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

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**FORM 10-Q**

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

**For the quarterly period ended March 31, 2002**

**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) | (IRS Employer Identification Number)

**2207 Bridgepointe ParkwaySan Mateo, CA   94404**(Address of principal executive offices, including zip code)

**(650) 477-5000**(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 April 19, 2002 was 473,572,763.







**SIEBEL SYSTEMS, INC.
                                    FORM 10-Q
                 For the Quarterly Period Ended March 31, 2002
                               Table of Contents**

**Part I.  Financial Information**



|ITEM 1.   Financial Statements                                                                                                    | Page
|--------------------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                                  |     
|Consolidated Balance Sheets as of
          
December 31, 2001 and March 31, 2002                                                 | 3   
|                                                                                                                                  |     
|Consolidated Statements of Operations and Comprehensive Income 
          
    for the three months ended March 31, 2001 and 2002 | 4   
|                                                                                                                                  |     
|Consolidated Statements of Cash Flows
          
    for the three months ended March 31, 2001 and 2002                           | 5   
|                                                                                                                                  |     
|Notes to Consolidated Financial Statements                                                                                        | 6   
|                                                                                                                                  |     
|ITEM 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations             | 16  
|                                                                                                                                  |     
|ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk                                                              | 35  
|                                                                                                                                  |     

**Part II.  Other Information**



|ITEM 1.   Legal Proceedings                | 36
|------------------------------------------ | --
|                                           |   
|ITEM 6.   Exhibits and Reports on Form 8-K | 37
|                                           |   
|**Signatures**                             | 38

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**Part I.  Financial Information**

**Item 1.  Financial Statements.**

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

`December 31,   March 31,
                                                                           2001          2002
                                                                       ------------  ------------
Assets

Current assets:
   Cash and cash equivalents......................................... $    799,090  $    954,374
   Short-term investments............................................      857,565       923,481
   Marketable equity securities......................................        8,254         8,827
   Accounts receivable, net..........................................      396,297       369,161
   Deferred income taxes.............................................       58,131        61,241
   Prepaids and other................................................       70,766        54,425
                                                                       ------------  ------------
          Total current assets.......................................    2,190,103     2,371,509

Property and equipment, net..........................................      353,242       346,551
Goodwill.............................................................       72,869        78,824
Intangible assets, net...............................................       19,000        16,772
Other assets.........................................................       56,905        56,112
Deferred income taxes................................................       52,725        52,725
                                                                       ------------  ------------
          Total assets............................................... $  2,744,844  $  2,922,493
                                                                       ============  ============

Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable.................................................. $     14,395  $     19,391
   Accrued expenses..................................................      350,282       356,269
   Deferred revenue..................................................      241,017       273,046
                                                                       ------------  ------------
          Total current liabilities..................................      605,694       648,706

Capital lease obligations............................................        3,048        20,222
Convertible subordinated debentures..................................      300,000       300,000
                                                                       ------------  ------------
          Total liabilities..........................................      908,742       968,928
                                                                       ------------  ------------

Commitments and contingencies

Stockholders' equity:
  Common stock; $0.001 par value; 2,000,000 shares authorized;
    466,950 and 473,229 shares issued and outstanding, respectively..          467           473
  Additional paid-in capital.........................................    1,357,422     1,416,452
  Notes receivable from stockholders.................................         (422)         (422)
  Deferred compensation..............................................       (8,362)       (6,873)
  Accumulated other comprehensive income (loss)......................        6,174        (1,509)
  Retained earnings..................................................      480,823       545,444
                                                                       ------------  ------------
          Total stockholders' equity.................................    1,836,102     1,953,565
                                                                       ------------  ------------
          Total liabilities and stockholders' equity................. $  2,744,844  $  2,922,493
                                                                       ============  ============`

See accompanying notes to consolidated financial statements.

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

`Three Months Ended
                                                                   March 31,
                                                             ---------------------
                                                               2001        2002
                                                             ---------  ----------
Revenues:
   Software................................................ $ 335,101  $  246,047
   Professional services, maintenance and other............   263,649     231,800
                                                             ---------  ----------
       Total revenues......................................   598,750     477,847
                                                             ---------  ----------
Cost of revenues:
   Software................................................     4,361       5,295
   Professional services, maintenance and other............   172,675     126,014
                                                             ---------  ----------
       Total cost of revenues..............................   177,036     131,309
                                                             ---------  ----------
       Gross margin........................................   421,714     346,538
                                                             ---------  ----------
Operating expenses:
   Product development.....................................    48,133      49,064
   Sales and marketing.....................................   211,959     165,345
   General and administrative..............................    54,226      41,751
                                                             ---------  ----------
       Total operating expenses............................   314,318     256,160
                                                             ---------  ----------
       Operating income....................................   107,396      90,378
Other income, net..........................................    14,699      10,593
                                                             ---------  ----------
       Income before income taxes..........................   122,095     100,971
Income taxes...............................................    45,174      36,350
                                                             ---------  ----------
       Net income ......................................... $  76,921  $   64,621
                                                             =========  ==========

Diluted net income per share............................... $    0.15  $     0.12
                                                             =========  ==========
Basic net income per share................................. $    0.17  $     0.14
                                                             =========  ==========

Shares used in diluted share computation...................   519,873     542,990
                                                             =========  ==========
Shares used in basic share computation.....................   448,025     470,489
                                                             =========  ==========
Comprehensive income:
Net income ................................................ $  76,921  $   64,621
Other comprehensive income (loss), net of tax:
   Foreign currency translation adjustments................    (4,867)     (2,263)
   Realized (gain) loss previously recognized in other
      comprehensive income.................................    (1,176)     (2,252)
   Unrealized gain (loss) on investments...................    (2,579)     (3,168)
                                                             ---------  ----------
       Other comprehensive income (loss)...................    (8,622)     (7,683)
                                                             ---------  ----------
       Total comprehensive income.......................... $  68,299  $   56,938
                                                             =========  ==========`

See accompanying notes to consolidated financial statements.

