**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 June 30, 1999**

**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 Incorporation or Organization)
          
          
(I.R.S. Employer Identification No.)

**1855 South Grant StreetSan Mateo, CA 94402**(Address of principal executive offices)

**(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 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 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 August 2, 1999, was 92,610,685.







**SIEBEL SYSTEMS, INC.
                                    FORM 10-Q
                 For the Quarterly Period Ended June 30, 1999
                               Table of Contents**

**Part I.  Financial Information**

Item  1.  Financial Statements

a)   Consolidated Balance Sheets
                        as of June 30, 1999 and December 31, 1998

b)   Consolidated Statements of Operations and Comprehensive Income (Loss)
                        for the three and six months ended June 30, 1999 and 1998

c)   Consolidated Statements of Cash Flows
                        for the six months ended June 30, 1999 and 1998

d)   Notes to Consolidated Financial Statements

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

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

**Part II. Other Information**

Item 1.   Legal Proceedings

Item 2.   Changes in Securities and Use of Proceeds

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

Item 6.   Exhibits and Reports on Form 8-K

**Signatures**

**Part I.  Financial Information**

Item  1.  Financial Statements

**SIEBEL SYSTEMS, INC.****Consolidated Balance Sheets
                     (in thousands, except per share data; unaudited)**

`June 30,     December 31,
                                                            1999          1998
                                                       ------------  ------------
Assets

Current assets:
   Cash and cash equivalents.........................     $132,889       $79,961
   Short-term investments............................      156,981       151,888
   Marketable equity securities......................       62,500           --
   Accounts receivable, net..........................      173,254       122,818
   Deferred income taxes.............................       13,120        13,120
   Prepaids and other................................       16,488        13,908
                                                       ------------  ------------
     Total current assets............................      555,232       381,695
Property and equipment, net..........................       37,062        45,537
Other assets.........................................       12,012        14,714
                                                       ------------  ------------
     Total assets....................................     $604,306      $441,946
                                                       ============  ============

Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable..................................      $13,178        $3,899
   Accrued expenses..................................       80,748        84,917
   Income taxes payable..............................        8,691        10,917
   Deferred revenue..................................       57,730        50,875
   Deferred income taxes.............................       21,275           --
                                                       ------------  ------------
     Total current liabilities.......................      181,622       150,608
Deferred income taxes................................          204           710
                                                       ------------  ------------
     Total liabilities...............................      181,826       151,318
                                                       ------------  ------------
Stockholders' equity:
  Common stock; $0.001 par value; 300,000
   shares authorized; 92,117 and 89,630 shares
   issued and outstanding, respectively..............           92            90
  Additional paid-in capital.........................      284,349       235,302
  Notes receivable from stockholders.................         (406)         (406)
  Deferred compensation..............................         (274)         (360)
  Accumulated other comprehensive income (losses)....       34,956          (669)
  Retained earnings..................................      103,763        56,671
                                                       ------------  ------------
     Total stockholders' equity......................      422,480       290,628
                                                       ------------  ------------
     Total liabilities and stockholders' equity......     $604,306      $441,946
                                                       ============  ============`

See accompanying notes to consolidated financial statements.

**SIEBEL SYSTEMS, INC.****Consolidated Statements of Operations and Comprehensive Income (Loss)
               (in thousands, except per share data; unaudited)**

`Three Months Ended   Six Months Ended
                                                June 30,            June 30,
                                          ------------------- -------------------
                                             1999      1998      1999      1998
                                          --------- --------- --------- ---------
Revenues:
  Software............................... $110,005   $67,340  $203,437  $123,342
  Professional services, maintenance
   and other.............................   54,411    22,676    95,029    40,846
                                          --------- --------- --------- ---------
      Total revenues.....................  164,416    90,016   298,466   164,188
                                          --------- --------- --------- ---------
Cost of revenues:
  Software...............................    2,270     2,286     3,601     3,302
  Professional services, maintenance
   and other.............................   34,492    15,227    58,678    26,032
                                          --------- --------- --------- ---------
      Total cost of revenues.............   36,762    17,513    62,279    29,334
                                          --------- --------- --------- ---------
      Gross margin.......................  127,654    72,503   236,187   134,854

Operating expenses:
  Product development....................   16,950    10,534    33,628    19,290
  Sales and marketing....................   60,390    39,569   112,558    74,921
  General and administrative.............   11,397     6,242    19,607    10,809
  Merger related expenses................      --     13,500       --     13,500
                                          --------- --------- --------- ---------
      Total operating expenses...........   88,737    69,845   165,793   118,520
                                          --------- --------- --------- ---------
      Operating income...................   38,917     2,658    70,394    16,334
Other income, net........................    1,959     1,336     4,354     2,928
                                          --------- --------- --------- ---------
      Income before income taxes.........   40,876     3,994    74,748    19,262
Income taxes.............................   15,124     4,804    27,656    10,324
                                          --------- --------- --------- ---------
      Net income (loss)..................  $25,752     ($810)  $47,092    $8,938
                                          ========= ========= ========= =========

Diluted net income (loss) per share......    $0.24    ($0.01)    $0.44     $0.09
                                          ========= ========= ========= =========

Shares used in diluted net income (loss)
 per share computation...................  107,690    86,870   107,239    99,454
                                          ========= ========= ========= =========

Basic net income (loss) per share........    $0.28    ($0.01)    $0.52     $0.10
                                          ========= ========= ========= =========

Shares used in basic net income (loss)
 per share computation...................   91,311    86,870    90,885    86,579
                                          ========= ========= ========= =========

Comprehensive income (loss):
      Net income (loss)..................  $25,752     ($810)  $47,092    $8,938

Other comprehensive income (loss),
  net of tax:
      Foreign currency translation
        adjustments......................      221      (345)      261      (360)
      Unrealized gains on securities.....   35,481      --      35,364       --
                                          --------- --------- --------- ---------
Other comprehensive income (loss)........   35,702      (345)   35,625      (360)
                                          --------- --------- --------- ---------
      Total comprehensive income (loss)..  $61,454   ($1,155)  $82,717    $8,578
                                          ========= ========= ========= =========`

See accompanying notes to consolidated financial statements.

