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

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                 OR

       [_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                                        
         FOR THE TRANSITION PERIOD FROM _____________ TO _____________
                                        
                    COMMISSION FILE NUMBER: 0-20725


                             SIEBEL SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)


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


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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes [X]  No [_]

  The number of shares outstanding of the registrant's common stock, par value
           $.001 per share, as of November 2, 1998, was 88,738,630.
<PAGE>
 
                             SIEBEL SYSTEMS, INC.

                                   FORM 10-Q

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                               TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION                                              PAGE
                                                                            ----
         Item 1.  Financial Statements

                  a) Consolidated Balance Sheets as of September 30, 
                     1998 and December 31, 1997                               3
                                                                            
                  b) Consolidated Statements of Operations for the three
                     and nine months ended September 30, 1998 and 1997        4
                                                                            
                  c) Consolidated Statements of Cash Flows
                     for the nine months ended September 30, 1998 and 1997    5
                                                                            
                  d) Notes to Consolidated Financial Statements               6

         Item 2.  Management's Discussion and Analysis of Financial 
                  Condition and Results of Operations                        11

PART II. OTHER INFORMATION
 
         Item 1.  Legal Proceedings                                          19
                                                                   
         Item 2.  Changes in Securities and Use of Proceeds                  19
                                                                   
         Item 5.  Other Information                                          19
                                                                   
         Item 6.  Exhibits and Reports on Form 8-K                           19
 

SIGNATURES                                                                   21

                                       2
<PAGE>
 
                         PART I. FINANCIAL INFORMATION
                         Item 1. Financial Statements
 
                             SIEBEL SYSTEMS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except per share data; unaudited)
 
<TABLE> 
<CAPTION> 
                                                                September 30,               December 31,
                                                                   1998                         1997
                                                               -------------                ------------
<S>                                                            <C>                          <C> 
                                    Assets
                                    ------
Current assets:
     Cash and cash equivalents                                $      105,700               $       70,202
     Short-term investments                                          123,476                       91,999
     Accounts receivable, net                                        107,849                       63,056
     Deferred income taxes                                             4,778                        4,778
     Prepaids and other                                                8,033                        6,701
                                                              --------------               --------------
          Total current assets                                       349,836                      236,736
                    
Property and equipment, net                                           30,168                       24,843
Other assets                                                           5,697                        6,585
                                                              --------------               --------------

          Total assets                                        $      385,701               $      268,164
                                                              ==============               ==============
 
                     Liabilities and Stockholders' Equity
                     ------------------------------------

Current liabilities:
     Accounts payable                                         $        5,554               $        5,684
     Accrued expenses                                                 71,565                       28,362
     Income taxes payable                                              8,401                        2,345
     Deferred revenue                                                 43,958                       22,243
                                                              --------------               --------------

          Total current liabilities                                  129,478                       58,634
 
     Deferred income taxes                                               162                          162
                                                              --------------               --------------
          Total liabilities                                          129,640                       58,796
                                                              --------------               --------------
 
Stockholders' equity:
     Common stock; $.001 par value; 300,000 shares 
       authorized; 88,402 and 85,864 shares issued 
       and outstanding, respectively                                      88                           86
     Additional paid-in capital                                      220,509                      195,432
     Notes receivable from stockholders                                 (406)                        (406)
     Deferred compensation                                              (426)                        (639)
     Accumulated other comprehensive losses                             (501)                        (365)
     Retained earnings                                                36,797                       15,260
                                                              --------------               --------------

          Total stockholders' equity                                 256,061                      209,368
                                                              --------------               --------------

          Total liabilities and stockholders' equity          $      385,701               $      268,164
                                                              ==============               ==============
</TABLE> 

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                             SIEBEL SYSTEMS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share data; unaudited)
 
<TABLE> 
<CAPTION> 
                                                         Three Months Ended            Nine Months Ended
                                                            September 30,                 September 30,
                                                      ------------------------      --------------------------
                                                         1998          1997            1998            1997
                                                      --------       --------        ---------       ---------
<S>                                                   <C>            <C>             <C>             <C> 
Revenues:                                     
     Software                                         $ 77,225       $ 41,486        $ 200,567       $ 104,435 
     Maintenance, consulting and other                  26,969         13,750           67,815          33,962
                                                      --------       --------        ---------       ---------

          Total revenues                               104,194         55,236          268,382         138,397
                                                      --------       --------        ---------       ---------
Cost of revenues:                             
     Software                                              993          1,346            4,295           2,843
     Maintenance, consulting and other                  16,698          7,826           42,730          19,654
                                                      --------       --------        ---------       ---------

          Total cost of revenues                        17,691          9,172           47,025          22,497
                                                      --------       --------        ---------       ---------

          Gross margin                                  86,503         46,064          221,357         115,900
                                                      --------       --------        ---------       ---------
Operating expenses:                           
      Product development                               11,572          6,607           30,862          17,272
      Sales and marketing                               47,242         27,204          122,163          67,211
      General and administrative                         6,915          4,392           17,724          12,232
      Merger related expenses                              -            3,298           13,500           3,298
                                                      --------       --------        ---------       ---------

          Total operating expenses                      65,729         41,501          184,249         100,013
                                                      --------       --------        ---------       ---------