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

`Three Months Ended
                                                                                   March 31,
                                                                             --------------------
                                                                               2001       2002
                                                                             ---------  ---------
Cash flows from operating activities:
   Net income.............................................................. $  76,921  $  64,621
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Compensation related to stock options, net............................     1,446      1,607
     Depreciation and other amortization...................................    14,677     32,003
     Amortization of goodwill..............................................     5,566         --
     Amortization of identifiable intangible assets........................     1,378      2,228
     Exchange of software for cost-method investments......................      (720)        --
     Deferred income taxes.................................................       (48)       504
     Tax benefit from exercise of stock options............................    31,000     10,000
     Write-down of cost-method investments to fair value...................       672         --
     Net gains on short-term investments and marketable equity securities..    (1,176)    (2,252)
     Provision for doubtful accounts and returns...........................    11,516      4,757
     Changes in operating assets and liabilities:
        Accounts receivable................................................    10,642     22,379
        Prepaids and other.................................................    24,962     16,341
        Accounts payable and accrued expenses..............................     4,417      5,285
        Deferred revenue...................................................    44,759     32,029
                                                                             ---------  ---------
           Net cash provided by operating activities.......................   226,012    189,502
                                                                             ---------  ---------
Cash flows from investing activities:
   Purchase of marketable equity securities................................        --     (1,000)
   Purchases of property and equipment.....................................   (91,944)   (22,645)
   Purchases of short-term investments.....................................  (190,870)  (348,075)
   Sales and maturities of short-term investments..........................   169,527    273,439
   Purchase consideration for acquired businesses, net of cash received....     9,484       (500)
   Other non-operating assets and non-marketable securities................    (6,692)       491
   Repayments from (advances to) affiliate, net............................    10,579         --
                                                                             ---------  ---------
           Net cash used in investing activities...........................   (99,916)   (98,290)
                                                                             ---------  ---------
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of repurchases..............    37,244     43,440
   Proceeds from equipment financing.......................................        --     24,873
   Repayments of capital lease obligations.................................        --     (2,001)
   Repayments of stockholder notes.........................................       698         --
                                                                             ---------  ---------
           Net cash provided by financing activities.......................    37,942     66,312
                                                                             ---------  ---------
Effect of exchange rate fluctuations on cash and cash equivalents..........    (4,867)    (2,240)
                                                                             ---------  ---------
Change in cash and cash equivalents........................................   159,171    155,284
Cash and cash equivalents, beginning of period.............................   751,384    799,090
                                                                             ---------  ---------
Cash and cash equivalents, end of period................................... $ 910,555  $ 954,374
                                                                             =========  =========
Supplemental disclosures of cash flows information:
   Cash paid for interest.................................................. $   8,301  $   8,623
                                                                             =========  =========

   Cash paid for income taxes.............................................. $   5,251  $   5,434
                                                                             =========  =========
Supplemental disclosures of non-cash activities:
   Common stock and stock options issued for acquisitions.................. $  28,235  $   5,478
                                                                             =========  =========`

See accompanying notes to consolidated financial statements.

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



1. Summary of Significant Accounting Policies
2. Intangible Assets and Goodwill
3. Convertible Subordinated Debentures
4. Commitments and Contingencies
5. Stockholders' Equity
6. Segment and Geographic Information
7. Acquisitions

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



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



Overview of the Company's Operations

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



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



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

Overview of the Results for the Three Months Ended March 31, 2002

The Company believes that in continued adverse economic
conditions in the information technology industry, its financial performance during the first
quarter of 2002 was solid, having improved many of its key operating metrics and strengthened its
financial position compared to December 31, 2001.  The Company has continued to maintain or
increase its market share in each of the product categories in which it operates.  Siebel 7, which
was introduced in the fourth quarter of 2001, has continued to distinguish the Company from its
competitors.  From a financial perspective, the Company continued its history of operating a cash
positive, profitable business.



The Company's revenue growth and profitability depends in large part on the
overall global economic and business conditions and the demand for information technology,
particularly within the markets in which the Company offers industry-specific versions of its
products.  The majority of the Company's revenues are generated from major corporate customers in
the high technology, telecommunications, financial services (including insurance), pharmaceutical,
utilities and consumer packaged goods industries.  Accordingly, the Company's business is affected
by the economic and business conditions of these industries and the demand for information
technology within these industries.  As the Company entered 2002, the global economy appeared to be
stabilizing and the information technology industry seemed poised to return to positive growth.
Although recent economic data indicate that macro-economic conditions may be stabilizing, capital
spending by corporations, and more specifically, technology spending, appears to be lagging the
overall economic recovery.  As a result, economic conditions within the information technology
industry continued to be extremely difficult during the first three months of 2002.  In fact, in
the first quarter, the overall demand for information technology did not increase at the rate
management anticipated and, in many regions, such as Europe, demand decreased.



In response to the weakening global economy, the Company set five broad
objectives, which were used to guide management's decisions during the first three months of 2002:
(i) operate a cash positive, profitable business; (ii) maintain and improve customer satisfaction
levels; (iii) maintain and improve the Company's market leadership; (iv) maintain the Company's
product leadership in eBusiness; and (v) continue to develop solutions for the Company's customers
that lower the total cost of integrating software applications.  With these broad objectives as a
guide, the Company continued many of the initiatives undertaken in 2001.  Management's actions
during the three months ended March 31, 2002 included the following:



- The Company assessed its revenue pipeline by industry in
order to focus its efforts on the transactions with the highest probability of success and identify
industries, such as the consumer packaged goods and public sector, that were showing signs of
strengthening.



- The Company maintained the cost controls that it initiated in 2001 and,
accordingly, made virtually all costs variable with revenue, with the exception of depreciation,
amortization and facilities expenditures.  Specifically, management continued to reduce advertising
expenditures, maintained the chief executive officer compensation at one dollar, maintained the 20%
reductions in senior executive compensation, reduced or eliminated bonuses for other employees,
deferred merit compensation increases, and reduced other discretionary expenditures, such as travel and recruiting.



- The Company continued its requirement of obtaining competitive bids, where
appropriate.  In addition, the Company continued to require chief executive officer approval for
all significant purchases and all hiring.



- In order to ensure that the Company maintains continuity of business
operations under adverse circumstances, including a significant geopolitical dislocation in the San
Francisco Bay Area, the Company has begun to strengthen its data communications and customer
service infrastructure.  The Company expects that by mid-year 2002, the Company will have
strengthened its ability to provide the highest-quality customer service globally, including during
a significant and sustained system outage at any of the Company's facilities.



- The Company continued its focus on customer satisfaction by leading a team
of system integrators and software vendors in a collaborative effort to reduce the cost to the
Company's customers of integrating software applications.  Through this collaborative effort, the
Company intends to release, later this year, "Universal Application Network," a
standards-based, vendor-independent application integration solution.  Universal Application
Network is designed to address one of the primary challenges facing the software applications
industry: driving down the cost of application ownership and maintenance.

