
scale of operations. The Company believes that its general and administrative
expenses will continue to increase in absolute dollar amount as a result of the
continued expansion of the Company's administrative staff and facilities to
support growing operations and the expenses associated with being a public
company. The Company anticipates that its general and administrative expenses as
a percentage of total revenues should remain at a similar percentage as the
first nine months of 1997.

OPERATING INCOME AND OPERATING MARGIN

Operating income increased to $8,470,000 for the three months ended September 
30, 1997 from $2,103,000 for the three months ended September 30, 1996 and 
operating margin increased to 26% in the fiscal 1997 period from 19% in the 
fiscal 1996 period. For the nine months ended September 30, 1997, operating 
income increased to $18,091,000 from $3,372,000 for the nine months ended 
September 30, 1996 and operating margin increased to 24% in the fiscal 1997 
period from 14% in the fiscal 1996 period. These increases in operating income 
and margin were due to increases in license revenues without a proportional 
increase in cost, particularly costs associated with the hiring of new 
personnel. The Company does not expect operating margins to remain as high as 
the level of the operating margin for the first nine months of 1997.

OTHER INCOME, NET

Other income, net is primarily comprised of interest income earned on the
Company's cash and cash equivalents and short-term investments and reflects
earnings on increasing cash and cash equivalents and short-term investment
balances.

PROVISION FOR INCOME TAXES

Income taxes have been provided at an effective rate of approximately 38%, which
is comprised primarily of federal and state taxes.  The Company accounts for
income taxes in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."

                                      11
<PAGE>
 
NET INCOME

The Company had net income (after provision for income taxes) of $5,702,000 for
the three months ended September 30, 1997 compared to net income of $1,593,000
for the three months ended September 30, 1996.  Net income per share increased
to $0.14 per share in the third quarter of 1997 from $0.04 in the comparable
period in 1996.  Net income increased as a percentage of total revenues to 17%
in the three months ended September 30, 1997 from 14% in the three months ended
September 30, 1996.  The Company had net income of $12,520,000 for the nine
months ended September 30, 1997, compared to net income of $2,492,000 for the
nine months ended September 30, 1996. Net income per share increased to $0.31
per share for the nine months ended September 30, 1997 from $0.06 in the
comparable period in 1996.  Net income increased as a percentage of total
revenues to 16% in the nine months ended September 30, 1997 from 11% in the nine
months ended September 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash, cash equivalents and short-term investments increased to
$75,993,000 as of September 30, 1997 from $72,387,000 as of December 31, 1996,
representing approximately 60% of total assets.  This increase was primarily
attributable to net income and increases in accrued expenses and deferred
revenue and issuances of common stock, partially offset by increases in accounts
receivable and purchases of property and equipment.

The Company believes that the anticipated cash flows from operations, cash, cash
equivalents and short-term investments, will be adequate to meet its cash needs
for working capital and capital expenditures for at least the next twelve
months.

FACTORS AFFECTING OPERATING RESULTS

Limited Operating History.  The Company commenced operations in July 1993 and
shipped version 1.0 of Siebel Sales Enterprise in April 1995 and version 2.2 of
Siebel Service Enterprise in December 1996.  The Company has only a limited
operating history, and its prospects must be evaluated in light of the risks and
uncertainties encountered by a company in its early stage of development.  The
new and evolving markets in which the Company operates make these risks and
uncertainties particularly pronounced.  To address these risks, the Company
must, among other things, successfully implement its sales and marketing
strategy, respond to competitive developments, attract, retain, and motivate
qualified personnel, continue to develop and upgrade its products and
technologies more rapidly than its competitors, and commercialize its products
and services incorporating these enhanced technologies.  The Company expects to
continue to devote substantial resources to its product development and sales
and customer support and, as a result, will need to generate significant
quarterly revenues to achieve and maintain profitability.  The Company's limited
operating history makes it difficult to predict accurately future operating
results.  There can be no assurance that any of the Company's business
strategies will be successful or that the Company will be profitable in any
future quarter or period.