**SIEBEL SYSTEMS, INC.****Consolidated Statements of Cash Flows
                           (in thousands; unaudited)**

`Six Months Ended
                                                                  June 30,
                                                          ----------------------
                                                              1999        1998
                                                          ----------  ----------
Cash flows from operating activities:
   Net income............................................   $47,092      $8,938
   Adjustments to reconcile net income to net cash
    provided by operating activities:
       Compensation related to stock options.............        86         129
       Depreciation and amortization.....................    10,068       5,156
       Loss on disposal of property and equipment........       688         230
       Provision for doubtful accounts and returns.......     2,985       2,728
       Changes in operating assets and liabilities:
         Accounts receivable.............................   (53,421)    (52,032)
         Prepaids and other..............................    (2,580)       (900)
         Accounts payable................................     9,279       1,530
         Accrued expenses................................    (4,169)     24,768
         Income taxes payable............................    15,974         929
         Deferred revenue................................     6,855      18,053
                                                          ----------  ----------

           Net cash provided by operating activities.....    32,857       9,529
                                                          ----------  ----------
Cash flows from investing activities:
   Purchases of property and equipment...................   (14,240)     (7,659)
   Proceeds from sale of property and equipment..........    13,203          --
   Purchases of short-term investments...................   (63,350)    (71,142)
   Sales and maturities of short-term investments........    57,153      50,143
   Other assets..........................................    (3,542)      2,128
                                                          ----------  ----------

           Net cash used in investing activities.........   (10,776)    (26,530)
                                                          ----------  ----------
Cash flows from financing activities:
   Proceeds from issuance of common stock................    30,847      14,214
                                                          ----------  ----------

           Net cash provided by financing activities.....    30,847      14,214
                                                          ----------  ----------
Change in cash and cash equivalents......................    52,928      (2,787)
Adjustment to conform acquired company's year end........        --      (4,140)
Cash and cash equivalents, beginning of period...........    79,961      70,202
                                                          ----------  ----------
Cash and cash equivalents, end of period.................  $132,889     $63,275
                                                          ==========  ==========
Supplemental disclosures of cash flow information:

 Cash paid for income taxes..............................   $11,988      $2,796
                                                          ==========  ==========

 Tax benefit from exercise of stock options..............   $18,200      $4,235
                                                          ==========  ==========`

See accompanying notes to consolidated financial statements.

**SIEBEL SYSTEMS, INC.****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)**

**1. Summary of Significant Accounting Policies**

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, 1998.

In May 1998, Siebel acquired Scopus Technology, Inc. ("Scopus") in
a merger transaction accounted for as a pooling of interests.
Accordingly, all financial information has been restated to reflect the
combined operations of the two companies. See Note 2.

Principles of Consolidation

The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated.

Revenue Recognition

Prior to January 1, 1998, the Company recognized revenue in
accordance with Statement of Position ("SOP") No. 91-1, "Software
Revenue Recognition." Software license revenue was recognized when all
of the following criteria had been met: there was an executed license
agreement, software had been shipped to the customer, no significant
vendor obligations remained, the license fee was fixed and payable
within twelve months and collection was deemed probable.

On January 1, 1998, the Company adopted the provisions of SOP No. 97-
2 "Software Revenue Recognition."  Revenue is recognized under SOP No.
97-2 when persuasive evidence of an arrangement exists and delivery has
occurred, provided the fee is fixed and determinable, collectibility is
probable and the arrangement does not require significant customization
of the software.  Under SOP No. 97-2, revenue on multiple element
arrangements is allocated to the various elements based on fair values
specific to the Company.

Professional services, maintenance and other revenues relate
primarily to consulting services, maintenance and training. Maintenance
revenues are recognized ratably over the term of the maintenance
contract, typically 12 months. Consulting and training revenues are
recognized as the services are performed and are usually on a time and
materials basis.  Such services primarily consist of implementation
services related to the installation of the Company's products and do
not include significant customization to, or development of, the
underlying software code.

Cost of Revenues

Cost of software consists primarily of media, product packaging,
documentation and other production costs, and third-party royalties.

Cost of professional services, maintenance and other consists
primarily of salaries, benefits and allocated overhead costs related to
consulting, training and customer support personnel, including cost of
services provided by third party consultants engaged by the Company.

Use of Estimates

The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents, Short-Term Investments and Marketable Equity  Securities

The Company considers all highly liquid investments with a remaining
maturity of 90 days or less at the date of purchase to be cash
equivalents.  Short-term investments generally consist of highly liquid
municipal securities with remaining maturities in excess of 90 days.
Marketable equity securities include an investment in a publicly traded
company.   The Company has classified its short-term investments and
marketable equity securities as "available for sale."  Such investments
are carried at fair value with unrealized gains and losses, net of
related tax effects, reported within accumulated other comprehensive
income.  Realized gains and losses on available for sale securities are
computed using the specific identification method.

Property and Equipment

Property and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective
assets, generally three to five years. Leasehold improvements are
amortized over the lesser of the lease term or the estimated useful
lives of the improvements, generally seven years.

Software Development Costs

Software development costs associated with new products and
enhancements to existing software products are expensed as incurred until
technological feasibility in the form of a working model has been
established. To date, the time period between the establishment of
technological feasibility and completion of software development has been
short, and no significant development costs have been incurred during that
period.  Accordingly, the Company has not capitalized any software
development costs to date.

Intangible Assets

Included in other assets are various intangible assets, primarily
goodwill related to acquisitions.  These amounts are being amortized over
a three-year period using the straight-line method.  Gross intangible
assets were $7,600,000 and $7,162,000 at June 30, 1999 and December 31,
1998, respectively, and the related accumulated amortization was
$1,994,000 and  $800,000 at June 30, 1999 and December 31, 1998,
respectively.

Advertising

Advertising costs are expensed as incurred. Advertising expense is
included in sales and marketing expense and amounted to $11,883,000 and
$4,598,000 for the six months ended June 30, 1999 and 1998, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for
income taxes.  Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
consolidated financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets are
recognized for deductible temporary differences, net operating loss
carryforwards and credit carryforwards if it is more likely than not that
the tax benefits will be realized. To the extent a deferred tax asset
cannot be recognized under the preceding criteria, allowances must be
established. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.

Net Income Per Share

Basic earnings per share is computed using the weighted average number
of shares of common stock outstanding. Diluted earnings per share is
computed using the weighted average number of shares of common stock and,
when dilutive, common equivalent shares from options to purchase common
stock and warrants outstanding using the treasury stock method.

Employee Stock Option and Purchase Plans

The Company accounts for its stock-based compensation plans using the
intrinsic value method. As such, compensation expense is recorded on the
date of grant if the current market price of the underlying stock exceeds
the exercise price.

Foreign Currency Translation

The Company considers the functional currency of its foreign
subsidiaries to be the local currency, and accordingly, the financial
statements of the foreign subsidiaries are translated into U.S. dollars
using exchange rates in effect at period end for assets and liabilities
and average exchange rates during each reporting period for the results of
operations. Adjustments resulting from translation of foreign subsidiary
financial statements are reported within accumulated other comprehensive
income.  To date, the related tax effects have not been significant.

The Company generally utilizes foreign currency forward contracts to
hedge its exchange risk on foreign currency receivable and intercompany
balances.  While these forward contracts are subject to fluctuations in
value, which are recorded in current results of operations, such
fluctuations are generally offset by the changes in value of the
underlying exposures being hedged.  The Company does not hold or issue
financial instruments for speculative or trading purposes.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of trade accounts
receivable. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral on accounts
receivable, as the majority of the Company's customers are large, well
established companies. The Company maintains reserves for potential credit
losses, but historically has not experienced any significant losses
related to any particular industry or geographic area since the Company's
business is not concentrated on any one particular customer or customer
base.  No single customer accounts for more than 10% of revenues; and the
Company's largest customer base, high technology, which accounted for
approximately 26% of revenues during the six months ended June 30, 1999,
is sufficiently broad that the Company does not consider itself
significantly exposed to concentrations of credit risk.

