Yesterday, business software maker Siebel Systems (NASDAQ:SEBL) reported third-quarter results that were admittedly good when compared with three months ago. But that's not saying much; June concluded one of the worst quarters in recent history for the company.

Those blindingly bullish on Siebel will see some good news in the earnings report. Revenues, for example, came in at $317 million, 5.3% better than last quarter's $301 million. Net income exceeded $19 million, 136% better than last quarter's $8 million. License revenue, a hugely important metric in the software industry, also improved sequentially.

Of course, that's hardly the whole story. The rest of the numbers suggest a company that is treading the thin line between deep value and permanent decline. As fellow Fool W.D. Crotty recently reported, margins are a big part of the story here. Certainly, all of Siebel's margins improved sequentially and from last year, but consider that the firm's operating margin was a razor-thin 1.3% during the quarter ended in June. Indeed, its improved but similarly single-digit operating margin for the three months ended in September is highly reminiscent of another ailing business software vendor: PeopleSoft (NASDAQ:PSFT). Look at the numbers:

Metric Siebel PeopleSoft
Revenue $1.31 billion $2.60 billion
Net Income $100.79 million $45.22 million
Operating Margin 9.4% 2.38%
Net Margin 7.7% 1.79%
Structural Free Cash Flow $214.5 million $150.3 million
Free Cash Flow Margin 16.3% 5.78%

All metrics are for the trailing 12 months; all PeopleSoft financials taken from Yahoo! Finance except for structural free cash flow and cash flow margin.

Look, I know this isn't exactly a comparison of identical twins, but the two are close competitors, and their recent mediocre results are strikingly similar. Plus, in its attempt to acquire PeopleSoft on the cheap, database king Oracle (NASDAQ:ORCL) has convincingly painted PeopleSoft as a business in permanent decline. If you believe Oracle, it's not hard to stretch that same idea to Siebel.

But should you? After all, Siebel's balance sheet shows roughly $3.79 per share in net cash, and that 16.3% cash flow margin is nothing to sneeze at. It's metrics like those that create the kind of margin of safety value investors crave. Still, Siebel's margins and growth rates in a mature business software market don't augur a quick comeback, if there is to be one. A quest for deep value in these turbulent shares could end up with your investment being deep-sixed.

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Philip Durell knows the difference between permanent decline and deep value. He regularly shops the bargain bins for out-of-favor businesses for subscribers of his Motley Fool Inside Value newsletter. A free, 30-day trial is yours for the asking.

Fool contributor Tim Beyers owns shares of Oracle. You can view his Fool profile and other stock holdings here.