Satyam Turns Out to be a House of Cards (SAY, INFY, WIT, PIN, EPI, IFN)
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DSP Merrill Lynch has also withdrawn as the company’s advisor.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