Fair Value of Financial Instruments

The carrying amount of the Company's cash and cash equivalents, short-
term investments, accounts receivable, and accounts payable approximate
their respective fair values.  Changes in the fair value of the Company's
derivative financial instruments (foreign currency forward contracts) are
generally offset by changes in the value of the underlying exposures being
hedged.  The fair value of the Company's derivative financial instruments
at June 30, 1999 was a gain of approximately $448,000.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including goodwill, 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.  The amount of any
impairment is measured as the difference between the carrying value and
the fair value of the impaired asset.  The Company does not have any long-
lived assets it considers to be impaired.

Comprehensive Income (Loss)

In 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". This
statement establishes rules for the reporting of comprehensive income and
its components.  The Company's comprehensive income includes net income
(loss), foreign currency translation adjustments and unrealized gains and
losses on short-term investments and marketable equity securities and is
presented in the Consolidated Statements of Operations.  The adoption of
SFAS No. 130 had no impact on total stockholders' equity.  Prior year
financial statements have been reclassified to conform to the SFAS No. 130
requirements.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities.  It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value.  If certain conditions are met, a
derivative may be specifically designated and accounted for as (a) a hedge
of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure
to variable cash flows of a forecasted transaction, or (c) a hedge of the
foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.  For a derivative not
designated as a hedging instrument, changes in the fair value of the
derivative are recognized in earnings in the period of change.  This
statement will be effective for all annual and interim periods beginning
after June 15, 2000.  Management does not believe the adoption of SFAS No.
133 will have a material effect on the Company's consolidated financial
position or results of operations.

In December 1998, the Accounting Standards Executive Committee (AcSEC)
of the AICPA issued SOP 98-9, "Software Revenue Recognition with Respect
to Certain Arrangements", which requires recognition of revenue using the
"residual method" in a multiple element arrangement when fair value does
not exist for one or more of the undelivered elements in the arrangement.
 Under the "residual method", the total fair value of the undelivered
elements is deferred and subsequently recognized in accordance with SOP
97-2.  Management does not believe the adoption of SOP 98-9 will have a
material effect on the Company's consolidated financial position or
results of operations.  SOP 98-9 will be effective for the Company for all
annual and interim periods beginning on and after January 1, 2000.

**2. Scopus Merger**

In May, 1998, the Company completed the acquisition of Scopus, a
leading provider of customer service, field service, and call center
software solutions. Under the terms of the agreement, each outstanding
share of Scopus common stock was exchanged for newly issued shares of
common stock of the Company. This resulted in the issuance of
approximately 15.1 million additional shares of the Company's Common
Stock. In addition, all outstanding stock options of Scopus were converted
into the right to acquire the Company's Common Stock at the same exchange
ratio with a corresponding adjustment to the exercise price. In connection
with the merger, the Company incurred direct merger-related expenses of
approximately $13,500,000 consisting of direct transaction fees for
investment bankers, attorneys, accountants and other professional fees of
$9,100,000, integration charges related to duplicate facilities and
equipment of $3,100,000 and other miscellaneous expenses of $1,300,000.
The Company also incurred indirect merger-related expenses of
approximately $1,800,000 for joint sales training and merger-related
marketing costs, which are included within sales and marketing expenses.

The transaction has been accounted for as a pooling of interests.
Accordingly, the financial statements of Siebel have been restated to
include the financial position and results of operations of Scopus for all
periods presented. Prior to the merger with Siebel, Scopus ended its
fiscal year on March 31. The restated financial statements as of December
31, 1997, and for prior periods, include Siebel's results of operations
for those periods and Scopus' results of operations for the fiscal period
ending three months later. Beginning January 1, 1998, the reporting
periods of Siebel and Scopus were conformed, and results of operations
were combined for the calendar periods presented.

The results of operations for the separate companies and the combined
amounts presented in the consolidated financial statements follow:

`Three months
                                       ended
                                     March 31,
     (in thousands, unaudited)          1998
                                    ------------
   Total revenues:
       Siebel.....................      $47,100
       Scopus.....................       27,072
                                    ------------
                                        $74,172
                                    ============

   Net income:
       Siebel.....................       $8,284
       Scopus.....................        1,464
                                    ------------
                                         $9,748
                                    ============`

**3. Net Income Per Share**

The following is a reconciliation of the number of shares used in the
basic and diluted earnings per share computations for the periods
presented:

`Three Months Ended   Six Months Ended
                                                June 30,            June 30,
                                          ------------------- -------------------
(in thousands, unaudited)                    1999      1998      1999      1998
                                          --------- --------- --------- ---------
Shares used in basic net income (loss)
 per share computation...................   91,311    86,870    90,885    86,579
Effect of dilutive potential common
 shares..................................   16,379       --     16,354    12,875
                                          --------- --------- --------- ---------
Shares used in diluted net income (loss)
 per share computation...................  107,690    86,870   107,239    99,454
                                          ========= ========= ========= =========`

The Company excludes potentially dilutive securities from its diluted
net income per share computation when either the exercise price of the
securities exceeds the average fair value of the Company's common stock or
the Company reported net losses because their effect would be anti-
dilutive.  For the three and six months ended June 30, 1999, the Company
excluded 1,887,130 and 2,167,630 employee stock options, respectively,
with a weighted average exercise price of $47.29 and $46.93 per share,
respectively, from the earnings per share computation as their exercise
prices exceeded the fair value of the Company's common stock and,
accordingly, their inclusion would have been anti-dilutive. For the three
and six months ended June 30, 1998, the Company excluded 592,608 and
1,282,700 employee stock options, respectively, with a weighted average
exercise price of $30.35 and $28.08 per share, respectively, from the
earnings per share computation.

**4. Segment and Geographic Information**

The Company and its subsidiaries are principally engaged in the design,
development, marketing and support of Siebel Front Office Applications,
its family of proprietary software applications.  Substantially all
revenues result from the licensing of the Company's software products and
related consulting and customer support (maintenance) services.  The
Company's chief operating decision maker reviews financial information
presented on a consolidated basis, accompanied by disaggregated
information about revenues by geographic region for purposes of making
operating decisions and assessing financial performance.  Accordingly, the
Company considers itself to be in a single industry segment, specifically
the license, implementation and support of its software applications.

**5. Commitments and Contingencies**

In March 1999, the Company entered into a security agreement with a
bank to collateralize certain letters of credit issued by the bank on
behalf of the Company.  Letters of credit for $8,400,000, expiring October
2001, have been issued under this agreement.

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

The statements contained in this Quarterly Report on Form 10-Q (the
"Report") that are not historical are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including statements regarding
the Company's expectations, beliefs, intentions or strategies regarding
the future. 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 the Company's
products, and statements regarding reliance on third parties. All forward-
looking statements included in this document are based on information
available to the Company as of the date hereof, and the Company assumes no
obligation to update any such forward-looking statement. It is important
to note that the Company's actual results could differ materially from
those in such forward-looking statements.