Reliance on Andersen Consulting and Other Relationships; Dependence on System
Integrators. The Company has established strategic relationships with a number
of organizations that it believes are important to its worldwide sales,
marketing and support activities and the implementation of its products. The
Company believes that its relationships with such organizations provide
marketing and sales opportunities for the Company's direct sales force and
expand the distribution of its products. These relationships also assist the
Company in keeping pace with the technological and marketing developments of
major software vendors, and, in certain instances, provide it with technical
assistance for its product development efforts. In particular, the Company has
established a non-exclusive strategic relationship with Andersen Consulting, a
principal stockholder of the Company. In 1996 and the first nine months of 1997,
approximately 46% and 39%, respectively, of the revenues of the Company were
derived from customers for which Andersen Consulting had been engaged to provide
system integration services. Any deterioration of the Company's relationship
with Andersen Consulting could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company has relationships with Itochu Corporation and Itochu Techno-Science
Corporation, among others. The failure by the Company to maintain its existing
relationships, or to establish new relationships in the future, could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's customers and potential customers frequently
rely on Andersen Consulting, as well as other third-party system integrators to
develop, deploy

                                      12
<PAGE>
 
and/or manage Siebel Enterprise Applications. If the Company is unable to train
adequately a sufficient number of system integrators or, if for any reason such
integrators do not have or devote the resources necessary to facilitate
implementation of the Company's products or if such integrators adopt a product
or technology other than Siebel Enterprise Applications, the Company's business,
operating results and financial condition could be materially and adversely
affected.

Limited Deployment.  Many of the Company's customers are in the pilot phase of
implementing the Company's software.  There can be no assurance that enterprise-
wide deployments by such customers will be successful.  The Company's customers
frequently contemplate the deployment of its products commercially to large
numbers of sales, marketing and customer service personnel, many of whom have
not previously used application software systems, and there can be no assurance
of such end-users' acceptance of the product. The Company's products are being
deployed on a variety of computer hardware platforms and used in connection with
a number of third-party software applications and programming tools. Such
deployments present significant technical challenges, particularly as large
numbers of sales, marketing and customer service personnel attempt to use the
Company's product concurrently. If any of the Company's customers are not able
to customize and deploy Siebel Enterprise Applications successfully and on a
timely basis to the number of anticipated users, the Company's reputation could
be significantly damaged, which could have a material adverse effect on the
Company's business, operating results and financial condition. In addition to
revenues from new customers, the Company expects that a significant percentage
of any future revenues will be derived from sales to existing customers.
However, such customers are not contractually committed in all cases to purchase
additional licenses. If existing customers have difficulty further deploying
Siebel Enterprise Applications or for any other reason are not satisfied with
Siebel Enterprise Applications, the Company's business, operating results and
financial condition would be materially and adversely affected.

Competition.  The market for the Company's products is intensely competitive,
subject to rapid change and significantly affected by new product introductions
and other market activities of industry participants.  The Company's products
are targeted at the emerging market for sales, marketing and customer service
information systems, and the Company faces competition primarily from customers'
internal information technology departments and systems integrators, as well as
from other application software providers that offer a variety of products and
services to address this market. Many of the Company's customers and potential
customers have in the past attempted to develop sales, marketing and customer
service information systems, in-house either alone or with the help of systems
integrators and there can be no assurance that the Company will be able to
compete successfully against such internal development efforts.

The Company relies on a number of systems consulting and systems integration
firms, particularly Andersen Consulting, for implementation and other customer
support services, as well as recommendations of its products during the
evaluation stage of the purchase process.  Although the Company seeks to
maintain close relationships with these service providers, many of them have
similar, and often more established, relationships with the Company's
competitors.  If the Company is unable to develop and retain effective, long-
term relationships with these third parties, the Company's competitive position
could be materially and adversely affected.  Further, there can be no assurance
that these third parties, many of which have significantly greater resources
than the Company, will not market software products in competition with the
Company in the future or will not otherwise reduce or discontinue their
relationships with, or support of, the Company and its products.

