Over the last several weeks Satyam computer share holders have been subjected to one bad news after another. First it was the failed attempt to diversify into real estate and infrastructure. Then it was the resignation of board members. Now it is the resignation of the CEO and a open letterto stakeholders admitting wrongdoings. Apparently, the company has been misstating its revenues and operating margins for several quarters. While the CEO has taken the whole blame for this and absolved all other parties, I wonder if this scale of wrongdoing can be perpetuated by just one person.
The finacial crisis in North America provide the backdrop to these events. There is intense rivalry between the IT vendors in India and sustaining growth and profit margins have proven to be a challenge to them in these times. There is a fear of being acquired if the stock prices fall as a reaction to lower revenue and margins. Employee retention is also a big competitive necessity. The admission of wrongdoings would definitely impact customer retention and employee morale. This could the beginning of the end for Satyam. The SWITCH vendors will be reduced to WITCH (just doesn't have the same ring to it). I hope the rest of them are learning from this.