The Three Wise Men of Satyam

The three wise men AKA Government-appointed Board of Directors for Satyam, have painstakingly interviewed around 50 candidates and after much delay finally landed up with a new CEO of Satyam Computers, Mr. A. S. Murthy (ASM). I do not wish to go into ASM's capability or discuss at length the implication of having a CEO who dumped his shares just before the Maytas episode.

No.
Instead let us investigate something more terrible.

What is greatest threat that Satyam faces today? It is not paucity of funds; they are not exactly bankrupt, are they? The employees are more or less still with Satyam - by choice or otherwise. The threat is from the customers. Some of them have cut off relationship with Satyam; while others are on a watch mode. So the prudent decision would have been to take on board someone who could instill confidence in the customer. Someone who could signal a fresh start - a clean break from the past.

ASM is not a clean break from the past. He is a Raju man. He may have worked with Satyam for the last 15 years and he may know all the customers; but that does not qualify him to become a CEO.

Satyam may survive. It may prosper once again. But only if the customers do not desert Satyam. A dynamic, known outsider would have been a much better choice. ASM may be capable, but he is not the man of the hour. If Satyam regains its lost glory, it would be in spite of and not because of ASM.

A thought pops up: Is this a political appointment designed to control damage?
I hope it is.
The alternative is even more distressing. If this is not a political appointment, then it shows a deeper problem that perhaps pervades the whole of corporate India.

Companies exist only for customer (Yeah! Yeah! I am aware of a certain CEO who thinks employees come before customer. He is wrong - I will explain this some other day, why he is wrong. The same CEO also goes around using "Blue Ocean" for every strategic(??) move. The only Blue Ocean created by an Indian, that I know of, is by Sabir Bhatia, creator of Hotmail.) Each and every action taken by the company should be focused only at the customer. This is something that no one needs to learn from a humble blogger. By not thinking about the customer while choosing the new Satyam CEO, the three wise-men have clearly signaled that corporate India thinks otherwise.

It is impossible to judge now the impact of this appointment. The implications lie in the future and is not visible to us. The best I can hope that it turns out inconsequential. At stake is the future of 40,000+ Satyam employees.

Picture courtesy: enimal

Did Credit Crunch Claim Satyam?

Satyam is imploding as I type out this blog.
The chairman of Satyam Computers has resigned. In his letter to the board of directors he has confessed that the balance sheet was inflated.
Consider this ...
In the September (Q2) 2008, the balance sheet showed an operating margin of 24% as against merely 3% of the revenues. The balance sheet shows an accrued interest of Rs 376 crores, which is non-existent.
In his letter, the chairman says "it was like riding a tiger, not knowing how to get off without being eaten."
Breaking news on all channels indicate that all major clients are washing their hands off Satyam. They are terminating their services.
So, why was this disclosure made now? Is it just because "tremendous burden I am carrying on my conscience" as stated in the letter? Or do you think this is a domino effect of the aborted Maytas deal?
Actually it is nothing of that sort. And this is my understanding ... though I cannot prove it.
Scams operate well when there is plenty of cash around; when banks are more than willing to part with cash where ever they see profit coming in. But when cash is tight and the banks are less than willing to provide loans, the bottom falls off and scams are exposed. Case in point: Madoff and his Ponzi scheme.
And I bet that if every thing was fine and there was no cash crisis this would have gone for a very long time.
Watch out for this space. If the credit crisis prolongs you will see more such skeletons tumbling out.
So in a way such crisis is good. It has a purgatory effect on a system. Rotten apples are exposed and that actually helps the system overall in long run.
And if you see an expert telling you that credit crisis was the reason behind the Satyam implosion, remember you read it here first!

Question: Who are their accountants?

Note: The picture used here belongs to Tory Byrne. To see more pictures, visit her gallery.