Thursday, 15 January 2009

Indian government dampens Satyam bail-out hopes

(By Anthony Miller). In a rather cryptic statement of intent towards the now very fragile Satyam, the Indian government says that it will be up to the new board, which the government itself put in place over the weekend, to decide on any potential bail-out. The Indian Minister of State for Industry was reported as saying that, "the government will try to ensure to the extent possible that the brand equity of the country and Satyam in terms of its intellectual capital is preserved and the jobs are secured to the extent possible”. No fence-sitting there, then! As a result, Satyam’s shares are down yet another 25% on the Mumbai stock exchange.

This turn of events will only serve to accelerate what must surely by now be a headlong rush of Satyam clients and prospects into other vendors’ arms. I’m sure Satyam employees would also leave in droves but for the severely reduced chances of finding a job elsewhere. Even SAP skills, arguably Satyam’s strongest suit and until recently still at a premium, are now pretty much freely available. The new board, the Indian IT industry and, yes, the government, need to act now to salvage the many good bits of Satyam and shore up confidence in the sector. This needs to be done and dusted by the start of the Nasscom annual conference mid-February so that the Indian offshore services industry can concentrate on its messages to the market for what is likely to be the worst year for IT services firms in many years.

Meanwhile, almost all the other top Indian SIs stocks are also suffering on yesterday’s news of Nortel’s bankruptcy. Nortel is a notable client of TCS (who reports later today), Infosys and Wipro as well as Indian telecom software specialist, Sasken, part owned by Nortel. Not a good day for the Indian IT sector at all.

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