          Operating income                              20,774          4,563           37,108          15,887
                                              
Other income, net                                        1,548          1,371            4,476           3,953
                                                      --------       --------        ---------       ---------
          Income before income taxes                    22,322          5,934           41,584          19,840
                                              
Income taxes                                             8,259          2,279           18,583           7,543
                                                      --------       --------        ---------       ---------

          Net income                                  $ 14,063       $  3,655        $  23,001       $  12,297
                                                      ========       ========        =========       =========
 Diluted net income per share                         $   0.14       $   0.04        $    0.23       $    0.13
                                                      ========       ========        =========       =========
Shares used in diluted net income 
 per share computation                                 100,348         95,280           99,765          93,379
                                                      ========       ========        =========       =========
  
Basic net income per share                            $   0.16       $   0.04        $    0.26       $    0.15
                                                      ========       ========        =========       =========
 Shares used in basic net income
 per share computation                                  88,048         83,873           87,075          83,304
                                                      ========       ========        =========       =========
</TABLE> 
  
         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                              SIEBEL SYSTEMS, INC
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands; unaudited)

<TABLE> 
<CAPTION> 
                                                                               Nine Months Ended
                                                                                 September 30,
                                                                          ---------------------------
                                                                             1998              1997
                                                                          ---------         ---------
<S>                                                                       <C>               <C> 
Cash flows from operating activities:
     Net income                                                           $  23,001         $  12,297
    Adjustments to reconcile net income to net cash 
       provided by operating activities:
          Compensation related to stock options                                 193               155
          Depreciation and amortization                                       7,969             5,673
          Tax benefit from exercise of stock options                          8,061               775
          Loss on disposal of property and equipment                            242               487
          Allowance for doubtful accounts and returns                         3,964               953
          Changes in operating assets and liabilities:
                Accounts receivable                                         (50,454)          (31,149)
                Prepaids and other                                             (563)           (2,836)
                Accounts payable                                              1,377            (1,228)
                Accrued expenses                                             41,930            12,714
                Income taxes payable                                          5,010            (1,035)
                Deferred revenue                                             23,139             5,048
                                                                          ---------         ---------

                      Net cash provided by operating activities              63,869             1,854
                                                                          ---------         ---------
Cash flows from investing activities:                                                     
     Purchases of property and equipment                                    (15,837)          (12,917)
     Purchases and sales of short-term investments, net                     (28,339)          (11,472)
     Other assets                                                             2,514            (2,209)
                                                                          ---------         ---------

                      Net cash used in investing activities                 (41,662)          (26,598)
                                                                          ---------         ---------
                                                                                         
Cash flows from financing activities:                                                     
     Proceeds from issuance of common stock                                  17,431             4,583
     Repayment of stockholder notes                                             -                 102
                                                                          ---------         ---------
                                                                                          
                      Net cash provided by financing activities              17,431             4,685
                                                                          ---------         ---------
                                                                                          
Change in cash and cash equivalents                                          39,638           (20,059)
Adjustment to conform acquired company's year end                            (4,140)              -
Cash and cash equivalents, beginning of period                               70,202            77,495
                                                                          ---------         ---------
 
Cash and cash equivalents, end of period                                  $ 105,700         $  57,436
                                                                          =========         =========
 
Supplemental disclosures of cash flows information:
     Cash paid for income taxes                                           $   3,154         $   7,867
                                                                          =========         =========
</TABLE> 
 
         See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
 
                              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 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 Statement of
     Position No. 97-2 "Software Revenue Recognition." Revenue is recognized
     under SOP 97-2 when all of the following criteria have been met: persuasive
     evidence of an arrangement exists, delivery has occurred, the vendor's fee
     is fixed or determinable, and collectibility is probable. Under SOP 97-2,
     revenue on multiple element arrangements is allocated to the various
     elements based on relative fair value.

     Maintenance, consulting and other revenues relate primarily to maintenance,
     consulting services and training. Maintenance revenues are recognized
     ratably over the term of the maintenance contract, typically 12 to 36
     months. Consulting and training revenues are generally recognized as the
     services are performed and are usually performed 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.

     The Company's customer base includes a number of its suppliers (e.g. AT&T,
     BankBoston Robertson Stephens, Bank of America, Cabletron Systems, The
     Charles Schwab Corporation, Cigna Corporation, Cisco Systems, Inc., Compaq
     Computer Corporation, Dell Computer Corporation, Lucent Technologies, MCI
     Telecommunications Corporation, Microsoft Corporation, NationsBank
     Montgomery Securities, PeopleSoft, Inc., Sequent Computer Systems, Inc.,
     Siemens Medical and Sun Microsystems, Inc.). On occasion, the Company has
     purchased goods and/or services for company operations from these vendors
     at or about the same time Siebel has licensed its software to these
     organizations. These transactions are separately negotiated at terms the
     Company considers to be arm's-length. During the three months ended
     September 30, 1998, the Company recognized revenue of approximately $10.8
     million in connection with such transactions.

                                       6
<PAGE>
 
     COST OF REVENUES

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

     Cost of maintenance, consulting 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, AND SHORT-TERM INVESTMENTS

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

     The Company has classified its investments in certain debt and equity
     securities as "available for sale." Such investments are carried at fair
     value, with gross unrealized gains and losses, when material, reported as a
     separate component of stockholders' equity within accumulated other
     comprehensive other losses.

