Satyam Computer (SAY) Just like the Plague

by Jeannette Di Louie,
Assistant Editor, Mt. Vernon Research

Editor’s Note: With any large company involved in a substantial scandal, it will take Satyam Computer Services (NYSE: SAY) awhile before it can get back to the business of making money – without distraction. For investors, this is a pretty clear signal to stay away until the firm finds it’s footing again. And with each passing week, it seems like there is another headline-grabbing revelation. For speculators and bottom feeders, it can be hard to tell which drop is the final one. And the lesson here is clear. If you can’t figure that out, you probably should stay away as well. Remember that there are still areas in India that suffer from the plague – I’d avoid them as well.

You Almost Have To Feel Bad For Satyam… Almost

“The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do,” Prem Chand Gupta, India’s corporate affairs minister told reporters today, adding that “The government is committed to punish everyone found guilty, including the auditors.”

That doesn’t bode well for Satyam Computer Services (NYSE: SAY)’s board of directors, who have already been sacked. And former CEO B. Ramalinga Raju is going to be “interviewed” (read: interrogated) on Saturday.

However, the company itself isn’t in danger of being shut down at this point. At least not in any more danger than it was Wednesday. Ten government-appointed directors will be meeting in the next week to appoint new managers to the company, while other officials pour over documents seized from the main office.

So what does this mean for Satyam? Obviously, India intends it to go on if at all possible, but that doesn’t mean that it will ever gain back the trust it had before. Already, the Indian market and currency have suffered due to the scandal. And according to media reports, Citigroup (NYSE: C) has frozen its accounts with Satyam in order to secure $70m in loans.

Rest assured that won’t be the last company to do so.

To see the original article, go here.

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