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Satyam seeks redemption with new owner after scandal

Patrick Thibodeau | April 14, 2009
India-based Tech Mahindra wins bidding process to buy controlling stake in outsourcer

On the plus side, Bendor-Samuel said that the parent companies of Tech Mahindra have strong reputations and "are in a position to take care of any issues that are coming out of the Satyam situation." But he added that Tech Mahindra faces substantial issues related to integrating the two firms and retaining customers as well as employees.

What may help Tech Mahindra keep some of Satyam's customers is the typical "stickiness" of IT services, as well as the early termination costs that companies might have to pay to get out of their services contracts. That could give Tech Mahindra a chance to stabilize Satyam's business while also providing customers with an opportunity to digest the upcoming changes, Bendor-Samuel said.

Ramalinga Raju resigned from Satyam in January after admitting that the company's accounts had been falsified; his brother, B. Rama Raju, also stepped down as the company's managing director. Last week, Indian authorities filed criminal charges against the Raju brothers and four other former Satyam executives in connection with the accounting scheme. Three people who didn't work for Satyam also were charged.

Satyam's reconstituted board, which was appointed by the Indian government after the financial scandal came to light, said today that the selection of Tech Mahindra as the high bidder "signals a new stage for [Satyam] in its progress towards stabilization and growth."

 

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