ASATYAM COMPUTERS books weren't cooked; that was 3D virtual reality

Here, I suspected it's no longer SATYAM.... Now I stand vindicated...

Speculations glaore. I go it's all worthless. May be it's worth the value of some pricey real estate that it occupies in India's southern city of Hyderabad provided its overcooked balance sheet has truth enough in its declaration of the company's debt-free status. Otherwise, one would assume that even the properties may have been pledged or worse, being that of a software company, it's created out of 3D virtual reality. Something as in Second Life.

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I begin to doubt the Indiaworld acquisition that Sify (Satyam Infoway, sister concern of Satyam then) did for a mind boggling Rs.499 crore ($115 million in 1999 $). Did money really changed hands to that nondescript entrepreneur Rajesh Jain, CEO of Indiaworld? If so, why is he still stuck with some never-to-start startup? People with $100 million certainly will have a lot more options that the world would be curious to track. I have this feeling the price that Sify paid would have been far less, far far less and bulk of the money would have been stashed away by Rajus in some secret tax haven accounts.

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But then they also say the liabilities are underfunded to the extent of Rs.1230 crore (about $24 million) that Raju has arranged by pledging his shares. Anyway, too bad that Raju used a wildlife metaphor while attempting to clear his conscience in his letter to the Board- "it was like riding the tiger and not knowing how to get off without being eaten" - and disgrace the animal.

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It sure is a murky mess and it's only getting murkier. But there are some bravehearts too... And I sure can't stop envying the folks that were short on the stock yesterday...!
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Should they junk SATYAM management?

The (A)SATYAM saga is getting messier by the day.

The issue has meandered around a lot of flaky bends. First it was the bid to diversify into real estate defying all norms of corporate governance by disregarding the need for shareholder approval before making a strategic business shift. Then came the relevance of independent directors on its Board, that remained passive to promoter Ramalinga Raju’s initiative to buy grossly overvalued family concerns. Almost all of them have since resigned. What followed was yet another rant on Raju’s wiliness – how could he pull off all this while his stake has dwindled close to nothing (all of his 8.6 % in SATYAM was pledged to institutions to raise funds to finance MAYTAS venture that lost almost 80% of its value in the recent real estate meltdown – the institutions have recalled the loans that Raju could not meet and they sold his entire stake in the open market last week as the story broke).

And the latest is, HP training its guns on SATYAM. Gartner studies say IBM leads the global IT services market with around 7.2% of the market, followed by HP-EDS with around 5.3% of the market. HP overtook second-placed Accenture after it acquired EDS earlier this year. The global market for computer services is estimated to be around $748 billion. Even after the EDS acquisition, through which HP gained over 20,000 employees of MphasiS, it trails both IBM and Accenture in terms of offshore strength. IBM has over 73,000 professionals in India and Accenture some 37,000.

And now a fresh debate. Should the existing management be allowed to continue given their track record of delivering consistent business growth? I too believe that a change could be harmful and are willing to give the existing operational team a chance. Had the management clearly realized its mistake and makes amends on the governance front, it’s better to run with the same bunch that ensures customer comfort and affirms durable relationships. It’s not easy to let go off clients GE, Qantas and regain their confidence in the short term for any new management.

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SATYAM is up for grabs, pal

Ok. Enough is said about SATYAM COMPUTERS in the last one week. I come straight to the point. Dice begins to roll on who gets to buy SATYAM now that it is a sitting duck for a strategic investor / a PE raider. Want proof? Check out the huge volume of 90 million shares changing hands in the Indian stock exchanges (NSE and BSE) even as we still have a good 2 hours of trading left!!

I stuck my neck out and wanted a piece of action. Bought some SATYAM stock today. Here is some perspective on the India Offshoring scenario that I checked out before buying it. Feels good, buddy... the stock is already up by 5% from the price I bought...

So....I am already in-the-money :-) on my SATYAM buy of this morning. Aren't you too?

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Will India's IT vendors turn realty players?

Pune factories going the Mumbai Mill-land way… Turning into expensive real estates. Bajaj Auto looks like exploring turning its Akurdi plant into developed real estate.

Judging by the little or no R&D investment by India’s famed IT vendors, recently endorsed by Indis’s distant 46th ranking in global IT map, what are the odds for Infosys, Wipro and TCS to junk their businesses and turn realty plays? Satyam already has its "Maytas " group (got by reversing “S.a.t.y.a.m”) of companies into which it can morph any day.

Going by the large swathes of land and building they hold, You can’t grudge them that… Benefits? Besides the huge value that they can unlock, here they don’t have to face up to an IBM, Accenture and EDS or to brood about higher visa costs, rising wage costs, Rupee depreciation, poor skill levels, shrinking margins, attrition levels….

Aside of that, few will see any great organic upsides in the near term to their shareholders…

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Heads I win...

Results season throws up a lot of fun. I can’t stop laughing.

Satyam too joined the list of IT majors battered by the rising rupee. The INR surged by nearly 7% against the USD in Q1-08 with every 1% rise shaving off 30 basis points(0.3%) operating margins. Aiming to join the $2 billion league this fiscal, Satyam suffered a sequential slip of 3.88% in net profit for the Q1 ended June 30 to touch INR 3.78 billion ($93.4 m).

Here are some carpings.

Addressing the media, Satyam CFO V Srinivas said, “In dollar terms, we have grown by 10% and rupee terms, the growth is 3%. The 7% difference represents the rupee impact. Revenue would have been higher by Rs 138 crore if the rupee impact was not there.”

Last year when Rupee was declining, has he ever said - “we’ve actually lost market share, but our revenues have been propped up by an appreciating $ against Rupee” – Nah....

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