Avoiding Satyam Like the Plague

by Jeannette Di Louie

Note: As with any large company involved in a substantial scandal, it will take Satyam Computer Services (NYSE: SAY) awhile before it can get back to the business of making money – without distraction. For investors, this is a pretty clear signal to stay away until the firm finds its footing again. And with each passing week, it seems like there is another headline-grabbing revelation. For speculators and bottom feeders, it can be hard to tell which drop is the final one. And the lesson here is clear. If you can’t figure that out, you probably should stay away as well. Remember that there are still areas in India that suffer from the plague – I’d avoid them as well.

You Almost Have To Feel Bad For Satyam… Almost

“The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do,” Prem Chand Gupta, India’s corporate affairs minister told reporters today, adding that “The government is committed to punish everyone found guilty, including the auditors.”

That doesn’t bode well for Satyam Computer Services’s board of directors, who have already been sacked. And former CEO B. Ramalinga Raju is going to be “interviewed” (read: interrogated) on Saturday.

However, the company itself isn’t in danger of being shut down at this point. At least not in any more danger than it was Wednesday. Ten government-appointed directors will be meeting in the next week to appoint new managers to the company, while other officials pore over documents seized from the main office.

So what does this mean for Satyam? Obviously, India intends it to go on if at all possible, but that doesn’t mean that it will ever gain back the trust it had before. Already, the Indian market and currency have suffered due to the scandal. And according to media reports, Citigroup (NYSE: C) has frozen its accounts with Satyam in order to secure $70m in loans.

Rest assured that won’t be the last company to do so.

To see the original article, go here.

Comments

[Adukes:]

China's Ctrip(NASDAQ: CTRP) is certainly the next!

Jan 13 09:08 AM

[mlkr:]

The author didnt cover issues of 60 k strong labor force and potential harm of competitors..such as TATA family..
Remarkable an OHIO state university graduate could establish such IT firm and try to protect it against hostile takeover attempts of competitors..
Took a position.

Jan 13 11:28 AM

[Dr Pandey, S.N:]

SAY Affair is a unique case of frauds in connivance with institutions and people in position to excercise control. This evident. promoter's family offloaded 43.8 million shares. So is the case wit other large institutional investors like Merril, DSP and who not at the cost of small investors and the people. Raju forged and frauded every thing including the number of emploees on its role. When people and institutions do not care for norms and go by personal considerations, nothing better can beexpected. The GOI has to be tough.
Dr S.N Pandey
[e-mail]

Jan 14 01:19 AM