24/7 Wall St. » SAY

Satyam Tries To Save Itself (SAY)

Douglas A. McIntyre — Fri, 23 Jan 2009 09:57:03 +0000

Satyam Computer Services Limited (NYSE: SAY) has become the Enron of India. The troubles over its book-cooking are widely known, and there is very little tangible data about the real value of the company. This is what happens when a company says most of its cash balance is a lie. Somehow, some way, the company’s board of directors is trying to convey that it has things under control.

The board met for the third time in 13 days. The company claimsthat it is in the final stages of arranging additional funding that will cover salaries and vendor payments through March. The boardbelieves it will reach an agreement and make a formal announcement before Wednesday.

It also claims that its fixed assets, including its owned campuses, arefree of encumbrance. Moreover, collections fromreceivables have been robust. The company is discussing expeditingcustomer collections and other cost controls.

The board has narrowed the list of possible CEO and CFO candidates to 3 candidates each. The boardalso claims that the new CEO "will be a leader of global renown anduniquely qualified to lead Satyam during this transition period."Transition period? It sounds more like a crisis period if you havefollowed it.

The board of directors has also met with several investment bankersregarding advice on strategic options, and claims it will appoint one within a few days.

Board members have spoken to "almost two dozen key customers" and are communicating to all of its keycustomers to show the most recent positive developments and to "restoretheir confidence in Satyam." Good luck.

Thge company is further claiming that its existing customers continueto sign new work orders and have given positive feedback over the"timely delivery of projects and adherence to service levelagreements." It even noted that several of its large customers havevisited Satyam development centers in India and expressedsatisfaction. It is almost hard to believe, but the company said thatwhile it it has monitored its customer attrition it has seen no realmaterial impact. It also claimed that its associate attrition(employee turnover) also remains well under control.

The board will convene again this coming Monday and Tuesday, January 26th and 27th.

What is interesting is the point of relevance. If you were a majorcompany which hired Satyam for a huge IT outsourcing pact, how would you react when the vendor announcedmanagement fraud to the point that almost all of the cash balance was alie. If you were a highly qualified employee with skills inhigh-demand or that were not held by most, would you just put your nosedown to the grindstone and hope for the best?

It seems that the best case is that could come is that an outsideacquirer could salvage the company’s reputation. But Satyam is now the Enron of India.Its future is not assured.

We wish the board luck in saving the company and in turning it around.But there are still more questions than answers to the tune of a ratiogreater than 100-to-1 if you are a student of history. That is why wedo not and will not just take the company statements at face value.The proof is in the execution.

So far it seems that the bottom fishers are taking the company’sstatements at face value. Shares are up a whopping 26% today. Keepin mind that this is still only a $1.35 stock after that sharp gain.Its 52-week trading range is $0.78 to $29.84.

Jon C. Ogg
January 23, 2009

Posted in Emerging Markets, International Markets, Technology, Technology Companies, Turnarounds, Value Investing Tagged: SAY

Satyam Turns Out to be a House of Cards (SAY, INFY, WIT, PIN, EPI, IFN)

Douglas A. McIntyre — Wed, 07 Jan 2009 06:38:53 +0000

If you are one of those who cannot stand Indian IT-outsourcing firms, you probably just got another feather in your cap. India’s Satyam Computer Services Ltd. (NYSE: SAY) is turning out to be a house of cards. Shares closed at $9.35 yesterday after many recent troubles, and that was already down two-thirds from their highs. Things are worse this morning. Much, much worse.

The company’s Chairman Raju admitted to cooking the books for the lastfew years. It seems the company had phony profits and a highly inflated balancesheet. He resigned and another director resigned. Indian officials areexamining the role of auditors and the role of directors. This is allon the heels of what was going to be one horrible mismatched merger inrecent weeks.

DSP Merrill Lynch has also withdrawn as the company’s advisor. Aboutall that can be said on the decency side here is that the company’sboard of directors is still meeting this Saturday.