As a result of these actions and the actions undertaken in
2001, the Company was able to operate a cash positive, profitable business in challenging economic
times; maintain or increase the Company's customer satisfaction levels; maintain or increase the
Company's market share in the various product categories in which it operates; continue its
technology leadership in the customer relationship management market; and continue its efforts to
lower the total cost to the Company's customers of integrating software applications.  In addition,
the Company achieved the following financial results:



- Total revenues and total expenses for the first quarter
of 2002 remained comparable on a sequential basis with the fourth quarter of 2001, with a decrease
of approximately 1% for total revenues and total expenses.



- Total quarterly expenses decreased by 21%, from $491.4 million in the first
quarter of 2001, to $387.5 million in the first quarter of 2002.



- Operating margins increased from 18% during the first quarter of 2001 to 19%
during the first quarter of 2002.



- Cash and short-term investments increased by $221.2 million, or 13%, from
$1,656.7 million as of December 31, 2001, to $1,877.9 as of March 31, 2002, representing
approximately 61% and 64% of total assets, respectively.  During 2001 and the first three months of
2002, a period of deteriorating global economic conditions, the Company increased cash and short-term
investments by $725.3 million, or 63%, primarily through operations.



- Cash flows from operations were $226.0 million and $189.5 million during the
three months ended March 31, 2001 and 2002, respectively.



- Days sales outstanding decreased from 74 days as of December 31, 2001, to 70
days as of March 31, 2002.



- Deferred revenue, which consists primarily of deferred maintenance revenue,
increased by 13%, from $241.0 million as of December 31, 2001, to $273.0 million as of March 31,
2002.





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



Use of Estimates





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

Critical Accounting Policies

The Company believes that there are several accounting policies that
are critical to understanding the Company's historical and future performance, as these policies
affect the reported amounts of revenue and the more significant areas involving management's
judgments and estimates. These significant accounting policies relate to revenue recognition, the
provision for doubtful accounts, other-than-temporary declines in the market value of investments,
impairments of long-lived assets and the provision for income taxes.  These policies, and the
Company's procedures related to these policies, are described in detail below.  Please see Note 1
to the accompanying unaudited consolidated financial statements for a detailed description of these
accounting policies.

Revenue Recognition

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

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

A customer typically prepays maintenance for the first 12 months and the
related revenue is deferred and recognized over the term of the initial maintenance contract.
Maintenance is renewable by the customer on an annual basis thereafter.  Rates for maintenance,
including subsequent renewal rates, are typically established based upon a specified percentage of
net license fees as set forth in the arrangement.  Professional services revenue primarily consists
of implementation services related to the installation of the Company's products and training
revenues.  The Company's software is ready to use by the customer upon receipt.  While many of the
Company's customers may choose to alter the software to fit their individual needs, the Company's
implementation services do not involve significant customization to or development of the
underlying software code.  Substantially all of the Company's professional service arrangements are
on a time and materials basis and, accordingly, are recognized as the services are performed, which
is typically over a three- to six-month period subsequent to licensing of the Company's software.

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



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



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



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



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

Provision for Doubtful Accounts



The Company initially records its provision for doubtful accounts based on
its historical experience of write-offs and then adjusts this provision at the end of each
reporting period based on a detailed assessment of its accounts receivable and allowance for
doubtful accounts.  In estimating the provision for doubtful accounts, management considers the age
of the accounts receivable, the Company's historical write-offs, the credit worthiness of the
customer, the economic conditions of the customer's industry, and general economic conditions,
among other factors.  Should any of these factors change, the estimates made by management will
also change, which could impact the level of the Company's future provision for doubtful accounts.
Specifically, if the financial condition of the Company's customers were to deteriorate, affecting
their ability to make payments, additional provision for doubtful accounts may be required.

Other-Than-Temporary Declines in the Market Value of Investments



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

Impairments of Long-Lived Assets

The Company tests goodwill for impairment in accordance with SFAS No. 142
"Goodwill and Other Intangible Assets" ("SFAS 142").  SFAS 142 requires that
goodwill be tested for impairment at the "reporting unit level" ("Reporting
Unit") at least annually and more frequently upon the occurrence of certain events, as defined
by SFAS 142.  Consistent with the Company's determination that it has only one reporting segment,
the Company has determined that it has only one Reporting Unit, specifically the license,
implementation and support of its software applications.  Goodwill will be tested for impairment
annually on July 1, in a two-step process.  First, the Company must determine if the carrying
amount of its Reporting Unit exceeds the "fair value" of the Reporting Unit based on
quoted market prices of the Company's common stock, which would indicate that goodwill may be
impaired.  If the Company determines that goodwill may be impaired, the Company compares the
"implied fair value" of the goodwill, as defined by SFAS 142, to its carrying amount to
determine the impairment loss, if any.

The Company evaluates all of its long-lived assets, including intangible
assets other than goodwill, for impairment in accordance with the provisions of SFAS No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
SFAS 144 requires that long-lived assets and intangible assets other than goodwill be evaluated for
impairment whenever events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable based on expected undiscounted cash flows attributable to that asset.
Should events indicate that any of the Company's assets are impaired; the amount of such impairment
will be measured as the difference between the carrying value and the fair value of the impaired
asset and recorded in earnings during the period of such impairment.

Provision for Income Taxes



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



Results of Operations for the three months ended March 31, 2001 and 2002



The following table sets forth the consolidated statement of operations data
for the three months ended March 31, 2001 and 2002, expressed as a percentage of total revenues:

`Three Months Ended
                                                        March 31,
                                                 -----------------------
                                                    2001        2002
                                                 ---------   ---------
Revenues:
  Software......................................     56.0 %      51.5 %
  Professional services, maintenance and other..     44.0        48.5
                                                 ---------   ---------
      Total revenues............................    100.0       100.0
                                                 ---------   ---------
Cost of revenues:
  Software......................................      0.7         1.1
  Professional services, maintenance and other..     28.8        26.4
                                                 ---------   ---------
      Total cost of revenues....................     29.5        27.5
                                                 ---------   ---------
        Gross margin............................     70.5        72.5
                                                 ---------   ---------
Operating expenses:
  Product development...........................      8.0        10.3
  Sales and marketing...........................     35.4        34.6
  General and administrative....................      9.1         8.7
                                                 ---------   ---------
      Total operating expenses..................     52.5        53.6
                                                 ---------   ---------
        Operating income........................     18.0        18.9
Other income, net...............................      2.4         2.2
                                                 ---------   ---------
        Income before income taxes..............     20.4        21.1
Income taxes....................................      7.6         7.6
                                                 ---------   ---------
        Net income..............................     12.8 %      13.5 %
                                                 =========   =========`

Revenues



Software.  Software license revenues decreased by 27% from $335.1 million
for the three months ended March 31, 2001, to $246.0 million for the three months ended March 31,
2002.   Software license revenues decreased on a year-over-year basis primarily due to the
progressive weakening of the global economy that began midway through the first quarter of 2001.
This caused many of the Company's customers, especially in industries such as high technology,
telecommunications and financial services, to reduce their capital expenditure budgets, which in
turn led to the Company's customers delaying their purchasing decisions.  Despite continued weak
economic conditions, the Company's customers have continued to express a strong interest in the
Company's products resulting in the Company's revenue pipeline continuing to increase.  Please
refer to the risk factor "A variation in the conversion of our revenue pipeline to contracts
could adversely affect our revenues and ability to forecast operations."



