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Satyam and the ‘Shadow Board'

Zafar Anjum | March 14, 2011
Beleaguered Indian IT Services giant Satyam recently announced it is making a comeback towards greater stability and success, but acknowledges that its leaders and employees have their work cut out.

The company also faces a class action suit in the U.S. alleging violations of American federal securities laws. The company delisted last year from the New York Stock Exchange, after it failed to publish its results according to U.S. accounting rules, within a stipulated period.

Its profits in the quarter were whittled down by 533 million rupees (US$11.7 million) in exceptional items relating to restructuring costs, forensic investigation and litigation support, and erosion in value of assets in subsidiaries.

The company added 764 staff in the recently announced quarter, taking the total to 28,832 at quarter’s end, when it had 217 customers.

The road ahead

Satyam, which was once India’s fourth largest outsourcer, is far from reaching the revenue and profit levels of its competitors, such as Tata Consultancy Services, Infosys Technologies, and Wipro. All these three companies reported strong revenue and profit growth in the quarter ended December 31, benefiting from a recovery in the outsourcing market.

On its proposed merger with Tech Mahindra, Satyam’s minority shareholders have demanded that it should be delayed until the company’s full recovery, and when the valuations of equity are reasonable.

“Have we returned to industry standard profitability? - the answer is no,” admits Gandhi. “Are we getting there? The answer is yes. Could this turn around been done in any other fashion? I have my doubts.

“I think it was mammoth task, pretty well-orchestrated. It has been the experience of a life-time. When there is a crisis, you tend you work very differently. When things are stable, you actually become very lethargic.”

Satyam is on the road to more stability and more success. Its leaders and employees are out of the clouds now but they still have some distance to go. Gandhi’s enthusiasm matched with a seasoned cautiousness is perhaps a good sign for Satyam’s investors and customers. For now, it seems they just need to keep the faith. (With inputs from IDG News Service).


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