**Overview**

Siebel Systems, Inc. ("Siebel" or the "Company") is the world's
leading supplier of Web-based front office software systems.  Siebel
provides an integrated family of sales, marketing and customer service
application software for field sales, customer service, telesales,
telemarketing, field service, third-party resellers and Internet-based e-
commerce and self service. Siebel Systems' products are designed to meet
the needs of small, medium and large businesses.

In today's increasingly competitive global markets, businesses must
continuously improve their operations. Having spent considerable effort
and resources in previous years automating finance, manufacturing,
distribution, human resources management, and general office operations,
many businesses are now looking to apply the leverage of information
technology to their sales, marketing and customer service processes.
Unlike previous automation efforts which have focused on decreasing
expenses, sales, marketing and customer service information systems focus
primarily on increasing revenues and customer satisfaction.

The Siebel Front Office Applications are comprised of a broad range of
advanced Web-based application software products designed to allow
corporations to deploy comprehensive sales, marketing and customer service
information systems on a global basis. The Company's products  provide
support for a number of frequently interdependent distribution channels,
including direct field sales, telesales, telemarketing, retail, customer
service, call centers, field service, resellers, business partners and
Internet-based e-commerce, marketing and customer service.  The Company's
products provide support for a broad range of industries, business
practices and multiple languages and currencies.

**Results of Operations**

Revenues

Software.  License revenues increased to $110,005,000 for the three
months ended June 30, 1999 from $67,340,000 for the three months ended
June 30, 1998 and decreased as a percentage of total revenues to 67% in
the second quarter 1999 from 75% in the second quarter 1998. License
revenues increased to $203,437,000 for the six months ended June 30, 1999
from $123,342,000 for the six months ended June 30, 1998 and decreased as
a percentage of total revenues to 68% in the fiscal 1999 period from 75%
in the fiscal 1998 period.  License revenues increased in absolute dollars
during this period as compared to the respective prior period due to an
increase in the number of licenses of Siebel applications sold to new and
existing customers and also due to licenses of new modules, released with
the latest version of Siebel applications, sold to existing users of
Siebel base applications.  The increase in the number of licenses was
primarily due to continued demand by new and existing customers for
products in the Siebel applications family both in the United States and
internationally.  The Company expects that license revenues will remain
the same or decrease as a percentage of total revenues as the Company's
maintenance revenues continue to grow as a result of increases in the
installed base of customers receiving maintenance and due to the Company's
expansion of its consulting organization to meet anticipated customer
demands in connection with product implementation.

Professional Services, Maintenance and Other.  Professional services,
maintenance and other revenues increased to $54,411,000 for the three
months ended June 30, 1999 from $22,676,000 for the three months ended
June 30, 1998 and increased as a percentage of total revenues to 33% in
the second quarter 1999 from 25% in the second quarter 1998. Professional
services, maintenance and other revenues increased to $95,029,000 for the
six months ended June 30, 1999 from $40,846,000 for the six months ended
June 30, 1998 and increased as a percentage of total revenues to 32% in
the fiscal 1999 period from 25% in the fiscal 1998 period.  The increase
in the absolute dollar amount was due to growth in the Company's
consulting business and growth in the installed base of customers with a
maintenance contract.  First-year maintenance is typically sold with the
related software license.  Revenue related to such maintenance is deferred
based on vendor-specific objective evidence of fair value and amortized
over the term of the maintenance contract, typically 12 months.  The
Company expects that professional services, maintenance and other revenues
will remain the same or increase as a percentage of total revenues due to
increased maintenance revenues derived from the Company's growing
installed base and due to the Company's expansion of its consulting
organization to meet anticipated customer demands in connection with
product implementation.

The Company markets its products in the United States through its
direct sales force and internationally through its sales force and through
distributors which are primarily in Japan, Latin America, South Africa and
Asia.  International revenues accounted for 33% and 31% of license
revenues for the six months ended June 30, 1999 and 1998, 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.

Cost of Revenues

Software.  Cost of software license revenues includes third party
software royalties, product packaging, documentation and production. Cost
of license revenues decreased to $2,270,000 for the three months ended
June 30, 1999 from $2,286,000 for the three months ended June 30, 1998 and
as a percentage of total revenues was less than 3% for each of the three
month periods ended June 30, 1999 and 1998.  Cost of license revenues
increased to $3,601,000 for the six months ended June 30, 1999 from
$3,302,000 for the six months ended June 30, 1998 and as a percentage of
total revenues was less than 3% for each of the six month periods ended
June 30, 1999 and 1998.  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.

Professional Services, Maintenance and Other.  Cost of professional
services, maintenance and other revenues consists primarily of personnel,
facilities and systems costs incurred in providing consulting and customer
support. Cost of professional services, maintenance and other revenues
increased to $34,492,000 for the three months ended June 30, 1999 from
$15,227,000 for the three months ended June 30, 1998 and increased as a
percentage of total revenues to 21% in the fiscal 1999 period from 17% in
the fiscal 1998 period.  Cost of professional services, maintenance and
other revenues increased to $58,678,000 for the six months ended June 30,
1999 from $26,032,000 for the six months ended June 30, 1998 and increased
as a percentage of total revenues to 20% in the fiscal 1999 period from
16% in the fiscal 1998 period.  The increase in the absolute dollar amount
reflects the effect of fixed costs resulting from the Company's expansion
of its maintenance and support organization and growth in the Company's
consulting business.  The Company expects that professional services,
maintenance and other costs will continue to increase in absolute dollar
amount as the Company expands both its customer support organization to
support a growing installed base and its consulting 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.

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 $16,950,000
for the three months ended June 30, 1999 from $10,534,000 for the three
months ended June 30, 1998 and decreased as a percentage of total revenues
to 10% in the fiscal 1999 period from 12% in the fiscal 1998 period.
Product development expenses increased to $33,628,000 for the six months
ended June 30, 1999 from $19,290,000 for the six months ended June 30,
1998 and decreased as a percentage of total revenues to 11% in the fiscal
1999 period from 12% in the fiscal 1998 period.  The increase in the
absolute dollar amount of product development expenses was 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 in the first six
months of 1999.  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.

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 $60,390,000 for the three months
ended June 30, 1999 from $39,569,000 for the three months ended June 30,
1998 and decreased as a percentage of total revenues to 37% in the fiscal
1999 period from 44% in the fiscal 1998 period.  Sales and marketing
expenses increased to $112,558,000 for the six months ended June 30, 1999
from $74,921,000 for the six months ended June 30, 1998 and decreased as a
percentage of total revenues to 38% in the fiscal 1999 period from 46% in
the fiscal 1998 period.  The increase in the dollar amount of sales and
marketing expenses reflects primarily the hiring of additional sales and
marketing personnel and costs associated with expanded promotional
activities.  The Company expects that sales and marketing expenses will
continue to increase in absolute dollars as the Company continues to
expand its sales and marketing efforts, establishes additional sales
offices in the United States and internationally and increases its
promotional activities. These expenses are expected to remain at a similar
percentage of total revenues as in the first six months of 1999.