Software license revenues as a percentage of total revenues decreased from
56% in the three months ended March 31, 2001, to 52% in the three months ended March 31, 2002.  The
decline in software license revenues as a percentage of total revenues was primarily due to the
progressive weakening of the global economy impacting software license revenue to a greater extent
than professional services, maintenance and other revenue.  The Company anticipates that the
Company's software license revenues will return to positive sequential quarterly growth as the
overall economic conditions strengthen and, more specifically, the overall demand for information
technology increases.  If the information technology industry returns to positive growth in the
second half of 2002 as expected, the Company anticipates that quarterly software license revenues,
both in terms of absolute dollars and as a percentage of total revenues, will also increase in the
second half of 2002 from the levels achieved in the first three months of 2002.



The Company markets its products in the United States through its direct sales
force and internationally through its direct sales force and to a limited extent through
distributors, primarily in Europe, Asia Pacific, Japan and Latin America.  International license
revenues accounted for 38% of software license revenues in both the three months ended March 31,
2001 and 2002.  The Company expects international software license revenues will continue to
account for a significant portion of total software license revenues in the future.







The decrease in the absolute dollar amount of professional services,
maintenance and other revenues was due to a decrease in professional services revenue (i.e.,
implementation services and training revenues), partially offset by an increase in maintenance
revenues.   Professional services revenues decreased on a year-over-year basis as a result of the
deterioration of global economic conditions and subsequent decrease in the Company's software
license revenues.  The Company's maintenance revenues have continued to increase both sequentially
and on a year-over-year basis, primarily due to the continued high renewal rate of customer
maintenance agreements.  The increase in professional services, maintenance and other revenues as a
percentage of total revenues was due primarily to the growth in the number of customers receiving
maintenance and the decrease in the Company's software license revenues.



If the Company's software license revenues return to sequential quarterly
growth in the second half of 2002 as currently anticipated, the Company believes that professional
services, maintenance and other revenues will also return to positive growth in the second half of
2002.  The Company expects to manage the growth of its professional services to ensure that the
Company's professional services organization does not compete with its implementation partners.



On January 1, 2002, the Company adopted Topic No. D-103 "Income
Statement Characterization of Reimbursements Received for 'Out-of-Pocket' Expenses Incurred"
("Topic D-103").  Topic D-103 requires that certain out-of-pocket expenses rebilled to
customers be recorded as revenue versus an offset to the related expense.  Prior to the adoption of
Topic D-103, the Company recorded rebilled out-of-pocket expenses as an offset to the related
expense.  Comparative financial statements for prior periods have been conformed to the current
year presentation.



Cost of Revenues



Software.  Cost of software license revenues includes third-party
software royalties; amortization of acquired technology; and product packaging, production and
documentation.  All costs incurred in the research and development of software products and
enhancements to existing products have been expensed as incurred.  Cost of software license
revenues was $4.4 million for the three months ended March 31, 2001, compared to $5.3 million for
the three months ended March 31, 2002.  As a percentage of software license revenues, cost of
software license revenues increased from 1% in the three months ended March 31, 2001, to 2% for the
three months ended March 31, 2002.  Cost of software license revenues increased in absolute dollars
and as a percentage of software license revenue primarily due to increases in amortization expense
associated with the acquired technology obtained in the acquisition of nQuire Software, Inc., as
discussed in Note 7 to the accompanying unaudited consolidated financial statements.  These costs
as a percentage of software license revenues are expected to remain the same as the percentage of
software license revenues obtained during the three months ended March 31, 2002.



Professional Services, Maintenance and Other.  Cost of professional
services, maintenance and other revenues consist primarily of personnel, facilities and systems
costs incurred to provide training, consulting and other global services.  Cost of professional
services, maintenance and other revenues decreased from $172.7 million for the three months ended
March 31, 2001, to $126.0 million for the three months ended March 31, 2002.  As a percentage of
professional services, maintenance and other revenues, these costs were 66% in the first quarter of
2001 as compared to 54% in the first quarter of 2002.  The decrease in the absolute dollar amount
reflects the (i) the reduction of headcount in 2001 in response to the global economic downturn and
the subsequent decrease in demand for the Company's implementation services; (ii) a reduction in
the use of third-party contractors; and (iii) an acceleration of the Company's cost control
initiatives initiated in early 2001, including reductions of discretionary expenditures such as
travel and entertainment, incentive and other variable compensation. The decrease as a percentage
of professional services, maintenance and other revenues from the first quarter of 2001 to the
first quarter of 2002 reflects: (i) the continued growth of the Company's higher-margin maintenance
revenues; (ii) a higher utilization of the Company's global services personnel; (iii) a reduction
in the use of third-party contractors; and (iv) an acceleration of the Company's cost control
initiatives discussed above.  The Company expects that professional services, maintenance and other
costs, in terms of both absolute dollars and as a percentage of professional services, maintenance
and other revenues, will remain comparable to or increase from the levels obtained in the three
months ended March 31, 2002.



As described above, prior to the adoption of Topic D-103, the Company
recorded rebilled out-of-pocket expenses as an offset to the related expense.  Comparative
financial statements for prior periods have been conformed to the current year presentation.



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 and equipment.  The Company considers technological feasibility
of its software products to have been reached upon completion of a working model that has met
certain performance criteria.  The period between achievement of technological feasibility and
general release of a software product is typically very short, and development costs incurred
during that period have not been material.  Accordingly, the Company has not capitalized any
software development costs to date.  Product development expenses increased from $48.1 million for
the three months ended March 31, 2001, to $49.1 million for the three months ended March 31, 2002,
and as a percentage of total revenues, product development expense was 8% and 10% in 2001 and 2002,
respectively.