The last trades early this morning are under $3.00 pershare. MarketWatch even put out a headline with the reference of theIndian-Enron.

Interestingly enough, this killed India’s overall stock market morethan it hurt IT-outsourcing competitors. Infosys Technologies Ltd.(NASDAQ: INFY) is hardly down this morning. Same goes for Wipro Ltd.(NYSE: WIT).

The Bombay SENSEX fell by 7%. You might as well expect weakness to be seen in the Powershares India (NYSE: PIN), WisdomTree India Earnings (NYSE: EPI), and the India Fund, Inc. (NYSE: IFN) for additional fallout.

Jon C. Ogg
January 7, 2009

Posted in Accounting, ADR, Corporate Governance, Earnings, Earnings Warning, Emerging Markets, International Markets, Law, Regulation, Shareholder Issues Tagged: EPI, IFN, INFY, PIN, SAY, WIT

Pre-Market Analyst Downgrade/Negative Calls (AAPL, BK, BUCY, CCRT, EGO, JOYG, NOK, PALM, SAY)

Douglas A. McIntyre — Thu, 18 Dec 2008 07:20:33 +0000

These are some of the top pre-market analyst downgrades or cautious calls seen from Wall Street early this Thursday morning with more than two hours to the open:

Apple (NASDAQ: AAPL) Started as Hold at Canaccord.
Bank of NY Mellon (NYSE: BK) Cut to Market Perform at KBW.
Bucyrus International (NASDAQ: BUCY) Cut to Underweight at JPMorgan.
CompuCredit (NASDAQ: CCRT) Cut to Market Perform at KBW.
Eldorado Gold (NYSE: EGO) Cut to Outperform from Strong Buy at Raymond James.
Joy Global (NASDAQ: JOYG) Cut to Underweight at JPMorgan.
Nokia (NYSE: NOK) Started as Sell at Canaccord.
Palm (NASDAQ: PALM) Started as Sell at Canaccord.
Satyam Computer (NYSE: SAY) Cut to Sell at Goldman Sachs; Cut to Underweight at Morgan Stanley.

Jon C. Ogg
December 18, 2008

Posted in Analyst Calls Tagged: AAPL, BK, BUCY, CCRT, EGO, JOYG, NOK, PALM, SAY

The 52-Week Low Club (SAY)(KFN)(ZIXI)

Douglas A. McIntyre — Tue, 16 Dec 2008 15:46:44 +0000

Satyam Computer (SAY) Plans to buy another company send stock diving. Drops to $5.05 from 52-week high of $29.84.

KKR Financial (KFN) Plans to replace CEO on top of poor performance. Drops to $.60 from 52-week high of $16.78.

Zix (ZIXI) No news, just a bad day. Falls to $1.11 from 52-week high of $5.30.

Douglas A. McIntyre

Posted in General Tagged: KFN, SAY, ZIXI

Satyam’s Diversification, A Bridge To Nowhere (SAY)

Douglas A. McIntyre — Tue, 16 Dec 2008 11:42:52 +0000

Satyam Computer Services Ltd. (NYSE: SAY) is seeing its stock crushed this morning after the company’s board of directors approved acquisitions of infrastructure development companies Maytas Infra Ltd. and Maytas Properties Ltd. What is interesting is that this acquisition of the two Maytas was being sold as a view to remove the risk from its core business of software and IT-outsourcing services. The purchase price is roughly $1.6 billion, and technically these are majority stakes being taken.

This move is almost mind boggling. Could you imagine IBM buying aconstruction company? Could you imagine an infrastructure companybuying an IT-consulting firm? Niche plays are one thing if they savecompanies money. This is something else entirely.

It seems that the IT-outsourcing is reaching some peaks on its ownright now. Some may be on the economic problems that the world isgoing through. Some may be on the laws of growth after a critical masshas been reached.

Taking on infrastructure seems a stretch here. Actually, more than a stretch.

