Date:02/01/2009 URL: http://www.thehindu.com/2009/01/02/stories/2009010255681400.htm

Business

Satyam: big question over renewal of contracts

A. Saye Sekhar

Few funds give ‘benefit of doubt’ to Ramalinga Raju
Analyst warns customers to watch the company

HYDERABAD: A big question mark is staring at the battered Satyam Computer Services over the renewal of contracts by the existing prestigious clients across the globe.

Though company sources claim that there is no problem from the customers as of now, whether the clients will wield the stick will be known when the financial year ends in March. While Satyam completed its third quarter on Wednesday, the first quarter of the financial year began for its global customers on Thursday.

The controversies triggered by the now-aborted deal of acquiring Maytas companies, the World Bank’s eight-year ban and the fresh case seeking to restrain the company from taking up further transactions by Upaid mobile telecom company, are already finding the embattled IT giant in a tight spot.

Meanwhile, Forrester Research, a global IT analyst company, warned the customers to watch Satyam before renewing the contracts or awarding fresh ones.

Report

The report put out on December 30 said: “Sourcing and vendor management executives will need to review their dependence on Satyam and ensure that they have strong contingency plans and change of ownership clauses in the event that Satyam is acquired or the fallout from this serious misstep affects the firm’s ability to compete [in the] long-term.”

However, a few funds, which invested in Satyam, are giving the “benefit of doubt” to Chairman B. Ramalinga Raju saying that his intentions to acquire “might have had” solid arithmetic behind.

The company, while announcing the second quarter results, said that its clientele included eight of the top ten automobile, two of the top five investment banks, seven of the top ten electronics and electrical equipment manufacturers, six of the top ten pharmaceuticals and an equal number of aerospace and defence manufacturers, three of the top five healthcare industries and two of the top five oil and gas companies.

Besides bracing itself up for the upcoming special meeting of the board on January 10 and the subsequent quarterly results, Satyam’s top-brass is gearing up to meet the challenge of the second case by Upaid in a Texas court, posted for January 7.