The increase in product development expense was primarily attributable to
costs of additional personnel and depreciation of equipment utilized in the Company's product
development operations.  Product development as a percentage of total revenues increased from the
first quarter of 2001 to the first quarter of 2002 primarily as a result of the Company's increased
investment in new product development during a period in which the Company's software license
revenues decreased as a result of the weakening global economy.  The Company anticipates that it
will continue to devote substantial resources to product development as it develops new products,
new versions of its existing products and additional modules for its existing products.
Accordingly, the Company expects product development expenses to continue to increase in absolute
dollar amount, but remain comparable to the percentage of total revenues obtained during the three
months ended March 31, 2002.



Sales and Marketing.  The Company continues to place significant
emphasis, both domestically and internationally, on direct sales through its own sales force.
Accordingly, sales and marketing expenses consist primarily of salaries, commissions and bonuses
earned by sales and marketing personnel, along with field office expenses and travel and
entertainment related to sales and marketing personnel.  Sales and marketing expenses also include
promotional and advertising expenses.  Sales and marketing expenses decreased from $212.0 million
for the three months ended March 31, 2001, to $165.3 million for the three months ended March 31,
2002, and as a percentage of total revenues, sales and marketing expenses were 35% in both 2001 and
2002.  In response to the weakening global economy, the Company reduced its expenditures throughout
2001 and has continued to closely monitor its expenses during the three months ended March 31,
2002.  Sales and marketing expense has decreased in absolute dollars from the first quarter of 2001
to the first quarter of 2002 primarily due to the Company's cost control initiatives, along with
the decrease in sales commissions as a result of the decrease in the Company's software license
revenues.  The Company's cost controls included: (i) decreased or eliminated incentive compensation
and reduced executive compensation; (ii) deferral of merit compensation increases; (iii) reduced
advertising, travel and other discretionary expenditures; and (iv) reduced headcount in the second
half of 2001.  While the Company expects to continue to closely monitor discretionary expenditures
and to continue its cost control initiatives, the Company expects that sales and marketing
expenses, in terms of absolute dollars and as a percentage of total revenues, will remain
comparable to or increase from the levels obtained during the three months ended March 31,
2002.



General and Administrative.  General and administrative expenses
consist primarily of salaries and occupancy costs for administrative, executive and finance
personnel, along with bad debt expense.  General and administrative expenses decreased from $54.2
million for the three months ended March 31, 2001, to $41.8 million for the three months ended
March 31, 2002, and as a percentage of total revenues were 9% in both the three-month periods ended
March 31, 2001 and 2002.  The decrease in absolute dollars from the first quarter of 2001 to the
first quarter of 2002 was primarily due to: (i) management's cost control initiatives described
above; (ii) reductions in the Company's provision for doubtful accounts as a result of improved
collection efforts; and (iii) the elimination of goodwill amortization expense in 2002 as the
result of the required adoption of new accounting pronouncements effective January 1, 2002, as more
fully described in Note 1 to the accompanying unaudited consolidated financial statements.  The
Company currently anticipates that general and administrative expenses, in terms of absolute
dollars and as a percentage of total revenues, will remain comparable to or increase from the
levels obtained during the three months ended March 31, 2002.



Operating Income and Operating Margin



Operating income was $107.4 million for the three months ended March 31,
2001, compared to $90.4 million for the three months ended March 31, 2002, and operating margins
were 18% and 19% in the first quarters of 2001 and 2002, respectively.  Operating income decreased
in the three months ended March 31, 2002 from the comparable period in 2001 primarily due to: (i)
the year-over-year decrease in software license revenues as a result of the deterioration of the
global economy and (ii) the Company's increased investment in product development.  This decline in
operating income was partially offset by management's cost control initiatives and the elimination
of the requirement to amortize goodwill, both of which lead to an increase in operating margins in
2002.  The positive effects of the Company's cost control initiatives on operating margins were
partially offset by: (i) a higher percentage of total revenues coming from professional services,
maintenance, and other revenues, which are at lower margins than software license revenues and (ii)
the Company's increased investment in product development.

Other Income, Net





`Three Months Ended
                                                         March 31,
                                                    --------------------
                                                       2001       2002
                                                    ---------  ---------
Interest income.................................... $  19,108  $  14,072
Interest expense...................................    (4,734)    (4,947)
Net gains on investments...........................     1,176      2,252
Write-down of cost-method investments to fair value      (672)        --
Other, net.........................................      (179)      (784)
                                                     ---------  ---------
                                                    $  14,699  $  10,593
                                                     =========  =========`

Interest income represents earnings on the Company's cash and short-term
investments.  Interest income for the three months ended March 31, 2002 decreased from the levels
for the three months ended March 31, 2001, primarily due to a decline in interest rates, partially
offset by the Company's increased balances of cash and short-term investments.  Interest expense
for all periods presented primarily represents interest on the Company's $300.0 million convertible
subordinated debentures (see Note 3 to the accompanying unaudited consolidated financial
statements).



During both the three months ended March 31, 2001 and 2002, net gains on
investments were primarily the result of gains from sales of the Company's short-term investments.
The Company holds several minority interests, included in other assets, in companies having
operations or technology in areas within its strategic focus.  During the three months ended March
31, 2001, the Company wrote down certain of these investments accounted for under the cost method
to fair value, as the decline in these investments was deemed to be other-than-temporary.  There
were no other-than-temporary impairments during the three months ended March 31, 2002.  Other, net
for all periods presented is primarily composed of banking fees and foreign currency gains or
losses.



Provision for Income Taxes







Net Income



The Company had net income of $76.9 million and $64.6 million for the three
months ended March 31, 2001 and 2002, respectively.  Diluted net income per share was $0.15 in the
first quarter of 2001 compared to $0.12 in the first quarter of 2002.



Adoption of Accounting Standards



During the three months ended March 31, 2001 and 2002, the Company adopted
new accounting standards related to the accounting for its: derivative instruments and hedging
activities; business combinations; intangible assets and goodwill; impairment of long lived assets;
discontinued operations; and presentation of rebilled out-of-pocket expenses.  There was not a
cumulative transition adjustment upon the adoption of any of these accounting standards and the
adoption of the these accounting standards did not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.  The following is a brief
summary of the accounting standards adopted during the three months ended March 31, 2001 and
2002:



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



Business Combinations.  On July 1, 2001, the Company adopted certain
provisions of SFAS No. 141 "Business Combinations" ("SFAS 141"),



Goodwill and Intangible Assets.



