Siebel Systems (NASDAQ:SEBL), the king of customer relationship marketing (CRM) software, is soaring 16% after announcing preliminary third-quarter results.

The company's revenue can be viewed as a pie split into three pieces of roughly equal size. License revenue (new sales) will be up 10% over the second quarter. Maintenance revenue will be up 3%, and services will gain 1%. Overall, that adds up to a 5% sales increase.

What should concern shareholders are the operating margins. Although the company sees them possibly increasing to 8.5% (including charges), they still lag the 32% margins at Oracle (NASDAQ:ORCL) and the 25% margins at SAP (NYSE:SAP). In the tough-fought world of software, margins are an important measure of profitability.

Still, the news and the uptick in the stock is welcome relief to shareholders. The stock has lost over a quarter of its value during the last 52 weeks and is down 42% (even after today's rise) from the high it set in January.

One factor that will cap the stock price will be competitive pressures, although Oracle's proposed purchase of PeopleSoft (NASDAQ:PSFT) would eliminate one competitor. But, Siebel's 10% sales increase pales when compared to's (NASDAQ:CRM) 88%.

Siebel does have one significant advantage. It has no debt and $2.15 billion ($4.20 a share) in cash. For a $9.50 a share stock, that is a big featherbed of green.

Siebel is not cheap. It is selling for 37 times analyst estimates for the next fiscal year. When you can buy Oracle and Microsoft (NASDAQ:MSFT) for 22 times trailing earnings, and get far better margins, why take the risk of the richly priced comeback story at Siebel?

Fool contributor and IT consultant W.D. Crotty does not own stock in any of the companies mentioned.