Wednesday, January 14, 2009

Take Satyam into Bankruptcy and Sell It

Indian government is balking at writing a 1000 crore cheque to bail out Satyam - as it rightly should be. Satyam is a pack of lies - it is probably operating at 40% utilization rate - which means that 10-20K employees anyway need to be laid off just to right size the company. Paying them salaries using taxpayers money even for couple of months would be completely unjustified - what has happened is sad, but let's not compound one mistake by committing other.  

If Deepak Parekh is planning to wait for the correct financials of Satyam to be prepared before deciding what to do, he will be waiting 12-24 months. 2009 is the year when IT industry is going to take it to the chin. Even till last qtr, Citi, Merrill, MS, GS and UBS were increasing their technology spend year on year. That is not going to happen this year. The easiest vendor for anyone to cut is going to be Satyam.  

The best idea for all of Satyam's stakeholders is here.  Even its creditors will recover something. Bankruptcy is a good idea for dead companies - creative destruction and reallocating capital of failed companies is an important concept of capitalism. 

Their is one hope for the the Indian IT industry - Barrack Obama and his plan of digitizing healthcare and investment in broadband access. Digitizing healthcare records appears a problem that is tailormade for offshoring. The obvious caveat is - Obama's priority is to create jobs in US and not India.  

1 comment:


Excellent recommendation