Satyam shares are paying the price. Its market cap is now about $1.95billion, but that is only because shares are down right over 50%today. Its prior 52-week trading range was $10.80 to $29.84. Withshares at $5.85 and now at roughly 5-year lows, you have to wonder whaton earth the company was thinking.

Jon C. Ogg
December 16, 2008

Posted in Emerging Markets, Infrastructure, International Markets, Mergers & Acquisitions, Mergers and Buy Outs, Software, Technology Tagged: SAY

Indian ADR’s Unphased By Terror Attacks (INFY, IBN, REDF, SAY, SLT, TTM, WIT)

Douglas A. McIntyre — Wed, 26 Nov 2008 15:17:19 +0000

Fresh attacks that appear to be targeted against foreigners in Mumbai, India have failed to thwart a market rally today even in Indian stocks. Reports have foreigners being taken hostage at premiere hotels frequented by the wealthy and by business travelers and some 60 deaths have been reported. Interestingly enough, this has also failed to take out the wind of the Indian ETF’s and Indian ADR’s which are actively traded here in the US. Stock Moves in ADR’s:

Infosys Technologies Ltd. (NASDAQ: INFY) up 6.3% at $24.61
ICICI Bank (NYSE: IBN) down 2.7% at $13.26 (had been up before)
Rediff.com India Ltd. (NASDAQ: REDF) up 5.6% at $2.06
Satyam Computer Services (NYSE: SAY) up over 3% at $12.78
Sterlite Industries (NYSE: SLT) up 7% at $4.80
Tata Motors (NYSE: TTM) down 2.3% at $4.59 (was down most of day)
Wipro Ltd. (NYSE: WIT) up 4.3% at $7.48

We also added in an after-report list to the ETF’s and closed-end funds we track to show a broad interest as well.

Jon C. Ogg
November 26, 2008

Posted in ADR, Emerging Markets, International Markets Tagged: IBN, INFY, REDF, SAY, SLT, TTM, WIT

IT Outsourcing Income Altered By Dollar (Strength)? (INFY, SAY, WIT)

Douglas A. McIntyre — Fri, 12 Sep 2008 07:48:28 +0000

There may be an interesting trend in the IT outsourcing game, and one that will seem counter-intuitive if you have witnessed the currency trends and jobs migration trends since 2002. This isn’t exactly breaking news now that we have seen the U.S. dollar rebound after a six-year pounding.

Infosys Technologies Ltd. (NASDAQ: INFY) is one of the largest IndianIT outsource operations, said earlier this week that it seessome weaker revenue growth trends and is seeing some project delays.The company also said that dollar gains may hurt its earnings andrevenue reported under U.S. accounting standards.Infosys shares were down about $2.00 to $37.18 yesterday on the sameconcerns. Investors whobuy ADR’s and ADS’s in foreign companies whenthe dollar is strengthening should also be concerned.

Then this morning Satyam ComputerServices (NYSE: SAY) and Wipro Ltd. (NYSE: WIT) noted how the currency conversions would alsohave an impact in their quarter. While it doesn’t look like there areany guidance changes, this trend could strengthen if the dollar rebound continues. This was part of the reason that the SENSEX in India fell by more than 2% today. Indian tech stocks fared worse. Much of the woes and the pressure on the USGreenback do still exist longer-term, but the Euro essentially rallied100% from its lows seen at the start of this decade.

Next stop, imagine another scenario which would seem odd if youconsider the manufacturing outsourcing to China. Imagine ahypothetical day where China actually threw in the towel and said itwants to remove the renminbi peg to the dollar entirely. You wouldalmost certainly see a sudden move up in the value of the renminbi. Bywhat amount is unknown. Some economists have forecasted as much as a 25% move almost instantly. Take that one stepfurther and all of a sudden all of that cheap labor and outsourcedfactory renting that has been going on would cost that much more toofor all the local currency expenses. Maybe Michigan and Ohiomanufacturing could actually stage a comeback after a couple decades of erosion.