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 $11,397,000 for the three months ended June 30, 1999 from
$6,242,000 for the three months ended June 30, 1998 and remained as a
percentage of total revenues at 7% in each of the fiscal 1999 and 1998
periods. General and administrative expenses increased to $19,607,000 for
the six months ended June 30, 1999 from $10,809,000 for the six months
ended June 30, 1998 and remained as a percentage of total revenues at 7%
in each of the fiscal 1999 and 1998 periods.  The increase in the absolute
dollar amount of general and administrative expenses was 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 dollars as a result of the continued expansion of the Company's
administrative staff and facilities to support growing operations.  The
Company anticipates that its general and administrative expenses as a
percentage of total revenues should remain at a similar percentage as in
the first six months of 1999.

Merger related expenses. In connection with the merger with Scopus, the
Company incurred direct merger-related expenses of approximately
$13,500,000 consisting of direct transaction fees for investment bankers,
attorneys, accountants and other professional fees of $9,100,000,
integration charges related to duplicate facilities and equipment of
$3,100,000 and other miscellaneous expenses of $1,300,000. The Company
also incurred indirect merger-related expenses of approximately $1,800,000
for joint sales training and merger-related marketing costs, which are
included within sales and marketing expenses.

There were no merger-related expenses in the three and six months ended
June 30, 1999.

Operating Income and Operating Margin

Operating income increased to $38,917,000 for the three months ended
June 30, 1999 from $2,658,000 for the three months ended June 30, 1998 and
operating margin increased to 24% in the fiscal 1999 period from 3% in the
fiscal 1998 period.  For the six months ended June 30, 1999 operating
income increased to $70,394,000 from $16,334,000 for the six months ended
June 30, 1998 and operating margin increased to 24% in the fiscal 1999
period from 10% in the fiscal 1998 period.  These increases in operating
income and margin were primarily due to $13,500,000 of merger-related
expenses incurred in the three months ended June 30, 1998, not recurring
in 1999.  Excluding the merger-related expenses, operating income for the
six months ended June 30, 1999 increased to $70,394,000 from $31,618,000
for the six months ended June 30, 1998 and operating margin increased to
24% in the fiscal 1999 period from 19% in the fiscal 1998 period. This
increase in operating income and margin was due to increases in license
revenues without a proportional increase in cost, particularly costs
associated with the hiring of new personnel.  The Company expects
operating margins, net of merger-related expenses, to decrease as compared
to operating margin for the first six months of 1999 as it continues to
invest heavily in sales, marketing, development and support activities
globally.

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 are comprised primarily of federal and state taxes. The
provision for income taxes was $15,124,000 and $4,804,000 and
approximately 37% and 120%, respectively, for the three months ended June
30, 1999 and 1998, respectively. The provision for income taxes was
$27,656,000 and $10,324,000 and approximately 37% and 54%, respectively,
for the six months ended June 30, 1999 and 1998 respectively. The
effective tax rate in 1998 was affected by the non-deductibility of
certain merger-related expenses.  The Company expects its effective tax
rate for the remainder of 1999 to be approximately 37%.

Net Income (Loss)

The Company had net income of $25,752,000 for the three months ended
June 30, 1999 compared to a net loss of $810,000 for the three months
ended June 30, 1998. Diluted net income per share was $0.24 per share in
the second quarter of 1999 compared to a net loss of $0.01 per share in
the comparable period in 1998.  Net income was 16% as a percentage of
total revenues for the three months ended June 30, 1999 compared to a net
loss of 1% for the three months ended June 30, 1998.  The Company had net
income of $47,092,000 for the six months ended June 30, 1999 compared to
net income of $8,938,000 for the six months ended June 30, 1998. Diluted
net income per share was $0.44 per share in the second quarter of 1999
compared to net income of $0.09 per share in the comparable period in
1998.  Net income increased as a percentage of total revenues to 16% in
the six months ended June 30, 1999 from 5% in the six months ended June
30, 1998, due primarily to the effect of the merger-related expenses in
1998.

Liquidity and Capital Resources

The Company's cash, cash equivalents and short-term investments
increased to $289,870,000 as of June 30, 1999 from $231,849,000 as of
December 31, 1998, representing approximately 48% and 52% of total assets,
respectively.  This increase was primarily attributable to net income,
sale of certain property and equipment, increases in accounts payable,
income taxes payable and deferred revenue and issuances of common stock
under the Company's stock option plans, partially offset by an increase in
accounts receivable, purchases of property and equipment and a decrease in
accrued expenses.  The Company's days sales outstanding (DSO) in accounts
receivable was 95 as of June 30, 1999, compared with 90 as of December 31,
1998.  The Company expects DSO to fluctuate significantly in future
quarters.

As of August 2, 1999, the fair market value of the Company's marketable
equity securities was $38,318,000.

The Company has used fully serviced office suites on a month-to-month
rental basis to establish its presence in new locations.  As these
locations expand, the Company expects to transition more of the office
suites to leased space.  This transition will involve 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 has already built-out a number of leased
facilities, both domestically and internationally, and expects this trend
to continue.

Capital expenditures of the nature described above are expected to
increase during the remainder of 1999 and 2000.

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.

Year 2000 Preparedness

Many existing computer programs and systems use only two-digit fields
to identify the year, e.g. 85=1985, and they are unable to process date
and time information between the twentieth and twenty-first centuries.
Accordingly, computer programs and software may need to be modified prior
to the year 2000 ("Y2K") in order to remain functional.  Failure to
complete the necessary modifications could cause a disruption or failure
of such program and system.

The Company's Y2K initiative has been managed by a team of internal
staff and third-party consultants specializing in Y2K issues.  The team's
activities are designed to identify potential Y2K problems and to ensure
that there is no adverse effect on our core business operations and that
transactions with clients, suppliers and financial institutions are fully
supported.  The Company's efforts have focused on three areas:  (i) the
Company's products, (ii) internal operating systems and (iii) interfaces
with third-party systems.

o   Products. The Company has put in place a certification program to
verify the Y2K compliance of its products.  Beginning with version
4.0 (Siebel 98), the Company's programs have been designed to be Y2K
compliant.  The Company has applied a number of test approaches and
criteria to each of its products beginning with Siebel 98 and
believes that all such products are Y2K compliant. While we believe
that our currently developed and actively marketed products are Y2K
compliant for significantly all functionality, our software products
could contain errors or defects relating to Y2K. The Company has
advised certain of its customers that internal testing of Y2K
compliance should be conducted to ensure that the operations managed
by Siebel products continue without disruption. If such
modifications and conversions are not made, or are not completed in
a timely manner, the Y2K issue could have a material adverse impact
on our operations.  The costs incurred to test the Company's
products for Y2K compliance were incurred as normal product
development expenses.  Any additional expenses are expected to be
minimal.

