Tech Mahindra Pledges To Restore Confidence In Satyam - InformationWeek

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IT Leadership // IT Strategy

Tech Mahindra Pledges To Restore Confidence In Satyam

Executives at Satyam's white knight promise changes, but the challenges are many.

On the heels of their successful bid for Satyam, executives at India's Tech Mahindra said their main goal is to help the scandal-scarred outsourcer regain trust lost as a result of an accounting scandal so vast it's been dubbed "India's Enron."

"We will work with Satyam's customers, business partners, employees, and other stakeholders to restore confidence in the company and to create a platform for future growth," Tech Mahindra CEO Vineet Nayyar said in a statement.

Tech Mahindra, which specializes in providing IT services to the telecom industry, on Monday was declared the highest bidder for Satyam. The outsourcer had placed itself on the block with an eye to finding a buyer capable of salvaging its operations. Tech Mahindra agreed to pay a total of $422 million for a 51% stake in Satyam. The deal remains subject to closing conditions.

Tech Mahindra has its work cut out for it. The fraud perpetrated by Satyam's leaders infected a wide swath of the company's operations and management ranks.

Founder and chairman Ramalinga Raju has admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam also may have faked employee numbers and other data.

Indian authorities last week formally charged Raju and several alleged accomplices with a range of crimes. The charges, which run 300 pages in length, include criminal conspiracy, impersonation, forgery, falsification of records, and evidence tampering.

Charged along with Raju were Satyam managing director Rama Raju, CFO Vadlamani Srinivas, finance VP G. Ramakrishna, senior finance manager D. Venkatapathy, assistant finance manager Ch. Srisailam, and director Suryanarayana Raju. Also charged were two employees of Satyam auditor PricewaterhouseCoopers India.

Tech Mahindra's first priority must be to stanch an exodus that has seen Satyam customers flee in droves after learning of the fraud.

Last month, the United Nations said it planned to terminate its contracts with Satyam and bar the outsourcer from bidding on future work. Another Satyam customer to eye alternatives is Selective Insurance, the 47th-largest property and casualty insurance company in the United States. Selective has outsourced about a quarter of its IT staffing requirements to Satyam.

Gadget maker SanDisk has also said it's considering pulling its contracts from Satyam.

Tech Mahindra also will have to deal with numerous investor lawsuits filed against Satyam and its management team. Last week, a judge agreed to consolidate several of those suits into a single case that will be heard in U.S. federal court in lower Manhattan.

Tech Mahindra has yet to provide much detail on its plans for Satyam. Yet to be answered are the number of employees to be retained and the fate of the Satyam brand name.

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