     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 Company's software development has been completed concurrent with the
     establishment of technological feasibility, and, accordingly, no costs have
     been capitalized.

     ADVERTISING

     Advertising costs are expensed as incurred. Advertising expense is included
     in sales and marketing expense and amounted to $7,245,000 in 1997 and
     $6,324,000 for the nine months ended September 30, 1998.

     INCOME TAXES

     The Company uses the asset and liability method of accounting for income
     taxes. Under the asset and liability method, 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, available 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.

                                       7
<PAGE>
 
     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, convertible preferred stock outstanding and 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 if on the
     date of grant 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, they 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 shown as a separate component of
     stockholders' equity within accumulated other comprehensive losses.

     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
     individual customers or groups of customers in any particular industry or
     geographic area.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of the Company's cash and cash equivalents, accounts
     receivable, and accounts payable approximate their respective carrying
     amounts defined as the amount at which the instrument could be exchanged in
     a current transaction between willing parties.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
     "Disclosures about Segments of an Enterprise and Related Information." This
     new accounting standard is not expected to have a material effect on the
     Company's consolidated financial statements.

     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, 1999. Management does not believe the adoption of SFAS No.
     133 will have a material effect on the financial position of the Company.

                                       8
<PAGE>
 
2.   SCOPUS MERGER

     On May 18, 1998, the Company completed the acquisition of Scopus of
     Emeryville, California, 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 $13.5 million consisting of direct transaction
     fees for investment bankers, attorneys, accountants and other professional
     fees of $9.1 million, integration charges related to duplicate facilities
     and equipment of $3.1 million and other miscellaneous expenses of $1.3
     million. As of September 30, 1998, the Company had $5.0 million remaining
     in accrued merger expenses, which the Company expects to pay in the fourth
     quarter of 1998. The Company also incurred indirect merger-related expenses
     of approximately $1.8 million 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 used a fiscal
     year ending March 31. The restated financial statements for the three and
     nine month periods ended September 30, 1997 include Siebel's results of
     operations for those periods and Scopus' results of operations for the
     three and nine month periods ended December 31, 1997. Beginning on January
     1, 1998, the restated financial statements combine the operating results of
     Siebel and Scopus for the calendar periods noted.

     As a result of conforming the reporting periods of Siebel and Scopus, as
     described above, the operating results of Scopus for the three month period
     ended March 31, 1998 are included in the restated financial statements for
     both 1997 and 1998. Net income for this period is reflected as a reduction
     of opening retained earnings in the restated 1998 financial statements.

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

<TABLE>
<CAPTION>
                                                     Three months ended             Years ended      
     (in thousands, unaudited)                           March 31,                  December 31,     
                                                  ------------------------    ------------------------ 
                                                     1998          1997           1997          1996 
                                                  ----------    ----------     ----------    ---------
     <S>                                           <C>            <C>           <C>           <C> 
     Total revenues:
         Siebel                                    $47,100        $19,485       $118,775      $ 39,152
         Scopus                                     27,072         19,562         88,853        62,210
                                                  ----------    ----------     ----------    ---------
                                                   $74,172        $39,047       $207,628      $101,362
                                                  ==========    ==========     ==========    =========

     Net income (loss):
         Siebel                                    $ 8,285        $ 2,758       $ (2,427)     $  5,025
         Scopus                                      1,463          1,264          1,240         7,836
                                                  ----------    ----------     ----------    ---------
                                                    $9,748        $ 4,022       $ (1,187)     $ 12,861
                                                  ==========    ==========     ==========    =========
</TABLE>

     In combining the financial statements of Siebel and Scopus, certain
     reclassifications, conforming changes and adjustments relating to revenue
     recognition were made to the historical financial statements of Scopus.
     These conforming changes and adjustments resulted in a reduction of
     previously reported net income of approximately $505,000 in fiscal 1995,
     $578,000 in fiscal 1996, and $2,931,000 in fiscal 1997. There were no
     conforming changes or adjustments for the period from April 1, 1998 through
     May 18, 1998. These changes and adjustments will not reverse in future
     periods.

                                       9
<PAGE>
 
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:

<TABLE>
<CAPTION>
 
     (in thousands, unaudited)                         Three months ended              Nine months ended
                                                         September 30,                   September 30,
                                                   ----------------------------    --------------------------
                                                       1998            1997           1998           1997
                                                   ------------    ------------    -----------    -----------
     <S>                                             <C>              <C>            <C>            <C>
     Shares used in basic net income per share
      computation                                     88,048          83,873          87,075         83,304
      Effect of dilutive potential common shares      12,300          11,407          12,690         10,075
                                                   ------------    ------------    -----------    -----------
     Shares used in diluted net income per share
      computation                                    100,348          95,280          99,765         93,379
                                                  ============    ============    ============   ============
</TABLE>

