Satyam Computer Services Ltd. (fka SAYCY)

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New Satyam Boss A Sign Of Quick Sale
Megha Bahree, 02.05.09, 03:55 PM EST
Elevation of insider Murty to CEO spot indicates the scandal-plagued outsourcer will soon have a new owner.

Scandal-ridden Satyam Computer Services on Thursday named an insider as its new chief executive, a possible harbinger of a quick sale of the outsourcer.

The company named A.S. Murty, formerly its human resources head, to take over from B. Ramalinga Raju, who left last month after admitting he had been cooking the company's books for years.

“By pulling someone from the inside, it says a deal to sell is imminent,” said John McCarthy, vice president at Forrester Research. McCarthy predicts that Larsen & Toubro, which has upped its stake to 12.0%, is the front runner. (See "Bidders Circle Over Satyam.") “The clock is ticking and they to get some kind of deal in place by end of March," he said, or the company will face severe customer defections.

Investors seemed to take a cautious approach, bidding Satyam's shares down 5.7%, or 11 cents, to $1.81, in late New York trading.

Until last month, when co-founder and chairman B. Ramalinga Raju in a five-page fax to the board admitted to inflating the company's reported earnings and revenues for years, Satyam was among the top four outsourcing companies in India.

Murty is a 15-year veteran of the company who was not considered to be as close to Raju as interim CEO Ram Mynampati. However, he sold 40,000 shares between Dec. 12 and 15, not long before the accounting scandal broke, raising questions on if he was a fit choice for a company that’s already plagued with accounting frauds.

James Sword, a company spokesman, said the sales were not improper and that the government-appointed board that has been running Satyam had decided Murty had acted within the law. Murty was quoted as saying last month that he had sold the shares to finance a new home.
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Apart from Murty, the board also appointed Homi Khusrokhan and Partho Datta as special advisers to assist in management and finance, respectively. The advisers will work for free. Khusrokhan retired as managing director of Tata Chemicals in December 2008 and Datta was the chief financial officer of Indian Aluminium.
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The massive fraud also raises the question of how comfortable customers are going to be outsourcing their work. McCarthy said there is no reason for concern. “No, in the same way that the president going to jail for cooking the books at Computer Associates did not hurt the systems software market,” he said. “The economy is the biggest issue for the Indians and the other offshore and IT service providers.” (See "Satyam And The Recession.")

Ashish Thadani, senior vice president at Gilford Securities agreed that the economic downturn is a bigger concern than the scandal. He added that recessionary forces are weighing on corporate profits and that makes turning to offshore providers of technology services a compelling proposition.

http://www.forbes.com/2009/02/05/satyam-murty-ceo-face-markets-0205_outsourcing_42.html?partner=yahootix