o Internal Operating Systems.  The Company has implemented a plan to
test all internal operating systems, such as computer hardware and
software, telephone/PBX systems, fax machines, facilities systems
such as building access and other miscellaneous systems on a
worldwide basis.  The Company has approached its Y2K internal
readiness program in the following three phases:  (i) assessment,
(ii) planning and (iii) implementation.  These phases included such
individual steps as taking an inventory of the Company's operating
systems prioritized by risk, identifying failure dates, defining a
solution strategy, estimating repair costs, identifying specific
tasks necessary to ensure readiness, determining resource
requirements and allocations, and finally, testing and fixing the
operating systems as well as putting in place contingency plans for
operating systems that have a high impact on the Company's business.
 The plan has been executed and the Company does not believe that
the Y2K issue will pose significant operational problems to our
internal operating systems. Costs incurred to complete this process
have not been material.

o Third-Party Systems.  The Company has developed a Y2K process for
dealing with its key suppliers, distributors, vendors, system
integrators and other partners.  The Company has been in contact
with its key third-party relationships regarding their Y2K
compliance. The Company has received responses from its critical
third-party relationships, who have stated that they expect to
address all of their significant Y2K issues in a timely manner. The
Company is working to identify and analyze the most reasonably
likely worst case scenarios for key third party relationships
affected by Y2K.  These scenarios could include possible
infrastructure collapse, the failure of water and power supplies,
major transportation disruptions and failures of communications or
financial systems - any of which could have a material adverse
effect on the Company's ability to deliver its products and services
to its customers.  While the Company has contingency plans in place
to address most issues under its control, an infrastructure problem
outside of its control could result in a delay in product shipments,
depending on the nature and severity of the problems.   The Company
has analyzed its key third-party systems and believes all of them to
be largely Y2K compliant.  Costs incurred to complete this process
have not been material.

Although the Company has spent a large amount of time and resource to
address potential Y2K problems, there is no assurance that the Company
will be successful in its efforts to identify and address all Y2K issues.
 Even though the Company has acted in a timely manner to complete all of
its assessments and planned solutions, some problems may not have been
identified or corrected in time to prevent material adverse consequences
to the Company.  The discussion above includes forward-looking statements
regarding Y2K and is based on the Company's best estimates given
information that is currently available and is subject to change.  As the
Company continues to progress with its Y2K initiatives, it may discover
that actual results will differ materially from these estimates.  See
"Factors Affecting Operating Results -- Year 2000 Problems may cause an
Interruption in our Business".

Factors Affecting Operating Results

A Limited Operating History Upon Which to Evaluate our Business.  We
began operations in July 1993. We first shipped our Siebel Sales
Enterprise product in April 1995 and our Siebel Service Enterprise product
in December 1996. Subsequent versions of these products were first shipped
in 1996 and 1997. Accordingly, we have a limited operating history upon
which you may evaluate our business and prospects. You should evaluate our
prospects in light of the risks, expenses and uncertainties that companies
in their early stage of development frequently encounter.

Net Revenue and Operating Results may Fluctuate.  Our net revenue and
operating results may fluctuate significantly because of a number of
factors, many of which are outside of our control. These factors include:

o   Level of product and price competition;

o   Length of our sales cycle and customer purchasing patterns;

o   The size and timing of individual license transactions;

o   Delay or deferral of customer implementations of our products;

o   Success in expanding our customer support organization, direct
sales force and indirect distribution channels;

o   Timing of new product introductions and product enhancements;

o   Appropriate mix of products and services sold;

o   Levels of international sales;

o   Activities of and acquisitions by competitors;

o   Timing of new hires and the allocation of our resources;

o   Changes in the economy and foreign currency exchange rates;
and

o   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 on the
preceding factors, we may experience a shortfall in revenue or earnings or
otherwise fail to meet public market expectations, which could materially
adversely affect our business, financial condition and the market price of
our common stock.

Quarterly Operating Results may Fluctuate.  Our net revenue and
operating results may vary drastically from quarter to quarter. The main
factors, which may affect these fluctuations, are:

o   The discretionary nature of our customer's purchase and budget
cycles;

o   The size and complexity of our license transactions;

o   The potential delays in recognizing revenue from license
transactions;

o   The timing of new product releases;

o   Seasonal variations in operating results; and

o   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 their 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 two to eighteen 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
operating results could be materially and adversely affected. Although we
have not experienced significant seasonal variations in operating results,
such variations could develop in the future.

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 useful. You
should not rely on these comparisons as indications of future performance.
It is likely that our future quarterly operating results from time to time
will not meet the expectations of market analysts or investors, which
would likely have an adverse effect on the price of our common stock.

Reliance on Strategic Relationship with Systems Integrators.  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 a non-exclusive strategic
relationship with Andersen Consulting, one of our principal stockholders.
 We have also entered into significant relationships with other third-
party systems integrators such as PriceWaterhouseCoopers and Deloitte
Consulting. A significant portion of our revenues have historically been
derived from customers for whom Andersen Consulting, or another systems
integrator with which we have a significant relationship, have been
engaged to provide system integration services. Any deterioration of our
relationship with these significant third-party systems integrators could
have a material adverse effect on our business, financial condition and
results of operations. We also have relationships with Compaq Computer
Corporation, IBM Corporation, Microsoft Corporation and Sun Microsystems,
among others. Our failure to maintain existing relationships, or to
establish new relationships in the future, could have a material adverse
effect on our business, results of operations and financial condition.

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

The Internet Presents Unique Risks.  The Siebel Front Office
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 which are compatible with the Internet. We
cannot predict with any assurance whether the Internet will be a viable
commercial marketplace or 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. We may
not be able to effectively compete in the Internet-related products and
services market.

Critical issues concerning the commercial use of the Internet,
including security, 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, operating results and financial condition could be materially
and adversely affected.

A Competitive and Rapidly Changing Market.  The market for Web-based
application 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. 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.

Customers may not Successfully Implement our Products.  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 product
concurrently. If existing customers have difficulty further deploying
Siebel Front Office Applications or for any other reason are not satisfied
with Siebel Front Office Applications, our business, operating results and
financial condition could be materially and adversely affected.

A Limited Number of Products for our License Revenues.  In 1998 and the
first six months of 1999, a substantial majority of our revenues were
attributable to sales of Siebel Front Office Applications. We expect that
such product family and related consulting, maintenance and training
services will continue to account for a majority of our future revenues.
As a result, factors adversely affecting the pricing of or demand for such
products, such as competition or technological change, could have a
material adverse effect on our business, operating results and financial
condition.

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. You should not rely on prior sales and
implementation cycles 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 substantial reengineering
efforts that may be performed by the customer or third-party system
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 front office 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 which may cause significant delays, over many of which
we have little or no control.  These factors include (i) the size and
complexity of the overall project and (ii) 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 and operations and cause our
operating results to vary significantly from quarter to quarter.

