Satyam Denies Layoffs, Cash Crunch

A spokesman for the outsourcer rejects analyst's allegations.

Paul McDougall, Editor At Large, InformationWeek

January 16, 2009

2 Min Read

Officials at scandal-plagued outsourcer Satyam are denying an analyst's contention that the company doesn't have enough cash to meet expenses and news reports that it's laying off staff from customer sites.

"We categorically deny that workers in the United States, Australia, New Zealand, and Europe are being fired," a Satyam spokesman said in an e-mail. "Satyam has enough money to run its services and its receivables are strong," said the spokesman, reinforcing statements made by Satyam director Deepak Parekh to the Indian press Thursday.

On Jan. 7, Satyam chairman Ramalinga Raju admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by as much as 28%. Raju tendered his resignation and has since been arrested and jailed.

Earlier this week, Ovum analyst Hansa Krishnamurthy Iyengar released a research note indicating that Satyam's financial plight is worsening.

"The financial situation at Satyam is indeed dire, with inside sources confirming that the company lacks sufficient working capital to meet current expenses and employee salaries for this month," wrote the analyst.

To save money, Satyam is "firing employees onsite" in the United States, Australia, New Zealand, and Europe, Krishnamurthy Iyengar wrote, referring to press reports.

On Thursday, Indian Economic Affairs Secretary Ashok Chawla told reporters that his country's government doesn't plan a Satyam bailout. "The government at this stage is not looking at any direct support or bailout to the company," Chawla said, according to news agency Reuters.

Last week, IT advisory firm Gartner warned Satyam customers to prepare for the possibility of the outsourcer's demise and related service disruptions.

"IT services are unlike hardware or software in that they focus on a relationship with a 'trusted partner,' rather than on a product. We believe Satyam's difficulties have considerably diminished its ability to retain and inspire this trust," Gartner said in research note.

Gartner said it believes that Satyam's accounting scandal, which has been dubbed India's Enron, will make it difficult for the firm to compete going forward.

Satyam is facing lawsuits from investors who claim they were misled about the company's financial situation.

Please join us for InformationWeek's Editorial Webcast: "Offshore In India: What's Next?" on Thursday, Jan. 22, at 11 a.m. EST. Editor in chief Rob Preston and a panel of top executives including Som Mittal, president, India’s National Association of Software and Services Companies (Nasscom); Kiran Karnik, new Satyam board member and former president of Nasscom; and Kris Gopalakrishnan, co-founder and CEO, Infosys Technologies; Pradeep Kar, founder and chairman, Microland will discuss these and other issues. Go here to register.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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