Satyam Firing Workers 'Onsite,' Analyst Says - InformationWeek

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IT Leadership // IT Strategy

Satyam Firing Workers 'Onsite,' Analyst Says

The scandal-plagued outsourcer is also virtually broke, a new report states.

Beleaguered Indian outsourcer Satyam, whose chairman earlier this month admitted falsifying profits and revenue by more than $1 billion, is perilously close to running out of cash and is laying off employees summarily in a desperate effort to remain solvent, an analyst said in a report issued Thursday.

"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 Hansa Krishnamurthy Iyengar, an analyst at U.K.-based advisory firm Ovum.

To save money, Satyam is "firing employees onsite" in the United States, Australia, New Zealand, and Europe, Krishnamurthy Iyengar wrote, citing third-party news reports.

Satyam has claimed to have more than 53,000 workers worldwide, but the analyst said the real number is "far fewer."

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 disgraced 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 the 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.

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.

Satyam is now 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, 2009, at 11 a.m. EST. Editor in chief Rob Preston and a panel of top executives from the Indian IT industry will discuss these and other issues. Register at the link here.

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