4.   COMPREHENSIVE INCOME

     Effective January 1, 1998, the Company adopted Statement of Financial
     Accounting Standards No. 130, "Reporting Comprehensive Income." This
     Statement requires that all items recognized under accounting standards as
     components of comprehensive earnings be reported in an annual financial
     statement that is displayed with the same prominence as other annual
     financial statements. This Statement also requires that an entity classify
     items of other comprehensive earnings by their nature in an annual
     financial statement. For example, other comprehensive earnings may include
     foreign currency translation adjustments, minimum pension liability
     adjustments and unrealized gains and losses on marketable securities
     classified as available-for-sale. Annual financial statements for prior
     periods will be reclassified, as required. The Company's total
     comprehensive earnings were as follows:

<TABLE>
<CAPTION>
 
     (in thousands, unaudited)                       Three months ended           Nine months ended
                                                        September 30,                September 30,
                                                  --------------------------    ------------------------
                                                     1998            1997         1998            1997 
                                                  ----------      ----------    ---------      ---------
     <S>                                            <C>              <C>          <C>            <C>
     Net income                                     $14,063          $3,655       $23,001        $12,297
     Translation adjustment                             224             (22)         (136)           (22) 
                                                  ---------       ---------     ---------      ---------
     Total comprehensive income                     $14,287          $3,633       $22,865        $12,275
                                                  =========       =========     =========      =========
</TABLE>

                                       10
<PAGE>
 
   ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                           AND RESULTS OF OPERATIONS

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

OVERVIEW

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

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.

The Siebel Enterprise Applications are comprised of a broad range of advanced
client/server application products designed to allow corporations to deploy
comprehensive customer information systems, product information systems,
competitive information systems, and decision support systems on a global basis.
The Company's products provide support for multiple languages and multiple
currencies with support for a number of frequently interdependent distribution
channels, including direct field sales, telesales, telemarketing, distribution,
retail and Internet-based selling and support.

RECENT DEVELOPMENTS

On May 18, 1998, the Company completed the acquisition of Scopus of Emeryville,
California, 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 $13.5 million,
consisting of direct transaction fees for investment bankers, attorneys,
accountants and other professional fees of $9.1 million, integration charges
related to duplicate facilities and equipment of $3.1 million and other
miscellaneous expenses of $1.3 million. As of September 30, 1998, the Company
had $5.0 million remaining in accrued merger expenses, which the Company expects
to pay in 1998. The Company also incurred indirect merger-related expenses of
approximately $1.8 million 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 used a fiscal year ending March 31. The restated
financial statements for the three and nine month periods ended September 30,
1997 include Siebel's results of 

                                       11
<PAGE>
 
operations for those periods and Scopus' results of operations for the three and
nine month periods ended December 31, 1997. Beginning on January 1, 1998, the
restated financial statements combine the operating results of Siebel and Scopus
for the calendar periods noted.

RESULTS OF OPERATIONS

REVENUES

Software.  License revenues increased to $77,225,000 for the three months ended
September 30, 1998 from $41,486,000 for the three months ended September 30,
1997 and decreased as a percentage of total revenues to 74% in the third quarter
1998 from 75% in the third quarter 1997.  For the nine months ended September
30, 1998, license revenue increased to $200,567,000 from $104,435,000 for the
nine months ended September 30, 1997 and remained constant at 75% as a
percentage of total revenues in the fiscal 1998 and fiscal 1997 periods.
License revenues increased in absolute dollar amount during these periods due to
an increase in the number of licensed Siebel Enterprise and Siebel Series 5
applications at new and existing customers and also due to licenses of new
modules, released with the latest version of Siebel applications, 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 Enterprise and Siebel Series 5 applications family both in the United
States and internationally.  The decrease in license revenues as a percentage of
total revenues was primarily due to increased levels of maintenance, consulting
and other revenues.

The Company's customer base includes a number of its suppliers (e.g. AT&T,
BankBoston Robertson Stephens, Bank of America, Cabletron Systems, The Charles
Schwab Corporation, Cigna Corporation, Cisco Systems, Inc., Compaq Computer
Corporation, Dell Computer Corporation, Lucent Technologies, MCI
Telecommunications Corporation, Microsoft Corporation, NationsBank Montgomery
Securities, PeopleSoft, Inc., Sequent Computer Systems, Inc., Siemens Medical
and Sun Microsystems, Inc.). On occasion, the Company has purchased goods and/or
services for company operations from these vendors at or about the same time
Siebel has licensed its software to these organizations. These transactions are
separately negotiated at terms the Company considers to be arm's-length. During
the three months ended September 30, 1998, the Company recognized revenue of
approximately $10.8 million in connection with such transactions.

Maintenance, Consulting and Other.  Maintenance, consulting and other revenues
increased to $26,969,000 for the three months ended September 30, 1998 from
$13,750,000 for the three months ended September 30, 1997 and increased as a
percentage of total revenues to 26% in the third quarter 1998 from 25% in the
third quarter 1997.  For the nine months ended September 30, 1998, maintenance,
consulting and other revenues increased to $67,815,000 from $33,962,000 for the
nine months ended September 30, 1997 and as a percentage of total revenues was
25% for each of the nine month periods ended September 30, 1998 and 1997.  The
increase in absolute dollar amount was due to growth in the Company's consulting
business and growth in the installed base of customers on maintenance, including
maintenance renewal from products licensed in prior periods.  The Company
expects that maintenance, consulting and other revenues will remain the same or
increase as a percentage of total revenues due to maintenance components of new
and existing license agreements and due to the Company's expansion of its
consulting organization to meet anticipated customer demands in connection with
product implementation.