Impairment of Long-Lived Assets and Discontinued
Operations.



Presentation of Rebilled Expenses.
On January 1, 2002, the Company adopted Topic No. D-103.  Topic D-103 requires that certain out-of-pocket
expenses rebilled to customers be recorded as revenue versus an offset to the related
expense.  Prior to the adoption of Topic D-103, the Company recorded rebilled out-of-pocket
expenses as an offset to the related expense.  Comparative financial statements for prior periods
have been conformed to the current year presentation.  This change had no effect on operating
income or net income for any period presented.



Liquidity and Capital Resources



The Company derives its liquidity and
capital resources primarily from the Company's cash flows from operations and from working capital,
which was $1,581.4 million and $1,722.8 million as of December 31, 2001 and March 31, 2002,
respectively.  The Company's cash, cash equivalents and short-term investments increased from
$1,656.7 million as of December 31, 2001, to $1,877.9 million as of March 31, 2002, representing
approximately 61% and 64% of total assets, respectively.  The Company's days sales outstanding in
accounts receivable was 74 days as of December 31, 2001, compared with 70 days as of March 31,
2002.  The Company's liquidity could be negatively impacted by a decrease in demand for the
Company's products, which are subject to rapid technological changes, or a reduction of capital
expenditures by the Company's customers as a result of a downturn in the global economy, among
other factors.  The Company does not have any off-balance-sheet arrangements with unconsolidated
entities or related parties and, accordingly, the Company's liquidity and capital resources are not
subject to off-balance-sheet risks from unconsolidated entities.

As of March 31, 2002, the Company's future fixed commitments for cash payments
primarily related to obligations under non-cancelable operating and capital leases and the
Company's convertible subordinated debentures.  The Company leases facilities under non-cancelable
operating leases expiring between 2002 and 2022 and certain equipment under non-cancelable
operating and capital leases expiring between 2002 and 2014.  Future minimum lease payments under
these leases as of March 31, 2002, consisted of $80.0 million due for the remainder of 2002, $562.2
million due within five years subsequent to 2002, and $570.7 million due in 2008 and thereafter.
In addition, as of March 31, 2002, the Company had $300.0 million of convertible subordinated
debentures outstanding.  These debentures mature on September 15, 2006; bear interest at a rate of
5.50%; and are convertible at the option of the holder into 12.9 million shares of the Company's
common stock at any time prior to maturity, at a conversion price of $23.32 per share, subject to
adjustment under certain conditions.  The Company may redeem the notes, in whole or in part, at any
time on or after September 15, 2002.  The redemption price will range from $309.4 million to $302.4
million if the notes are redeemed between September 15, 2002, and September 14, 2006.  Any
redemption made on or after September 15, 2006, will be at $300.0 million.  The Company will pay
accrued interest to the redemption date.



Cash provided by operating activities was $226.0 million and $189.5 million
for the three months ended March 31, 2001 and 2002, respectively.  Despite the weak economic
conditions, the Company has continued to operate its business to ensure significant positive cash
flows from its operations.  The Company's cash provided from operations in each of these periods
was primarily derived from the Company's earnings prior to non-cash expenses such as depreciation,
amortization and bad debt.  Also contributing to cash flows from operations is the tax benefit
related to the exercise of employee stock options, which reduces the Company's cash outlay for
income tax expense, and changes in the Company's working capital. The Company's cash provided by
operating activities decreased in 2002 from the comparable period in 2001 primarily as the result
of the decreases in revenues and operating income that occurred as a result of the weak global
economic conditions.



Cash used in investing activities was $99.9 million and $98.3 million for
the three months ended March 31, 2001 and 2002, respectively.  During each of the these periods,
the Company's investment activities primarily related to the purchase of additional property and
equipment and the reinvestment of the Company's cash into short-term investments.  For the three
months ended March 31, 2001 and 2002, the Company reinvested its cash flows from operations into
short-term investments in net amounts of $21.3 million and $74.6 million, respectively, and had net
purchases of property and equipment, including leasehold improvements, of $91.9 million and $22.6
million, respectively.  The Company's investing activities in the three months ended March 31,
2001, also included net cash received in connection with acquisitions of $9.5 million, along with
repayments from an affiliate of $10.6 million.



Capital expenditures were significantly higher in the first quarter of 2001
compared to the first quarter of 2002 primarily as a result of the following in 2001: (i) expansion
of the Company's infrastructure to support the development and testing of Siebel 7 and (ii)
purchases of tenant improvements and furniture and fixtures for newly leased facilities.  The
Company expects to increase is capital expenditures in the remaining nine months of 2002 compared
to the first three months of 2002 in order to strengthen the Company's data communications and
customer service infrastructure.  In addition, the Company may purchase land and buildings in the
future to meet its facilities' requirements.



Cash provided by financing activities was $37.9 million and $66.3 million
during the three months ended March 31, 2001 and 2002, respectively.  For the three months ended
March 31, 2001 and 2002, the Company's financing activities consisted primarily of net proceeds of $37.2 million and $43.4 million, respectively, from the issuance
of common stock pursuant to the exercise of stock options and the Company's employee stock purchase
plan.  During the three months ended March 31, 2002, the Company also received proceeds of
$24.9 million from equipment financing, offset by net repayments on this financing and other
capital leases of $2.0 million.



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

Risk Factors

Set forth below and elsewhere in this quarterly report and in the other
documents we file with the SEC are risks and uncertainties that could cause actual results to
differ materially from the results contemplated by the forward-looking statements contained in this
quarterly report.  Prospective and existing investors are strongly urged to carefully consider the
various cautionary statements and risks set forth in this quarterly report and our other public
filings.

Our total revenue and operating results may fluctuate.

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

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

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

Our quarterly operating results may fluctuate.

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

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

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

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



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

The revenue growth and profitability of our business depends on the overall
demand for eBusiness applications software and services, particularly within the industries that we
offer specific versions of our products.  Because our sales are primarily to major corporate
customers in the high technology, telecommunications, financial services (including insurance),
pharmaceutical, utilities and consumer packaged goods industries, our business depends on the
overall economic conditions and the economic and business conditions within these industries.  The
progressive weakening of the global economy, the weakening of the information technology industry,
and the weakening of the business conditions within the above industries has caused a decrease in
our software license revenues in both 2001 and 2002.  A softening of demand for computer software
caused by a continued weakening of the economy, domestically or internationally, may result in a
continued decrease in revenues and growth rates.  In addition, the financial, political, economic
and other uncertainties following the terrorist attacks upon the United States have led to a
further weakening of the global economy.  Subsequent terrorist acts and/or the threat of future
outbreak or continued escalation of hostilities involving the United States or other countries
could adversely affect the growth rate of the Company's software license revenue and have an
adverse effect on our business, financial condition or results of operations.



