Saturday, January 17, 2009

Satyam Computers has just 7 days to survive

Satyam Computer Services has just one week to know if it will survive. Even as the centre dithers on a financial package for the beleaguered company, customers have started showing signs of deserting it.

The situation has reached alarming proportions in the last 72 hours with at least six customers indicating they would like to terminate contracts. They are asking for transition plans even as the cash-strapped company has stopped all payments to vendors, sub-contractors on customer sites and travel services, senior company sources told DNA.

Moreover, in the absence of a CEO, no decisions are being taken while the company needs $50-60 million by the end of next week and a total of $100 million by the end of the month to pay salaries, rentals, and other expenses, they added.

Sending out an SOS of sorts, the senior leadership has said that the new board will have to communicate more aggressively with customers to hold them back. While new board member Kiran Karnik has been talking to three or four customers every day, what is being suggested is a webcast or broadcast by the entire board to customers to get the message across that they are serious about rescuing the company.

At last count, around the end of September Satyam had 649 active customers, of whom 185 were Fortune 500 companies. Currently, some 3,500-3,800 projects are going on, and some of them are slated for completion within the next six months.

At the end of Q2, Satyam had a total of 48,434 onsite, offshore and domestic employees. Considering the loading, or utilisation rate of 76% of employees, at any given time there are close to 10,000 employees without any work. In fact, it is these employees who have flooded job portals with resumes, the senior executive said.

However, with customers beginning to leave and with no prospects of any new business over the next six months, it is imperative that Satyam starts retrenching employees soon, he said. While it will be the employees on the bench who will go first, the number of pink slips will swell if the current situation persists, he added. In fact, the company is not likely to be even short-listed for new bids.

Some of the customers, who have asked for transition plans from Satyam, have also sought "rebadging" of associates on their projects so that the handover to new vendors can be smooth, the sources said. Rebadging means using current employees to handle the projects in new vendor companies or even absorption into the main client company.

Significantly,auditors KPMG and Deloitte will also conduct an employee audit, the senior source said. This gains significance in the backdrop of doubts being expressed over Satyam's exact employee strength.

Ramalinga Raju is suspectedto have jacked up the numbers to hike the salary bills. However, the senior management discounted such a possibility.

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