IBM to Bid for Satyam? Rumors All Over the Place

Published: March 9, 2009

by Timothy Prickett Morgan

Scandal-ridden Indian IT services company Satyam Computer Services may, or may not, have a Big Blue potential buyer sniffing around now that the Indian Securities and Exchange Commission has given its approval for Satyam to sell a 51 percent controlling stake in itself to a suitor.

Two months ago, Satyam founder and chairman Ramalinga Raju admitted that the company had forged documents and pumped up the company's assets by $1 billion. The high-flying application and IT services giant had a market capitalization of over $7 billion a year ago, and now is trading at something around $500 million after the scandal.

While the Business Standard, an Indian business newspaper, was reporting last Thursday that IBM had sent a team of bankers and lawyers to do due diligence on a deal, a follow-up report in Reuters on Friday poured a whole lot of cold water on the idea.

By some measures, IBM is already on track to be the largest services provider in India and while paying somewhere between $500 million and $1 billion for Satyam might be a steal, considering the revenue stream its 600-strong global customer base generates, the lawsuits relating to the accounting fraud, which has hammered stockholders, are a big question mark in terms of potential future liabilities. IBM, Hewlett-Packard, CSC, and a number of other players who are rumored to be interested in Satyam probably don't want those liabilities. It is probably far less costly--and certainly less risky--to try to steal away Satyam's business.

RELATED STORIES

SOA Remains Hard to Define, but Projects on the Rise

Bsafe and Satyam Partner for System i and z Security

Sun Partners with Indian Offshorers to Attack AIX, HP-UX, and Linux

Offshoring Grows Quickly in 2004, but Analysts Say That Won't Last