A variation in the conversion of our revenue pipeline to contracts could
adversely affect our revenues and ability to forecast operations.



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

We need to successfully integrate acquisitions and manage growth.

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

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

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

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

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



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

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

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

We operate in a competitive and rapidly changing market.

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

Our customers may not successfully implement our products.

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

A limited number of products providea substantial part of our license revenues.

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

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

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

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



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

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

Our distribution channels may create additional risks.

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

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

Our success depends on gaining new customers and maintaining
relationships with our existing customers.  From quarter to quarter, a relatively small number of
customers generally account for a significant percentage of our revenues.  We expect that licenses
of our products to a limited number of customers will continue to account for a significant
percentage of revenue in an individual quarter for the foreseeable future; however, because the top
ten customers vary from quarter to quarter, we anticipate that license revenues from the top ten
customers for an entire fiscal year will be less significant.  For the three months ended March 31,
2002, license revenues from our 10 largest customers accounted for approximately 39% of total
software license revenues.  The failure to successfully market our products to new customers or to
new industries, or the loss of a small number of customers or any reduction or delay in orders by
any such customer, could have a material adverse effect on our business, financial condition or
results of operations.

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

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

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

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

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

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

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

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

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

Software errors or defects in our products could reduce revenues.

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



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

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

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

We acquired two companies during 2001, nQuire Software, Inc. and
Sales.com, Inc., and may acquire additional companies in the future.  We may not be able to
successfully assimilate the additional personnel, operations, acquired technology and products
acquired from these companies into our business.  In particular, we will need to assimilate and
retain key professional services, sales, engineering and marketing personnel.  Key personnel from
the acquired companies have in certain instances decided, and they may in the future decide, to
pursue other opportunities.  In addition, it may be necessary to integrate products of these
companies with our technology, and it is uncertain whether we may accomplish this easily or at all.
These integration difficulties could disrupt our ongoing business, distract management and
employees or increase expenses.  Acquisitions are inherently risky, and we may also face unexpected
costs, which may adversely affect operating results in any quarter.

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

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

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

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

The loss of key personnel could negatively affect our performance.

Our performance depends on the continued service of our key
technical, sales and senior management personnel, particularly Thomas M. Siebel, our Chairman and
Chief Executive Officer.  None of our key employees has entered into an employment agreement with
us.  The loss of the services of one or more of our executive officers could have a material
adverse effect on our business, operating results and financial condition.  To integrate into our
company, new senior personnel must spend a significant amount of time learning our business model
and management system, in addition to performing their regular duties.  Accordingly, until new
senior personnel become familiar with our business model and systems, their integration may result
in some disruption to our ongoing operations.





Catastrophic events could negatively affect our information technology
infrastructure.

The efficient operation of our business, and ultimately our operating
performance, depends on the uninterrupted use of our critical business and information technology
systems.  Many of these systems require the use of specialized hardware and other equipment that is
not readily available.  A significant portion of these critical business and information technology
systems are concentrated in the San Francisco Bay Area.  We are currently in the process of
creating redundant communications and customer service infrastructure in several geographic
locations to ensure uninterrupted service and system back up.  Until we complete the creation of
the duplicate systems, in the event of a natural disaster, a fire or other catastrophic event, such
as the recent terrorist attacks upon the United States, in the San Francisco Bay Area that results
in the destruction of these systems, the replacement of these systems and restoration of the
archived data and normal operation of our business could take several days to several weeks.
During the intervening period when our critical business and information technology systems are
inoperable, our ability to conduct normal business operations could be significantly and adversely
impacted and as a result our business, financial condition or results of operations could be
adversely affected.

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

As of March 31, 2002, we have $300.0 million of convertible subordinated
notes outstanding, bearing interest at 5.50% and due September 15, 2006 (see Note 3 to the
accompanying unaudited consolidated financial statements).  While our current cash and short-term
investments are sufficient to pay our current outstanding indebtedness, we cannot assure you that
any future financing arrangements will be available, or if available, on terms acceptable to us.
Our current or future leverage could have negative consequences, including:

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

We may not be able to protect our proprietary information.

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

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

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

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

Our international operations involve unique risks.

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

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

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

Our current officers, directors and entities affiliated with us together
beneficially owned a significant portion of the outstanding shares of common stock as of March 31,
2002.  While these stockholders do not hold a majority of our outstanding common stock, they will
be able to exercise significant influence over matters requiring stockholder approval, including
the election of directors and the approval of mergers, consolidations and sales of our assets.
This may prevent or discourage tender offers for our common stock.

Our stock price may continue to be volatile.

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

Provisions in our charter documents may prevent certain corporate
actions.

Our Board of Directors is authorized to issue up to 2,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further approval by our stockholders.  One of
these shares has been designated Series A1 Preferred Stock, which was issued in connection with the
acquisition of Janna Systems Inc.  Please see Note 5 to the accompanying unaudited consolidated
financial statements for a more detailed description of the Series A1 Preferred Stock.  Preferred
stock could be issued with voting, liquidation, dividend and other rights superior to those of the
common stock.  The rights of the holders of common stock will be subject to and may be adversely
affected by the rights of the holders of any preferred stock that may be issued in the future.  The
issuance of preferred stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a third party to
acquire a majority of our outstanding voting stock.  We have a classified Board of Directors.  This
and certain other provisions of our certificate of incorporation and certain provisions of our
bylaws and of Delaware law could delay or make more difficult a merger, tender offer or proxy
contest.

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

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.



