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Review deals with Satyam, Forrester warns customers

Review deals with Satyam, Forrester warns customers
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First Published: Thu, Jan 01 2009. 12 30 AM IST

Facing the ire: Satyam is facing a crisis since Raju led a move to use Satyam’s money to buy two firms owned by his family members. Madhu Kapparath / Mint
Facing the ire: Satyam is facing a crisis since Raju led a move to use Satyam’s money to buy two firms owned by his family members. Madhu Kapparath / Mint
Updated: Fri, Jan 02 2009. 12 12 AM IST
Bangalore, Hyderabad: Influential technology consultant Forrester Research Inc. has asked customers of Satyam Computer Services Ltd to begin reviewing their contracts amid concerns of potential management change or a potential sale after 10 January, when the board of the embattled software services firm meets to try and extricate itself from a corporate governance mess.
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Satyam, India’s fourth-largest software firm by revenues, counts giants such as General Electric Co., Nissan Motor Co. Ltd and General Motors Corp., among its 690 clients who use a portfolio of its services.
Facing the ire: Satyam is facing a crisis since Raju led a move to use Satyam’s money to buy two firms owned by his family members. Madhu Kapparath / Mint
“A management miscue of this magnitude and an attempt to shift the company strategy 180 degrees from the current business model has to raise a red flag for Satyam accounts and prospects,” wrote analysts at the US technology researcher in a 30 December report.
A Satyam spokeswoman said her firm had made its case to Forrester and had seen the report. “We largely don’t agree with what has come out with the report and we have not seen any client cancellations,” she said.
Satyam is facing a serious management credibility crisis since chairman B. Ramalinga Raju led a move to use $1.6 billion (Rs7,760 crore) of Satyam’s money to buy two infrastructure firms owned by his family members under the pretext of diversification.
Following an investor revolt that saw its shares plunge, Satyam has seen four independent directors resign, including venture capitalist Vinod Dham, a day after Raju’s family also disclosed that its relatively small 8.6% stake in the firm may have shrunk following stock sales by financial institutions that lent them money against the their stakes.
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Late on Tuesday night, Dham, who hadn’t given specific reasons for his resignation, told Mint in an email: “The communication by the company, raising new issues arising from dilution of the promoter’s stake in the company, as well as inadequate relevant information in a timely manner has made it difficult for me to discharge my duties effectively as an independent board member.”
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Satyam could be a potential candidate for firms such as Hewlett Packard Co. and Logica as they look to expand their offshore footprint, the Forrester report said, adding the confusion could benefit rivals such as Tata Consultancy Services Ltd, Infosys Technologies Ltd and India-delivery focused Congizant Solutions.
Satyam’s shares rose 5.95% to close at Rs170.15 on Wednesday, sharply lower than when the deals were announced on 16 December.
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First Published: Thu, Jan 01 2009. 12 30 AM IST