COST OF REVENUES

Software.  Cost of software license revenues includes third party royalties,
product packaging, documentation and production. Cost of license revenues
decreased to $993,000 for the three months ended September 30, 1998 from
$1,346,000 for the three months ended September 30, 1997 and decreased as a
percentage of total revenues to 1% in the third quarter 1998 from 2% in the
third quarter 1997.  The decrease is primarily due to lower third-party royalty
costs.  For the nine months ended September 30, 1998, cost of software license
revenues increased to $4,295,000 from $2,843,000 for the nine months ended
September 30, 1997 and as a percentage of total revenues was 2% for each of the
nine months ended September 30, 1998 and 1997.  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.

                                       12

<PAGE>
 
Maintenance, Consulting and Other.  Cost of maintenance, consulting and other
revenues consists primarily of personnel, facility and systems costs incurred in
providing customer support.  Cost of maintenance, consulting and other revenues
increased to $16,698,000 for the three months ended September 30, 1998 from
$7,826,000 for the three months ended September 30, 1997 and increased as a
percentage of total revenues to 16% in the third quarter 1998 from 14% in the
third quarter 1997.  For the nine months ended September 30, 1998, cost of
maintenance, consulting and other revenues increased to $42,730,000 from
$19,654,000 for the nine months ended September 30, 1997 and increased as a
percentage of total revenues to 16% in the fiscal 1998 period from 14% in the
fiscal 1997 period.  The increases in the absolute dollar amount reflect the
effect of fixed costs resulting from the Company's expansion of its maintenance
and support organization and the costs of certain customers obtaining
implementation services through the Company. The increase as a percentage of
total revenues reflects the use of third-party contractors to assist on certain
consulting projects. The Company expects that maintenance, consulting and other
costs will continue to increase in absolute dollar amount as the Company expands
its customer support organization to meet anticipated customer demands in
connection with product implementation. These costs are expected to remain the
same or increase as a percentage of total revenues.

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 $11,572,000 for the three months ended
September 30, 1998 from $6,607,000 for the three months ended September 30, 1997
and decreased as a percentage of total revenues to 11% in the third quarter 1998
from 12% in the third quarter 1997.  For the nine months ended September 30,
1998, product development expenses increased to $30,862,000 from $17,272,000 for
the nine months ended September 30, 1997 and decreased as a percentage of total
revenues to 11% in the fiscal 1998 period from 12% in the fiscal 1997 period.
The increases in the dollar amount of product development expenses were
primarily attributable to costs of additional personnel in the Company's product
development operations. The Company anticipates that it will continue to devote
substantial resources to product development. The Company expects product
development expenses to increase in absolute dollar amount but remain at a
similar percentage of total revenues as the first nine months of 1998.  The
Company to date has not capitalized any software development costs.

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 $47,242,000 for the three months ended September
30, 1998 from $27,204,000 for the three months ended September 30, 1997 and
decreased as a percentage of total revenues to 45% in the third quarter 1998
from 49% in the third quarter 1997.  For the nine months ended September 30,
1998, sales and marketing expenses increased to $122,163,000 from $67,211,000
for the nine months ended September 30, 1997 and decreased as a percentage of
total revenues to 46% in the fiscal 1998 period from 49% in the fiscal 1997
period.  The increases in the dollar amount of sales and marketing expenses
reflect primarily the hiring of additional sales and marketing personnel, costs
associated with expanded promotional activities, and indirect merger-related
costs, such as corporate sales training and marketing programs.  The Company
expects that sales and marketing expenses will continue to increase in absolute
dollar amount as the Company continues to expand its sales and marketing
efforts, establishes additional sales offices in the United States and
internationally and increases its promotional activities. These expenses are
expected to remain at a similar percentage of total revenues as the first nine
months of 1998.

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 $6,915,000
for the three months ended September 30, 1998 from $4,392,000 for the three
months ended September 30, 1997 and decreased as a percentage of total revenues
to 7% in the third quarter 1998 from 8% in the third quarter 1997.  For the nine
months ended September 30, 1998, general and administrative expenses increased
to $17,724,000 from $12,232,000 for the nine months ended September 30, 1997 and
decreased as percentage of total revenues to 7% in the fiscal 1998 period from
9% in the fiscal 1997 period.  The increases in the absolute dollar amount of
general and administrative expenses were primarily due to increased staffing and
associated expenses necessary to manage and support the Company's increased
scale of operations.  The Company believes that its general and administrative
expenses will continue to increase in absolute dollar amount as a result of the
continued expansion of the Company's administrative staff and 

                                       13
<PAGE>
 
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 the first nine months of 1998.

Merger related expenses. In connection with the merger with Scopus, the Company
incurred direct merger-related expenses of approximately $13.5 million,
comprised primarily of investment bankers, attorneys, accountants and other
professional fees of $9.1 million and duplicate facilities and equipment of $3.1
million. As of September 30, 1998, the Company had $5.0 million remaining in
accrued merger expenses, which the Company expects to pay in the fourth quarter
of 1998. The Company also incurred indirect merger-related expenses of
approximately $1.8 million for joint sales training and merger-related marketing
costs, which are included within sales and marketing expenses.  The Company
incurred merger costs of approximately $3.3 million in the third quarter of 1997
in connection with its planned merger with Clear With Computers, Inc. The merger
plan was terminated early in the fourth quarter of 1997.