A large number of personal, departmental and other products exist in the sales,
marketing and customer service information systems market. Some of the Company's
current and potential competitors and their products include Symantec (ACT!),
Borealis Corporation (Arsenal), Early Cloud & Co. (CallFlow), Clarify, Inc.
(ClearSales, ClearSupport), IMA (EDGE), Marketrieve Company (Marketrieve PLUS),
Oracle Corporation (Oracle Sales and Marketing), Pivotal Software, Inc.
(Relationship), SalesBook Systems (SalesBook), SalesKit Software Corporation
(SalesKit), Scopus Technology, Inc. (SalesTEAM, ServiceTEAM, Voyager), Aurum
Software, Inc. (SalesTrak) (recently acquired by Baan Company N.V.), Saratoga
Systems (SPS for Windows), Brock International (Take Control Sales), and The
Vantive Corporation (Vantive Enterprise). 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 the Company. In addition, many competitors have well-
established relationships with current and potential customers of the Company.
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,

                                      13
<PAGE>
 
promotion and sale of their products, than can the Company.

It is also possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share.  The Company also expects
that competition will increase as a result of consolidation in the software
industry.  Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could materially adversely affect
the Company's business, operating results and financial condition.  There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially and adversely affect its business, operating results
and financial condition.

Management of Growth; Dependence upon Key Personnel.  In the event that the
significant growth of the Company's revenues continues, such growth may place a
significant strain upon the Company's management systems and resources.  The
Company's ability to compete effectively and to manage future growth, if any,
will require the Company to continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and expand, train
and manage its employee work force. There can be no assurance that the Company
will be able to do so successfully.  The Company's failure to do so could have a
material adverse effect upon the Company's business, operating results and
financial condition. The Company's future performance depends in significant
part upon the continued service of its key technical, sales and senior
management personnel, particularly Thomas M. Siebel, the Company's Chairman and
Chief Executive Officer, none of whom has entered into an employment agreement
with the Company.  The loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business, operating results and financial condition. The Company's future
success also depends on its continuing ability to attract and retain highly
qualified technical, customer support, sales and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to retain its key technical, sales and managerial
employees or that it can attract, assimilate or retain other highly qualified
technical, sales and managerial personnel in the future.

International Operations.  The Company's sales are primarily to large multi-
national companies. To service the needs of such companies, both domestically
and internationally, the Company must provide worldwide product support
services. As a result, the Company has expanded and intends to continue to
expand its international operations and enter additional international markets,
which will require significant management attention and financial resources and
could adversely affect the Company's operating margins and earnings, if any.
Revenues from international sales accounted for approximately 31% of the
Company's total revenues in the first nine months of 1997. The Company believes
that in order to increase sales opportunities and profitability it will be
required to expand its international operations. The Company has committed and
continues to commit significant management time and financial resources to
developing direct and indirect international sales and support channels. There
can be no assurance, however, that the Company will be able to maintain or
increase international market demand for Siebel Enterprise Applications. To the
extent that the Company is unable to do so in a timely manner, the Company's
international sales will be limited, and the Company's business, operating
results and financial condition could be materially and adversely affected.

The growth in the Company's revenues from international sales is expected to
continue to subject a portion of the Company's revenues to the risks associated
with international sales, including foreign currency fluctuations, economic or
political instability, shipping delays and various trade restrictions, any of
which could have a significant impact on the Company's ability to deliver
products on a competitive and timely basis.  Future imposition of, or
significant increases in the level of, customs duties, export quotas or other
trade restrictions, could have an adverse effect on the Company's business,
financial condition and results of operations.  As the Company develops an
international sales force, it expects to be more directly subject to foreign
currency fluctuations.  To the extent such direct sales are denominated in
foreign currency, any such fluctuation may adversely affect the Company's
business, financial condition and results of operations.  Finally, the laws of
certain foreign countries do not protect the Company's intellectual property
rights to the same extent as do the laws of the United States.

