Satyam tries to reassure customers, investors
- 09 January, 2009 08:21
Troubled Satyam Computer Services attempted on Thursday to reassure customers and investors that it could keep the company afloat, but did not discuss specific measures.
The Indian outsourcer is working on various options to improve liquidity on its balance sheet, which is right now not encouraging, Ram Mynampati, interim CEO at Satyam, told reporters at a press conference on Thursday. He did not offer plan details.
Company executives had reached out to customers, and spoke to some of them individually, to assure them of the continuity of Satyam's services, Mynampati said.
The company's chairman, B. Ramalinga Raju, resigned on Wednesday after admitting to inflating the company's profits for several years.
"The future of Satyam as an independent entity is in doubt now", said Sudin Apte, senior analyst at Forrester Research. "With fraud running high and no clear visibility into availability of working capital and cash on hand, its clients and employees will have serious challenges," he added.
Clients will start analyzing their dependence on Satyam's resources, particularly for mission-critical applications such as running SAP applications, and decide on moving them in-house or to another service provider, Apte said. Customers typically have more than one offshore supplier, reducing their dependence on any single supplier in the short term, he added.
Customers may also offer jobs to key Satyam staff working on their projects, either to work in-house or to transfer to another supplier, Apte said.
The moves at Satyam come even as Ramalinga Raju, who admitted to fiddling with the accounts, is still at large.
"We have no knowledge of where Mr. Raju is," Mynampati said.
Mynampati is appointed temporarily by a board that has been truncated by resignations since last month over a controversial bid by Satyam to diversify into the construction business. That bid was foiled by investor protests.
The company's board is scheduled to meet on Saturday, and before it can approve Mynampati's appointment, it will have to find new additions to the board, analysts said.
Mynampati sought to dispel speculation that he was privy to the adjustments of the accounts as he was a member of the board, and a high-profile spokesman for the company. Like other board members, he only received records that were audited and verified by the company's auditors, he said.
Earlier on Thursday, the company tried to convey a measure of stability by issuing a statement that said that 10 of Satyam's most senior executives, and 40 regional managers, had pledged to stay with the company.
Although no legal action has been taken in India against Raju or Satyam, two law firms have filed class-action suits in the U.S. on behalf of those who purchased Satyam's American Depository Receipts.
India's securities regulator, the Securities and Exchange Board of India (SEBI), has ordered an investigation into the Satyam episode. SEBI investigators visited Satyam's office on Thursday, Mynampati said.
Customer decisions will largely depend on how quickly Satyam moves to clear the mess at the company, said Apte. Some of Satyam's services are important to customers, and if the company is acquired or an investor steps in and funds the company within this month, customers are likely to stay with Satyam, he added.