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

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