OPERATING INCOME AND OPERATING MARGIN

Operating income increased to $20,774,000 for the three months ended September
30, 1998 from $4,563,000 for the three months ended September 30, 1997 and
operating margin increased to 20% in the third quarter 1998 from 8% in the third
quarter 1997.  For the nine months ended September 30, 1998, operating income
increased to $37,108,000 from $15,887,000 for the nine months ended September
30, 1997 and operating margin increased to 14% in the fiscal 1998 period from
11% in the fiscal 1997 period.  These increases in operating income and margin
were primarily due to increased license revenues without a proportionate
increase in costs, particularly costs associated with the hiring of new
personnel. Excluding merger related expenses and merger termination costs,
operating income for the nine months ended September 30, 1998 increased to
$50,608,000 from $19,185,000 for the nine months ended September 30, 1997 and
operating margin increased to 19% in the fiscal 1998 period from 14% in the
fiscal 1997 period.  The Company expects operating margins, net of merger-
related expenses, to decrease as compared to operating margin for the first nine
months of 1998 as it continues to invest 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

The provision for income taxes was $8,259,000 and $2,279,000 or 37% and 38% for
the three months ended September 30, 1998 and 1997, respectively. The provision
for income taxes was $18,583,000 and $7,543,000 or 45% and 38% for the nine
months ended September 30, 1998 and 1997, respectively. The effective tax rate
for the nine months ended September 30, 1998 was affected by the non-
deductibility of certain merger-related expenses.  The Company expects its
effective tax rate for the remainder of 1998 to be approximately 38%.

NET INCOME

The Company had net income of $14,063,000 for the three months ended September
30, 1998 compared to net income of $3,655,000 for the three months ended
September 30, 1997.  Diluted net income per share increased to $0.14 per share
in the third quarter of 1998 from net income of $0.04 per share in the
comparable period in 1997.  Net income was 13% as a percentage of total revenues
for the three months ended September 30, 1998, compared to net income of 7% of
total revenues for the three months ended September 30, 1997.  The Company had
net income of $23,001,000 for the nine months ended September 30, 1998 compared
to net income of $12,297,000 for the nine months ended September 30, 1997.
Diluted net income per share increased to $0.23 per share in the nine month
period ended September 30, 1998 from net income of $0.13 per share in the
comparable period in 1997.  Net income was 9% as a percentage of total revenues
for each of the nine month periods ended September 30, 1998 and 1997.

                                       14
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

The Company's cash, cash equivalents and short-term investments increased to
$229,176,000 as of September 30, 1998 from $162,201,000 as of December 31, 1997,
representing approximately 59% and 60% of total assets, respectively.  This
increase was primarily attributable to net income and increases in deferred
revenue, accrued expenses and issuances of common stock, partially offset by
increases in accounts receivable and purchases of property and equipment.  The
Company's days sales outstanding (DSO) in accounts receivable was 93 as of
September 30, 1998, compared with 82 as of December 31, 1997.  The Company
expects DSO will fluctuate significantly in future quarters.

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 leased facilities, both domestically and internationally, and
expects this trend to continue.  Accordingly, capital expenditures are expected
to increase during the fourth quarter of 1998 and in 1999.

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

FACTORS AFFECTING OPERATING RESULTS

Limited Operating History. The Company has only a limited operating history and
its prospects must be evaluated in light of the risks and uncertainties
encountered by a company in its early stage of development.

Limited Deployment. Many of the Company's customers are in the pilot phase of
implementing the Company's software. There can be no assurance that enterprise-
wide deployments by such customers will be successful. The Company's customers
frequently contemplate the deployment of its products commercially to large
numbers of sales, marketing and customer service personnel, many of whom have
not previously used application software systems, and there can be no assurance
of such end-users' acceptance of the product. If any of the Company's customers
are not able to customize and deploy Siebel applications successfully and on a
timely basis to the number of anticipated users, the Company's reputation could
be significantly damaged, which could have a material adverse effect on the
Company's business, operating results and financial condition.

Product Concentration. Approximately 61% of the Company's license revenues in
the nine months ended September 30, 1998 were attributable to sales of Siebel
Sales Enterprise. The remaining license revenues were attributable to sales of
Siebel Service Enterprise, Siebel Marketing Enterprise and Siebel Series 5. The
Company currently expects Siebel Sales Enterprise and related consulting,
maintenance and training services to continue to account for a substantial
amount of the Company's future revenues. As a result, factors adversely
affecting the pricing of or demand for Siebel Sales Enterprise, such as
competition or technological change, could have a material adverse effect on the
Company's business, operating results and financial condition.

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

The Company relies on a number of systems consulting and systems integration
firms, particularly Andersen Consulting, for implementation and other customer
support services, as well as recommendations of its products during the
evaluation stage of the purchase process.  Although the Company seeks to
maintain close relationships with these service providers, many of them have
similar, and often more established, relationships with the Company's

                                       15
<PAGE>
 
competitors.  If the Company is unable to develop and retain effective, long-
term relationships with these third parties, the Company's competitive position
could be materially and adversely affected.  Further, there can be no assurance
that these third parties, many of which have significantly greater resources
than the Company, will not market software products in competition with the
Company in the future or will not otherwise reduce or discontinue their
relationships with, or support of, the Company and its products.