Success Requires us to Continue to Expand our Direct Sales Force and
Technical Support Staff.  We have expanded the distribution of our
products in recent years. This expansion has placed new and increased
demands on our direct sales force and technical and sales support staff.
Our ability to achieve revenue growth in the future will depend, in part,
on our success in recruiting and training sufficient direct sales,
technical and customer support personnel. Although we invest significant
resources to expand our direct sales force and our technical and customer
support staff, there is only a limited number of qualified personnel in
these areas.  Therefore, we may not be able to expand our direct sales
force and technical support staff as necessary to support our growing
operations. In addition, such expansion may not result in increased
revenues. Any failure to expand our direct sales force or technical and
customer support staff or to expand our distribution channels could
materially and adversely affect our business, operating results and
financial condition.

Expanding Distribution May Create Additional Risks.  We have recently
entered into a number of relationships with resellers in order to obtain
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.  Any failure to minimize channel conflicts
could materially and adversely affect our business, operating results and
financial condition.

Revenue is Concentrated in a Relatively Small Number of Customers.  Our
success depends on maintaining relationships with our existing customers.
A relatively small number of customers have accounted for a significant
percentage of our revenues.  For 1998 and the six months ended June 30,
1999, license revenues from our ten largest customers accounted for 22%
and 34% of total revenues, respectively.  We expect that licenses of our
products to a limited number of customers will continue to account for a
significant percentage of revenue for the foreseeable future. The loss of
a small number of customers or any reduction or delay in orders by any
such customer, or failure to successfully market our products to new
customers could have a material adverse effect on our business, financial
condition and results of operations.

Success Requires 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. We may not be successful in developing, marketing and releasing
new products or new versions of the Siebel Front Office 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 the Siebel Front Office 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 forgo purchases of our products, which could have a material adverse
effect on our business, financial condition and results of operations.

Success Requires us to Effectively Compete in the Front Office Systems
Market.  Our products target the front office systems market. This market
is highly competitive, rapidly changing and significantly affected by new
product introductions. 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 to address this market. Many of our customers and
potential customers have attempted to develop front office systems, in-
house either alone or with the help of systems integrators. We may not be
able to compete successfully against such internal development efforts.

We rely on a number of systems consulting and systems integration firms
for a substantial portion of implementation and other customer support
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.

A large number of personal, departmental, enterprise-wide and other
products exist in the front office software market. Companies (Products)
such as Symantec (ACT!), Borealis Corporation (Arsenal), Saratoga Systems
(Avenue), Aurum (BaanFrontOffice) (acquired by Baan Company N.V.),
Corepoint (Corepoint Field Sales, Corepoint Telesales), Clarify Inc.
(ClearSales, ClearSupport), ONYX (Customer Center), Epiphany (e.4 System),
Silknet (eBusiness System), IMA (EDGE), Rubric (EMA), Applix (Enterprise),
Dendrite International, Inc. (Force One), Marketrieve Company (Marketrieve
PLUS), Firstwave Technologies, Inc. (Netgain), Broadvision, Inc. (One-To-
One Application System), Oracle Corporation (Oracle Field Sales Online,
Oracle Service and Oracle Call, Front Office Application), Relavis
(OverQuota), Pivotal Software, Inc. (Relationship), SAP AG (Sales Force
Automation Solution), SalesLogix (SalesLogix), Portera (ServicePort), MEI
(UniverSell), Exchange Applications (ValEX) and The Vantive Corporation
(Vantive Enterprise) 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 front
office 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
adversely affect our business, operating results and financial condition.
If we cannot compete successfully against current and future competitors
or overcome competitive pressures, our business, operating results and
financial condition may be adversely affected.

If we do not Maintain our Relationship with Third-Party Vendors,
Interruptions in the Supply of Our Products may result.  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. 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. The
absence of or any significant delay in the replacement of that
functionality could materially adversely affect our sales.

Software Errors or Defects Could reduce Revenues.  Software products
frequently contain errors or failures, especially when first introduced or
when new versions are released.  Although we conduct extensive product
testing during product development, we have been forced to delay the
commercial release of products until the correction of software problems.
We could lose revenues as a result of software errors or defects. Our
products are intended for use in sales 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, operating
results and financial condition.

If we do not Successfully Manage Our Growth, our Business may be
Negatively Impacted.  Our business has grown rapidly in recent years. This
growth has placed a significant strain on our management systems and
resources.  To manage future growth we must continue to (i) improve our
financial and management controls, reporting systems and procedures on a
timely basis and (ii) expand, train and manage our employee work force. If
we fail to manage our growth effectively, our business, financial
condition and results of operations could be materially and adversely
affected.

The Loss of our 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 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.

The Protection of Our Proprietary Information is Limited.  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 Front Office 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 money 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, operating results and financial condition.

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 adversely affect our business, operating results and financial
condition.

Year 2000 Problems may cause an Interruption in our Business.  Many
existing computer programs and systems use only two-digit fields to
identify the year, e.g. 85=1985, and they are unable to process date and
time information between the twentieth and twenty-first centuries.
Accordingly, computer programs and software may need to be modified prior
to the year 2000 in order to remain functional. Although the Company has
spent a large amount of time and resource to address potential Y2K
problems, there is no assurance that the Company will be successful in its
efforts to identify and address all Y2K issues.  Failure to complete the
necessary modifications could cause a disruption or failure of such
program and system. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Year 2000 Preparedness".

International Operations involve Unique Risks.  Our revenues are
primarily derived from large multi-national 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 Front
Office Applications. If we do not, our international sales will be
limited, and our business, operating results and financial condition 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 and
results of operations. In situations where direct sales are denominated in
foreign currency, any fluctuation in foreign currency or the exchange rate
may adversely affect our business, financial condition and results of
operations. The Company generally manages its foreign currency exchange
rate risk by entering into contracts to sell foreign currency at the time
a foreign currency receivable is generated.  When the foreign currency
receivable is collected, the contract is liquidated, thereby converting
the foreign currency to US dollars and mitigating the exchange rate risk.
 In certain instances, the Company has not hedged foreign currency
receivables when the forward contracts in the relevant currency were not
readily available or were not cost effective.

Certain Stockholders may be able to Exercise Control over Matters
Requiring Stockholders 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 June 30, 1999.
While these stockholders do not hold a majority of the Company's
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.

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, 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 which have affected the
market price for many companies in industries similar or related to ours
and which 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.

Certain 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. The
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 instituted a classified
Board of Directors in our Certificate of Incorporation. 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 3.   Quantitative and Qualitative Disclosures About Market Risk**

The tables below provide information about the Company's derivative
financial instruments and financial instruments that are subject to market
risk.  These include foreign currency forward contracts used to hedge
foreign currency receivables and intercompany balances, which are subject
to exchange rate risk, and available-for-sale short-term investments,
which are subject to interest rate risk.  The Company does not consider
its cash equivalents to be subject to interest rate risk due to their
short maturities.