                                      14
<PAGE>
 
                          PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

The Company is engaged in certain legal proceedings as disclosed in the
Company's Annual Report on Form 10-K and in the Company's Form 10-Q for the
quarter ended June 30, 1997.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The effective date of the Company's first registration statement, filed on Form
S-1 filed under the Securities Act of 1933 (No. 333-12061), was June 27, 1996
(the "Registration Statement"). The class of securities registered was Common
Stock. The offering commenced on June 27, 1996 and all securities were sold in
the offering. The managing underwriters for the offering were Hambrecht & Quist
LLC, Montgomery Securities and Robertson, Stephens, & Company LLC.

Pursuant to the Registration Statement, the Company sold 2,094,450 shares of its
Common Stock for its own account, for an aggregate offering price of
$33,113,000, and 163,000 shares of its Common Stock for the account of certain
selling stockholders, for an aggregate offering price of $2,577,030.

The Company incurred expenses of approximately $1,125,000. All such expenses
were direct or indirect payments to others. The net offering proceeds to the
issuer after total expenses was $31,988,000.

The Company has not used any of the net proceeds from the offering. All net
proceeds have been invested in U.S. Government obligations and certificates of
deposit.  The use of the proceeds from the offering does not represent a
material change in the use of the proceeds described in the prospectus.

                                      15
<PAGE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
  <C>           <S>
(a)  Exhibits

     Exhibit
     Number           Description of Document
     ------           -----------------------
     (3)3.3     Restated Certificate of Incorporation of the Registrant, as amended.

     (1)3.4     Bylaws of the Registrant.
  (1)(3)4.1     Reference is made to Exhibits 3.3 and 3.4.
     (1)4.2     Specimen Stock Certificate.
     (1)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.
     (5)4.4     Form of Registration Rights Agreement, dated October 1, 1997 between the Registrant 
                and certain stockholders.
     (6)4.5     Form of Registration Rights Agreement, dated November 1, 1997 between the Registrant
                and certain stockholders.
     (3)10.1    Registrant's 1996 Equity Incentive Plan, as amended.
     (3)10.2    Registrant's Employee Stock Purchase Plan, as amended.
     (1)10.3    Form of Indemnity Agreement entered into between the Registrant and its officers and 
                directors.
     (4)10.4    Registrant's Deferred Compensation Plan, dated January 10, 1997.
  (1)(2)10.6    Master Alliance Agreement, dated March 17, 1995, between the Registrant and Andersen 
                Consulting LLP.
     (1)10.9    Assignment Agreement, dated September 20, 1995, by and between the Registrant and  
                Thomas M. Siebel.
     (1)10.10   Lease Agreement, dated June 4, 1996, by and between the Registrant and Crossroad 
                Associates and Clocktower Associates.
     (5)10.11   InterActive Workplace, Inc. 1996 Stock Option Plan.
     (6)11.1    Statement Regarding Computation of Net Income Per Share.
     (6)27.1    Financial Data Schedule.
 

  (1)   Incorporated by reference to the Company's Registration Statement on Form S-1 (No. 333-03751),
         as amended.

  (2)   Confidential treatment has been granted with respect to portions of this exhibit.

  (3)   Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 333-07983),
        as amended.

  (4)   Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended 
        December 31, 1996.

  (5)   Incorporated by reference to the Company's Registration Statement on Form S-3 (No. 333-36967), as amended.

  (6)   Filed herewith.

(b)     Reports on Form 8-K

        None.
</TABLE> 

                                      16
<PAGE>
 
                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange 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:  November 12, 1997                 By:    /s/  Howard H. Graham
                                            -----------------------------
                                                  Howard H. Graham
                                         Senior Vice President Finance and 
                                     Administration and Chief Financial Officer