A large number of personal, departmental and other products exist in the sales
automation market. Companies (Products) such as Symantec Corporation (ACT!),
Borealis Corporation (Arsenal), Saratoga Systems (Avenue), Early Cloud & Co.
(CallFlow), Epiphany (Clarity, Momentum, Relevance), Clarify Inc. (ClearSales,
ClearSupport), Sales Technologies (Cornerstone), Onyx (Customer Center), IMA
(EDGE), 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
Sales and Marketing, Oracle Service and Oracle Call, Front Office Application),
Pivotal Software, Inc. (Relationship), SAP AG (Sales Force Automation Solution)
Software Artistry (SA-Expert Sales), SalesKit Software Corporation (SalesKit),
SalesLogix (SalesLogix), Kiefer & Veittinger GmbH (K&V) International (SALES
Manager) (SAP AG owns an 80% equity interest in K&V), Aurum (SalesTrak)
(recently acquired by Baan Company N.V.), MEI (UniverSell) 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 the Company. In addition, many competitors have well-established
relationships with current and potential customers of the Company. As a result,
these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products, than can the
Company. The Company believes it competes favorably in this marketplace based on
the following competitive advantages: breadth and depth of functionality,
configurable business objects, Internet and intranet enablement, strategic
alignments with industry leaders, support for the global enterprise, scalability
allowing support for large user communities and a modern and enduring product
architecture. In general, the Company has priced its products at or above those
of its competitors, which pricing the Company believes is justified by the scope
of functionality delivered and the performance characteristics afforded by the
Company's products.

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

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

International Operations. The Company's sales are primarily due to large multi-
national companies. To service the needs of such companies, both domestically
and internationally, the Company must provide worldwide product support
services. As a result, the Company has expanded and intends to continue to
expand its international operations and enter additional international markets,
which will require significant management attention and financial resources and
could adversely affect the Company's operating margins and earnings, if any.
Revenues from international sales accounted for approximately 27%, 26% and 29%
of the Company's total license revenues in fiscal 1997 and the three and nine
months ended September 30, 1998, respectively.

                                       16
<PAGE>
 
The growth in the Company's revenues from international sales is expected to
continue to subject a portion of the Company's revenues to the risks associated
with international sales, including foreign currency fluctuations, economic or
political instability, shipping delays and various trade restrictions, any of
which could have a significant impact on the Company's ability to deliver
products on a competitive and timely basis.  Future imposition of, or
significant increases in the level of, customs duties, export quotas or other
trade restrictions, could have an adverse effect on the Company's business,
financial condition and results of operations.  As the Company develops an
international sales force, it expects to be more directly subject to foreign
currency fluctuations.  To the extent such direct sales are denominated in
foreign currency, any such fluctuation may adversely affect the Company's
business, financial condition and results of operations.  Foreign currency
transactions, when realized, are included as a component of other income.
Finally, the laws of certain foreign countries do not protect the Company's
intellectual property rights to the same extent, as do the laws of the United
States.

The Company has not been significantly affected by the recent unfavorable
economic conditions in certain Asian and Pacific Rim countries.  If the economic
conditions in these markets do not improve, this may have an adverse impact on
the Company's business, financial condition and results of operations.

European Monetary Unit (EMU).  Siebel Enterprise applications have the
functionality to allow for dual currency reporting and information management,
however, failure of the software to operate properly could require the Company
to incur unanticipated expenses to address any problems.  The Company is
currently reviewing its internal systems for any potential problems that may
arise in connection with the conversion to the EMU.   In addition, the Company
utilizes other third party systems and software products that may or may not be
EMU compliant. Failure of third party products could have a material adverse
effect on the Company's business, financial condition and results of operations.

Furthermore, the Company's foreign exchange exposures to legacy sovereign
currencies of the participating countries in the EMU will become foreign
exchange exposures to the EMU upon conversion.  Currently, the Company has no
foreign exchange contracts denominated in legacy sovereign currencies with
maturity of January 1, 1999 or later.  To the extent hedging transactions are
entered for exposures after January 1, 1999, they will be denominated in euros
as applicable.  Although the Company is not aware of any material financial risk
arising from the conversion to EMU, the conversion may require the Company to
incur unanticipated expenses to address any problems, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Risk Relating to Acquisitions. The Company has acquired in the past, and may
acquire in the future, other products or businesses, which are complementary to
the Company's business.  The integration of products and personnel as a result
of any such acquisitions has and will continue to divert the Company's
management and other resources. There can be no assurance that difficulties will
not arise in integrating such operations, products, personnel or businesses. The
failure to successfully integrate such products or operations could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Risks Relating to the Merger with Scopus.  Risks associated with the merger with
Scopus, which was completed in May 1998, include but are not limited to
uncertainties relating to integration, retention of employees by the combined
company, and the effect of the merger on customers and existing agreements. The
successful integration of the two companies will require significant effort from
each company, including the coordination of their research and development,
integration of the companies' product offerings, coordination of their sales and
marketing efforts and business development efforts. The combined company will
need to integrate and streamline overlapping functions successfully. The Company
incurred approximately $1.8 million of such integration costs during the three
months ended September 30, 1998 for joint sales training and merger related
marketing activities. The integration of certain operations following the merger
will require the dedication of management resources that may distract attention
from the normal operations of the combined Company. The success of the combined
Company will also be dependent in part on the retention and integration of
management, technical, marketing, sales and customer support personnel. In
addition, certain of Scopus' and Siebel's existing customers may view the merger
as disadvantageous to them. As a consequence, the combined Company's
relationship with these customers could be adversely affected. Failure to
quickly and effectively complete the integration of the operations of Siebel and
Scopus, failure to attract, hire, retain and integrate skilled employees, and
uncertainty in the marketplace or customer concern regarding the impact of the
merger and related transactions could have a material adverse effect on the
combined Company's business, financial condition and results of operations.

