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Satyam waits for its new boss

The newly appointed board of Satyam Computer Services said on Monday finding a new CEO for the scam-hit company and restating its finances were its top priority. A possible merger with a rival company is also on the table.

On their first day at work, the three members of the board touched down in Hyderabad, held a quick review with company officials at Satyam’s headquarters and then addressed the media, in an attempt to talk up sentiments and restore confidence among employees and customers. They picked their words carefully.

They expressed optimism, but didn’t seek to undermine the challenges that lie ahead. They didn’t set a timeframe for putting Satyam back on track, but promised to give it their best shot.

All told, the best possible scenario for Satyam, experts said, would be one wherein the company eventually finds a buyer. Deepak Parekh, who anchors the new board for now, said the option of merging the company with a rival firm “is always open”, but gave no details.

To find a buyer, Satyam has to first come clean with its finances, which were rigged by its disgraced former chairman, B. Ramalinga Raju, allegedly to the tune of at least Rs 7,100 crore. Parekh said an independent auditor would be appointed within 48 hours to restate Satyam’s finances.

This is also crucial to raising money to pay salaries of its 53,000 employees and meeting running expenses. “There is a doubt (about financial numbers) in everyone’s mind, including ours,” he said.

“Unless we get some authenticated numbers, no bank will give money.” The board will also persuade Satyam’s clients to pay earlier for the services they have already received.

Former NASSCOM president Kiran Karnik, who is also on the new board, said the speed and decisiveness with which the government intervened had helped restore some confidence among Satyam’s stakeholders. “It’s not completely gone.

There is perception of some stability now,” Karnik said. On Monday, Satyam’s shares rose 44 per cent to Rs 34.40, on hopes of a revival.

But most analysts maintained that it would be difficult to entirely undo the company’s slide. As Parekh said himself, getting a good chief executive officer isn’t going to be easy, because “very few want to leave their job and come to a company with such uncertainty”.

Moreover, employees and customers need continuous assurance, and all of that has to be done in a transparent manner, in public glare. Already, clients are looking to switch and employees are passing on resumes to headhunters.

The board needs to be expanded, but few competent candidates are available in the market. Meanwhile, Prime Minister Manmohan Singh held a meeting of senior government officials in Delhi to review the Satyam issue.

“It’s a hell of a job,” said Omkar Goswami, economist and an independent director on the board of Infosys Technologies. “The best thing that can happen to the company is that it finds a buyer.

In the worst case, it faces liquidation, but I hope that doesn’t happen

January 13, 2009 Posted by | news | , , , , , | 2 Comments

Satyam head arrested

The chairman of Satyam Computer Services was arrested on Friday on charges of cheating and forgery, and the government dissolved the outsourcer’s board as authorities moved to limit fallout from India’s biggest corporate scandal.

Chairman Ramalinga Raju, who resigned on Wednesday after revealing years of accounting fraud, was expected to appear before India’s market regulator on Saturday.

In a late night development, Raju and his brother B. Rama Raju, Satyam co-founder and managing director, were arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery, Reuters was told by S.S.P. Yadav, police chief of the southern Andhra Pradesh state, whose capital, Hyderabad, is home to Satyam.

Officials with India’s Registrar of Companies searched Satyam’s offices and seized papers and electronic documents, the company said late on Friday in a filing with the U.S. Securities and Exchange Commission.

Earlier, Corporate Affairs Minister Prem Chand Gupta said the government would appoint 10 new members to the Satyam board, which would meet within seven days. There was no move at this time to take over Satyam’s management, he said.

“The government is considering appointment of suitable persons as directors of Satyam,” Gupta told a news conference in New Delhi. “We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders.”

A Satyam spokeswoman said the company welcomed the government’s decision, which would restore the confidence of all employees, customers and shareholders. However, she said Satyam had no comment on the arrests.

In a bid to ease investors’ concerns, the Securities and Exchange Board of India said auditors’ certification of corporate results from the December quarter would be peer reviewed.

The government barred Satyam’s board from holding its scheduled meeting on Saturday, called to consider options such as inviting a takeover or strategic investor and appointing an investment banker.

Analysts said Satyam’s very existence was threatened by the scandal, which stand-in Chief Executive Ram Mynampati said has pushed the company into a crisis of unimaginable proportions.

Satyam shares slumped to 11.50 rupees (24 U.S. cents), their lowest since March 1998 and a far cry from a 2008 high of 544 rupees, before ending down 40 percent at 23.85 rupees ahead of the board’s dissolution.

The company’s market value has shriveled to $330 million, from more than $7 billion six months ago.

January 10, 2009 Posted by | news | , , , , , , , | Leave a comment