Eyes are on Satyam these days, when it goes under the hammer. These troubled times when economy is going through a correction, Satyam scandal could be the worst timing for Indian IT industry. Lot of MNC’s from India and abroad is vying for this so called 4th largest software exporter of India, at least Raju says it. Yes, when the valuations are so attractive, why won’t you acquire it? Considering the revenue of Satyam of $2.5bn yearly, even a wild guess would indicate at a valuation of not less than $5bn, had everything been right. But, things are different now. Shares are trading low, and considering the deal is wrapped at Rs 50/share, the valuations won’t exceed $700-800 million. But, wait there is a catch. If it’s so, then why isn’t big Indian 3 i.e. TCS, Infy, Wipro vying for this so called value proposition despite having billions of cash in their kitty.
Let’s talk about who can turn around this company, if it acquires it. Signs are not good for Satyam. Majority of the firms that have applied to acquire it, are partnered by PE firms. Going to the basics, the sole motive of a PE firm is profit booking. They don’t stay invested for long. Barring few exceptions like Blackstone, I don’t believe that any PE firm can turn around this beleaguered giant. Phaneesh Murthy pulled out few days back citing fears of increasing law suits in US, which could go up to $840 million from an estimate. Rightly done by igate, as igate itself is not in a very good position these days.
Spice also pulled out citing lack of transparency in the process. I am still thinking for a reason why they tried to acquire it. Forget, about turning around a sinking ship, do they have any proper IT management experience? Rightly they realized and exited the proposition.
Why do I believe that it’s difficult to turn around Satyam? Satyam has an operating margin of 3%, when Cognizant reported an operating margin of 20%. Industry Bench strength of IT employees is around 15%, while sources say Satyam has at least 15000 extra employees. So, a company taking over Satyam first of all has to answer all these questions. How can they increase the operating margin, remember it’s a long drawn process and may require taking extreme steps.
Lack of big ticket clients, is another reason not favoring Satyam. Satyam doesn’t have clients who can give it around $100 million annually. Majority of its clients are around $40-70 mn, which makes it tough to guarantee a continuous source of income.
So, here is the take. Who can change Satyam and bring in a renaissance? Considering all the options, I believe that the best that could happen to Satyam is IBM. IBM’s track record of IT competence, coupled with vast management expertise is all that Satyam wants now. Satyam doesn’t need a novice, who will experiment with it, and then leave it in a lurch. It needs a mature player, who knows to take hard decisions and also has the capability to handle it.
Whoever takes it, the brunt has to be faced by Satyam employees only. One thing is certain, Satyam is gonna witness a larger layoff very soon. Things can be even tougher with IBM, which is known for its aggressive firing policy. Let Satyam stand for what it stood once. Satyamev Jayate.
Let’s talk about who can turn around this company, if it acquires it. Signs are not good for Satyam. Majority of the firms that have applied to acquire it, are partnered by PE firms. Going to the basics, the sole motive of a PE firm is profit booking. They don’t stay invested for long. Barring few exceptions like Blackstone, I don’t believe that any PE firm can turn around this beleaguered giant. Phaneesh Murthy pulled out few days back citing fears of increasing law suits in US, which could go up to $840 million from an estimate. Rightly done by igate, as igate itself is not in a very good position these days.
Spice also pulled out citing lack of transparency in the process. I am still thinking for a reason why they tried to acquire it. Forget, about turning around a sinking ship, do they have any proper IT management experience? Rightly they realized and exited the proposition.
Why do I believe that it’s difficult to turn around Satyam? Satyam has an operating margin of 3%, when Cognizant reported an operating margin of 20%. Industry Bench strength of IT employees is around 15%, while sources say Satyam has at least 15000 extra employees. So, a company taking over Satyam first of all has to answer all these questions. How can they increase the operating margin, remember it’s a long drawn process and may require taking extreme steps.
Lack of big ticket clients, is another reason not favoring Satyam. Satyam doesn’t have clients who can give it around $100 million annually. Majority of its clients are around $40-70 mn, which makes it tough to guarantee a continuous source of income.
So, here is the take. Who can change Satyam and bring in a renaissance? Considering all the options, I believe that the best that could happen to Satyam is IBM. IBM’s track record of IT competence, coupled with vast management expertise is all that Satyam wants now. Satyam doesn’t need a novice, who will experiment with it, and then leave it in a lurch. It needs a mature player, who knows to take hard decisions and also has the capability to handle it.
Whoever takes it, the brunt has to be faced by Satyam employees only. One thing is certain, Satyam is gonna witness a larger layoff very soon. Things can be even tougher with IBM, which is known for its aggressive firing policy. Let Satyam stand for what it stood once. Satyamev Jayate.
1 comment:
gud post bhai..nice stats..
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