Jon C. Ogg
September 12, 2008

Top 10 Early Bird Analyst Calls (AIG, CTAS, KBW, NTES, NKE, SAY, SHW, SWK, TEVA, WFMI)

Douglas A. McIntyre — Mon, 21 Jul 2008 06:01:45 +0000

These are only some of the early bird analyst calls that we have seen in early Monday pre-market trading, but these are some of the more active stock names:

American International Group (NYSE: AIG) Raised to Buy at Banc of America.
Cintas Corp. (NASDAQ: CTAS) Raised to Equal Weight at Morgan Stanley.
KBW (NYSE: KBW) Cut to Market Perform at FBR.
NetEase (NASDAQ: NTES) Raised to Outperform at Credit Suisse.
Nike (NYSE: NKE) Cut to Neutral at HSBC.
Satyam Computer Services (NYSE: SAY) Cut to Equal Weight at Morgan Stanley; Cut to Underperform at Credit Suisse.
Sherwin Williams (NYSE: SHW) Cut to Sell at Goldman Sachs.
Stanley Works (NYSE: SWK) Cut to Hold at Deutsche Bank.
Teva Pharmaceutical Ind. (NASDAQ: TEVA) Raised to Buy at Deutsche bank.
Whole Foods Markets (NASDAQ: WFMI) Raised to Equal Weight at Morgan Stanley.

Jon C. Ogg
July 21, 2008

Satyam Broadens GE Pact In Alliance (SAY, GE)

Douglas A. McIntyre — Tue, 20 May 2008 13:08:59 +0000

Satyam Computer Services Ltd. (NYSE: SAY) has partnered with General Electric Co. (NYSE: GE) unit GE Healthcare to support customers deploying healthcare IT solutions based on GE Centricity Enterprise software.

The companies will jointly plan, design, and implement infrastructures for global healthcare providers of all sizes, from small clinics to large hospitals, and they will perform
application integration and tailor solutions for providers.

Satyam will be the first global systems integrator to start enrolling consultants in new GE Healthcare certification exam programs for Centricity Enterprise Software in the fourth quarter of 2008.

Satyam is one of the largest India-based outsource operations for global consulting and information technology services. Normally, single contracts and ventures are one-off items for companies the size of Satyam. But scoring GE Healthcare when it wants to expand its reach is likely a larger deal than most. The companies have already worked with each other in the Middle East and India.

As far as wondering the size of Satyam now, it lists 51,127 people as its professionals. On a weak day like today, Satyam shares are still down over 1.8% at $25.86; its 52-week trading range is $20.02 to $30.89.

Unfortunately, it doesn’t look financial terms of this alliance were not disclosed.

Jon C. Ogg
May 20, 2008

ETF Launch: PowerShares India Portfolio (PIN, INFY, IBN, SAY, SLT, TTM, WIT)

Douglas A. McIntyre — Wed, 05 Mar 2008 12:58:46 +0000

We have now seen two Indian stock ETF’s successfully launch in the last few weeks. This morning there was another ETF launch on NYSE, although you can see the February news release with the full details. The PowerShares India Portfolio Fund Exchange Traded Fund listed under the ticker symbol "PIN" and began trading on NYSE Arca today. This ETF is based on the Indus India Index and tracks the performance of the Indian equity markets as a whole with representation across the consumer products, information technology, health sciences, financial services, and heavy industry sectors.

According to the press release at NYSE, the following NYSE listed ADR shares are a part of the index currently included in the Indus India Index:

Infosys Technologies Ltd. (NASDAQ: INFY), ICICI Bank (NYSE: IBN) Satyam Computer Services (NYSE: SAY), Sterlite Industries (NYSE: SLT), Tata Motors (NYSE: TTM), Wipro Ltd. (NYSE: WIT)

As a reminder, because of percentage foreign ownership limitation rules and because of ADR conversions, many US-traded ADR’s actually trade at premiums to shares traded locally in India. WisdomTree also recently launched an ETF that tracks Indians stocks at the local exchange level.

Jon C. Ogg
March 5, 2008