                                       17
<PAGE>
 
Year 2000. The Company is reviewing its information systems for any potential
problems that might arise as a result of the need for its installed computer
systems and software to reference dates following December 31, 1999 ("Year 2000
Issues") and does not believe such systems will be adversely affected by the
upcoming change in century. However, the Company utilizes third-party equipment
and software that may not be Year 2000 compliant.  Although the Company is
currently taking steps to address the impact, the failure of such third-party
equipment or software to operate properly with regard to Year 2000 Issues and
thereafter could have a material adverse effect on the Company's business,
financial condition and results of operations.  Additionally, the purchasing
patterns of customers or potential customers may be affected by Year 2000 Issues
as companies use significant resources to assess its current systems for Year
2000 compliance.  These assessments could result in expenditures which may
reduce the funds available to purchase products and services, such as those
offered by the Company, which could have a material adverse affect on the
Company's business, financial condition and results of operations.  Currently
supported Siebel Enterprise applications have been designed to be Year 2000
compliant, however, failure of the software to operate properly with regard to
Year 2000 and thereafter could require the Company to incur unanticipated
expenses to address any problems, which could have a material adverse effect on
the Company's business, financial condition and results of operations.  The
Company is aware of certain customer installations of earlier generation Scopus
product which is not Year 2000 compliant.  The Company has advised these
customers that their installations are not Year 2000 compliant and are no longer
supported by Siebel.  Updates to current Year 2000 compliant versions of
Siebel's software have been made available to all customers who are current on
maintenance.

                                       18
<PAGE>
 
                          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.  A jury verdict was returned
on May 15, 1998 with a judgment for an immaterial amount.  Post-trial
proceedings are continuing in the matter.  The Company believes it has adequate
legal defenses and believes that the ultimate outcome of these actions 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 the State of California for the 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 complaint alleges that
the Scopus board of directors breached its fiduciary duties to the shareholders
of Scopus in connection with its approval of the Merger. The complaint further
alleges that the Company aided and abetted the alleged breach of fiduciary duty.
The complaint seeks monetary and other relief. On October 26, 1998, the court
sustained a demurrer filed by the Company, with leave to amend. The Company
believes the suit is completely without merit and intends to contest vigorously
any future filings or amendments, although there can be no assurance as to the
outcome of any such litigation.

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 5.  OTHER INFORMATION

Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between January
28, 1999 and February 28, 1999 (unless such matters are included in the
Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, as amended).

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)

                                       19
<PAGE>
 
10.7   Lease Agreement, dated June 4, 1996, by and between the Registrant and
       Crossroad Associates and Clocktower Associates.(1)

10.8   Form of Voting Agreement dated as of March 1, 1998, a substantially
       similar version of which has been executed by and between the Registrant,
       Scopus Technology, Inc. and each of Thomas M. Siebel, Thomas M. Siebel as
       Trustee under the Siebel Living Trust u/a/d 7/29/93, the Thomas and
       Stacey Siebel Foundation and First Virtual Capital, Inc.(7)

10.9   Form of Affiliate Agreement, substantially similar versions of which are
       to be executed by the Registrant, Scopus Technology, Inc. and each of the
       affiliates of the Registrant.(8)

21.1   Subsidiaries of the Registrant.(6)

27.1   Financial Data Schedule.(9)

_____________________
(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) Incorporated by reference to exhibit 99.3 of the Registrant's Current Report
    on Form 8-K filed by the Registrant on March 16, 1998.

(8) Incorporated by reference to exhibit 99.5 of the Registrant's Current Report
    on Form 8-K filed by the Registrant on March 16, 1998.

(9) Filed herewith.


(b) Reports on Form 8-K

On May 19, 1998, the Company filed a report on Form 8-K relating to the
       closure of the Company's merger with Scopus Technology, Inc. on May 18,
       1998.

On May 29, 1998, the Company filed a report on Form 8-K relating to the
       Company's merger with Scopus Technology, Inc.

                                       20
<PAGE>
 
                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    SIEBEL SYSTEMS, INC.


Date:  November 13, 1998        By: /s/ Howard H. Graham
                                    --------------------
                                    Howard H. Graham
                                    Senior Vice President Finance and
                                    Administration and
                                    Chief Financial Officer


                                By: /s/ Paul J. Gifford
                                    -------------------
                                    Paul J. Gifford
                                    Corporate Controller

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