The Company generally manages its foreign currency exchange rate risk
by entering into contracts to sell foreign currency at the time a foreign
currency receivable is generated.  When the foreign currency receivable is
collected, the contract is liquidated, thereby converting the foreign
currency to US dollars and mitigating the exchange rate risk.

The Company manages its interest rate risk by maintaining an investment
portfolio with debt instruments of high credit quality and relatively
short average maturities.  The Company also manages interest rate risk by
maintaining sufficient cash and cash equivalent balances such that it is
typically able to hold its investments to maturity.

The Company is exposed to equity price risks on its marketable equity
securities.  This investment is in a publicly-traded company in the high-
technology industry sector.  The Company typically does not attempt to
reduce or eliminate its market exposure on these securities.  A 10%
adverse change in the equity price would result in an approximate $6.3
million decrease in the fair value of the Company's marketable equity
securities as of June 30, 1999.  The increase in marketable equity
securities compared to 1998 primarily reflects the unrealized market
appreciation.

The following summarizes the Company's foreign currency forward
contracts, all of which mature in 1999, by currency, as of June 30, 1999.
 Contract amounts are representative of the expected payments to be made
under these instruments (unaudited, in thousands):

`Contract                   Fair
                                          Amount       Contract   Value at
                                          (Local        Amount    June 30,
                                        Currency)        (US$)    1999 (US$)
                                     ----------------  ---------  ---------
German marks (contracts to pay
  DM/receive US$).................          DM  4,930    $2,649        $53

 British pounds (contracts to pay
 (Pounds)/receive US$)............    (Pounds)  2,341    $3,810       $118

Japanese yen (contracts to pay
 (Yen)/receive US$)...............    (Yen) 2,366,100   $19,807       $277`

The following summarizes the Company's short-term investments and the
weighted average yields, as of June 30, 1999 (unaudited, in thousands):

`Expected maturity date
                         -----------------------------------------------------
                                                                       There-
                           1999     2000     2001     2002     2003    after
                         -------- -------- -------- -------- -------- --------
US treasury securities..      --   $3,920   $1,987   $3,011   $3,992       --
Wtd. Avg. Yld...........             6.62%    5.88%    5.71%    5.77%

Municipal securities.... $17,446  $50,883  $37,411  $26,424   $5,375   $2,023
Wtd. Avg. Yld...........    3.75%    3.87%    3.78%    4.28%    4.39%    4.38%

Corporate bonds.........      --       --       --   $4,509       --       --
Wtd. Avg. Yld...........                               5.93%`

**Part II  -  Other Information**

**Item 1:  Legal Proceedings**

In June 1996, Debra Christoffers, a former sales person of the Company,
filed a complaint for wrongful termination against the Company and Thomas
Siebel, in the Superior Court of California, County of San Mateo.  On May
15, 1998, a jury returned verdicts in favor of Mr. Siebel and against the
Company for an immaterial amount.  Both the plaintiff and the Company have
filed notices of appeal.  The Company intends to pursue the appeal
vigorously and believes that the ultimate outcome of the action will not
have a material effect on the Company's financial position or results of
operations, although there can be no assurance as to the outcome of such
litigation.

In March 1998, a purported class action complaint was filed against the
Company, Scopus Technology, Inc. ("Scopus") and the members of the
Scopus board of directors in the Superior Court of California, County of
Alameda, by a person claiming to be a Scopus stockholder.  Scopus became a
wholly owned subsidiary of the Company on May 18, 1998, upon the merger of
a subsidiary of the Company with and into Scopus (the "Merger").  The
court sustained defendants' demurrers to the amended complaint and
dismissed the lawsuit with prejudice in June 1999.

**Item 2:  Changes in Securities and Use of Proceeds**

The effective date of the Company's first registration statement, filed
on Form S-1 under the Securities Act of 1933 (No. 333-12061) relating to
the Company's initial public offering of its Common Stock, was June 27,
1996. There has been no change to the disclosure contained in the
Company's report on Form 10-Q for the quarter ended March 31, 1998
regarding the use of proceeds generated by the Company's initial public
offering of its Common Stock.

**Item 4:  Submission of Matters to a Vote of Security Holders**

The Company's annual meeting of stockholders was held on April 27,
1999 (the "Annual Meeting").

The following matters were considered and voted upon at the Annual
Meeting:

The first matter related to the election of two director nominees,
Thomas M. Siebel and James C. Gaither as Directors to serve until the 2002
annual meeting of stockholders. The votes cast and withheld for such
nominees were as follows:

`Name                           For                     Withheld
     -----------------               ------------               ------------
     Thomas M. Siebel                 76,667,950                   434,979
     James C. Gaither                 76,661,357                   441,572`

The second matter related to the ratification of the appointment of
KPMG LLP as independent auditors of the Company for its fiscal year ending
December 31, 1999. 77,072,478 votes were cast for ratification and 16,966
votes were cast against ratification. There were 13,485 abstentions and no
broker non-votes.

Based on these voting results, each of the directors nominated was
elected and the second matter was approved.

**Item 6:  Exhibits and Reports on Form 8-K**

**(a) 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.(4)

3.1    Amended and Restated Certificate of Incorporation of the Registrant, as
       amended.(6)

3.2    Bylaws of the Registrant.(1)

4.1    Reference is made to Exhibits 3.1 and 3.2.

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.(1)

10.1   Registrant's 1996 Equity Incentive Plan, as amended.(3)

10.2   Registrant's Employee Stock Purchase Plan, as amended.(3)

10.3   Form of Indemnity Agreement entered into between the Registrant and
       its officers and directors.(1)

10.4   Registrant's Deferred Compensation Plan, dated January 10,1997.(5)

10.5   Master Alliance Agreement, dated March 17, 1995, between the Registrant
       and Andersen Consulting  LLP.(1)(2)

10.6   Assignment Agreement, dated September 20, 1995, by and between the
       Registrant and Thomas M. Siebel.(1)

10.7   Lease Agreement, dated June 4, 1996, by and between the Registrant and
       Crossroad Associates and Clocktower Associates.(1)

27.1   Financial Data Schedule.(7)

_____________________

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

(4) Incorporated by reference to exhibit 99.1 of the Registrant's Current Report
    on Form 8-K filed by the Registrant on March 16, 1998.

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

(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
    the year ended December 31, 1997.

(7) Filed herewith.`

**(b) Reports on Form 8-K**

None

**SIEBEL SYSTEMS, INC.**

**SIGNATURES**

Pursuant to the requirement of the Security 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.

| |             
| | ------------
| | (Registrant)

Dated: August 12, 1999



| |     |                     
| | --- | --------------------
| | By: | /s/ Howard H. Graham

| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                     
| | Howard H. Graham                                                                                                                                    
| | Senior Vice President Finance and
                                    Administration and
                                    Chief Financial Officer
| | (Principal Financial Officer)                                                                                                                       



| |     |                    
| | --- | -------------------
| | By: | /s/ Paul J. Gifford

| |                               
| | ------------------------------
| |                               
| | Paul J. Gifford               
| | Vice President, Controller    
| | (Principal Accounting Officer)

``