Satyam faces challenges a year after financial scandal

Irregularities to the tune of $1.6 billion were detected

Satyam Computer Services' revenue skidded in the Indian fiscal year, even as a new management tried to reassure customers and employees, according to financial results released belatedly by the company.

The company, which was hit by a financial scandal in January last year, reported on Wednesday revenue of 54.8 billion Indian rupees (US$1.22 billion at the exchange rate on the last day of the fiscal year) for the fiscal year ended March 31, 2010, down by 38 percent from revenue in the previous fiscal year.

The company however reduced its losses to 1.25 billion rupees from 81.8 billion rupees a year earlier. A large part of the losses last year are related to the financial irregularities at the company.

"It appears that the company is losing clients despite the new management," said Sudin Apte, principal analyst at Forrester Research.

Satyam has to reassure customers on a number of fronts, including its investments in new technologies, and how it plans to differentiate itself from larger Indian players like Tata Consultancy Services and Infosys Technologies, Apte said. The company will also have to stem attrition, as it appears that it has lost staff in the year to March 31, 2010, he added.

Satyam's staff cost has fallen to 39.8 billion rupees from 60.7 billion rupees a year earlier, suggesting large staff attrition.

The company announced on Wednesday its financial results in accordance with Indian GAAP (Generally Accepted Accounting Principles) for the fiscal years ended March 31, 2009 and March 31, 2010.

The company has decided to delist its American Depositary Receipts (ADRs) from the New York Stock Exchange (NYSE) in October, as it will not be able to comply with the stock exchange's requirement to file its delayed financial results in accordance with U.S. GAAP by an Oct. 15 deadline, the company said last week.

Satyam was plunged into a crisis in January last year after its founder, B. Ramalinga Raju, said that the company's account had been cooked up for several years.

A board appointed by the Indian government soon after had ordered the accounts of the company to be restated.

The accounts released on Wednesday disclose the extent of the fraud at Satyam. The company said a lot of information on its finances is still not available, or may have been destroyed.

A forensic examination from April 1, 2002 to Sept. 30, 2008 pointed out to two types of financial irregularities: unrecorded transactions, and fictitious entries entered in the accounting records.

The false entries for 62.3 billion rupees were largely fictitious recognition of revenue and interest, which resulted in the creation of false cash and bank balances and receivables, Satyam said.

The overall impact of these irregularities on the statement of assets and liabilities as of Sept. 30, 2008, was 67.6 billion rupees, according to Satyam.

Another Indian outsourcer, Tech Mahindra, acquired a dominant 43 percent stake in Satyam last year after the government decided to bring in a strategic investor. It assumed management control of Satyam in June, and adopted the "Mahindra Satyam" brand to market the company's services.

Satyam will be merged with Tech Mahindra after receiving necessary approvals, according to reports. A merger will not bring any value to customers, as there is little synergy between the two companies, Apte said. The challenges of merger and restructuring could further impact Satyam's business, he added.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags outsourcingbusiness issuesservicesForrester Researchfinancial resultsrestructuringoffshoringsatyam computer servicesTech MahindraInfosys TechnologiesTata Consultancy Services

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Cool Tech

Breitling Superocean Heritage Chronographe 44

Learn more >

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?