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



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



The following summarizes as of March 31, 2002, our foreign currency forward
contracts, by currency.  All of our foreign currency forward contracts mature within a year.
Contract amounts are representative of the expected payments to be made under these instruments (in
thousands):

`Contract                  Fair Value at
                                              Amount        Contract     March 31,
                                          (Local Currency)   Amount      2002 (US$)
                                          ---------------  ---------    ------------
Australian dollars ("AUD") (contracts
  to pay AUD/receive US$)................     (AUD) 8,180   US$4,280    $      (45)

Brazilian real ("BRL") (contracts to
  pay BRL/receive US$)...................     (BRL) 3,893   US$1,480    $     (181)

Japanese yen ("YEN") (contracts to
  pay Yen/receive US$)................... (YEN) 3,004,644  US$23,490    $      916

Mexican peso ("MXN") (contracts
  to pay MXN/receive US$)................    (MXN) 27,484   US$2,996    $      (47)

Singapore dollars ("SGD") (contracts
  to pay SGD/receive US$)................     (SGD) 2,445   US$1,336    $       15

British pounds ("GBP") (contracts to
  receive GBP/pay EUR)...................     (GBP) 2,377  EUR 3,928    $      (50)

Canadian dollars ("CAD") (contracts
  to receive CAD/pay US$)................     (CAD) 7,215   US$4,547    $       16

Euro ("EUR") (contracts to receive
  EUR/pay US$)...........................   (EUR) 115,669  US$101,166   $      172

Swedish krona ("SEK") (contracts to
  receive SEK/pay EUR)...................    (SEK) 18,778  EUR 2,063    $       17

Swiss Franc ("CHF") (contracts to
  receive CHF/pay EUR)...................    (CHF) 11,445  EUR 7,818    $       14`

The following summarizes the Company's short-term
investments and the weighted average yields, as of March 31, 2002 (in thousands):

`Expected maturity date
                         ------------------------------------------------------------------
                                                                         There-
                           2002      2003      2004     2005     2006    after      Total
                         --------- --------- -------- -------- -------- --------  ---------
US Treasury and Agency
  securities............  $44,679  $143,384  $47,083  $11,139  $16,419    5,287   $267,991
Wtd. Avg. Yld...........     2.77%     3.25%    3.74%    4.60%    4.50%    4.91%

Corporate bonds......... $126,246  $164,848  $91,803  $40,024  $36,924  $13,733   $473,578
Wtd. Avg. Yld...........     2.61%     3.69%    4.50%    5.24%    5.60%    5.62%

Asset-backed securities.  $18,532   $47,761  $63,718  $36,809  $15,092       --   $181,912
Wtd. Avg. Yld...........     2.69%     4.15%    4.63%    5.23%    5.40%`

As of March 31, 2002, we had an investment portfolio of
fixed income securities, excluding those classified as cash and cash equivalents, of $923.5
million.  These securities, like all fixed income instruments, are subject to interest rate risk
and will decline in value if market interest rates increase.  If market interest rates were to
increase immediately and uniformly by 100 basis points from levels as of March 31, 2002, the fair
value of the portfolio would decline by $14.1 million.



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



We are exposed to equity price risks on marketable equity securities.  These
investments are in publicly traded companies in the high technology industry sector.  We typically
do not attempt to reduce or eliminate our market exposure on these securities.  A 10% adverse
change in the equity price would result in an approximate $0.9 million decrease in the fair value
of our marketable equity securities as of March 31, 2002.



The fair value of our convertible subordinated debenture fluctuates based
upon changes in the price of our common stock, changes in interest rates and changes in our credit
worthiness.  The fair market value of the convertible subordinated debenture as of March 31, 2002,
was $454.7 million.

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Part II.	Other Information

Item 1.	Legal Proceedings.



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

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

(a) Exhibits.

|Exhibit Number | Description of Document                                                                                                                                        
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            | Arrangement Agreement dated September 11, 2000 among the Registrant, certain indirectly
wholly-owned subsidiaries of the Registrant, and Janna Systems Inc. (1)
|3.1            | Amended and Restated Certificate of Incorporation of the Registrant, as amended to date. (2)                                                                   
|3.2            | Bylaws of the Registrant. (3)                                                                                                                                  
|4.1            | Reference is made to Exhibit 3.1 and Exhibit 3.2.                                                                                                              
|4.2            | Specimen Stock Certificate. (3)                                                                                                                                
|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. (3)     
|4.4            | Certificate of Designation of Series A1 Preferred Stock of the Registrant. (1)                                                                                 
|10.1           | Registrant's 1996 Equity Incentive Plan, as amended. (4)                                                                                                       
|10.2           | Registrant's Employee Stock Purchase Plan, as amended. (5)                                                                                                     
|10.3           | Form of Indemnity Agreement entered into between the Registrant and its officers and directors. (3)                                                            
|10.4           | Registrant's Deferred Compensation Plan, dated January 10, 1997. (6)                                                                                           
|10.5           | Lease Agreement, dated June 4, 1996, by and between the Registrant and Crossroad Associates
and Clocktower Associates. (3)                                     
|10.6           | Lease Agreement, dated March 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (7)                                                
|10.6.1         | First Amendment to Lease  dated June 11, 1999 and Second Amendment to Lease dated
July 31, 1999. (8)                                                           
|10.7           | Lease Agreement, dated March 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (7)                                                
|10.7.1         | First Amendment to Lease  dated June 11, 1999 and Second Amendment to Lease dated
July 31, 1999. (8)                                                           
|10.8           | Lease Agreement, dated June 11, 1999, by and between the Registrant and Sobrato Interests III,
as amended. (7)                                                 
|10.8.1         | First Amendment to Lease  dated September 23, 2000. (8)                                                                                                        
|10.9           | Lease Agreement, dated August 24, 1994, by and between the Registrant and Watergate Tower
Associates. (7)                                                      
|10.10          | Lease Agreement, dated August 16, 1999, by and between the Registrant and Spieker
Properties, L.P. (7)                                                         
|10.11          | Lease Amendment 10, dated April 8, 1999, by and between the Registrant and Spieker
Properties, L.P. (7)                                                        
|10.12          | Lease Amendment 11, dated August 13, 1999, by and between the Registrant and Spieker
Properties, L.P. (7)                                                      
|10.13          | Lease Amendment 12, dated October 28, 1999, by and between the Registrant and Spieker
Properties, L.P. (7)                                                     
|10.14          | Registrant's 1998 Equity Incentive Plan, as amended. (9)                                                                                                       

__________________

(1)	Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on November 27, 2000.
(2)	Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2001.
(3)	Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (No. 333-03751), as amended.
(4)	Incorporated by reference to the Registrant's Definitive Proxy Statement
on Schedule 14A filed on September 17, 1999.
(5)	Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (No. 333-07983), as amended.
(6)	Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996. 
(7)	Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999.
(8)	Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000.
(9)	Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (No. 333-72218), as amended.





(b)	Reports on Form 8-K.

None.

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**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: April 30, 2002By:
    /s/ Kenneth A. GoldmanKenneth A. GoldmanSenior Vice President Finance and
                                    Administration and
                                    Chief Financial Officer(Principal Financial Officer)

| | 
| | 
| | 

Dated: April 30, 2002



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

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

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