IBM to Bid for Satyam? Rumors All Over the Place
March 9, 2009 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.