Correction: In an earlier version of this story, the CFO of Satyam was misidentified.
As the CFO of Satyam Computer Services Ltd. submitted his resignation in India’s ballooning accounting-fraud scandal, remaining senior managers of the global outsourcing giant focused on explaining the internal challenges. Meanwhile, a stunning list of U.S., European, and other companies — and their investors — scrambled to assess their exposure.
Among the biggest questions for some of the world’ largest companies that are Satyam clients: the implications of Satyam admitting to having at least $1 billion in fraudulently claimed cash on its balance sheet.
In a webcast interview today, interim CEO Ram Mynampati revealed that the CFO, identified as Srinivas Vadlamani, had tendered his resignation, but that the board hadn’t yet accepted it. Mynampati said the finance chief had promised to provide information for the internal investigation, and said he would come to work next week. He was not expected in the office this week because of “personal challenges,” the CEO added. According to one news report, Vadlamani was said to have the books in his possession, off-site.
PricewaterhouseCoopers is expected to remain as Satyam’s auditor, Mynampati said, although the company plans to look closely at the auditor’s performance. “If it turns out we need a different audit firm, we will [find one.] But it’s premature to say,” according to the CEO.
On Wednesday, the basics of the scandal were circumscribed by the four-and-a-half page letter from former CEO B. Ramalinga Raju to the Bombay Stock Exchange — admitting to a scam that involved his creation of a $1-billion cash entry on the books. The fraud, he wrote, “attained unmanageable proportions in size.” And he compared his own position as CEO of a fraud-infected company as having been “like riding a tiger, not knowing how to get off without being eaten.”
His replacement as CEO assured the press that the company was committed to ensuring that the business continued to run uninterrputed, “reaching out” to customers and talking to the top 100 clients, which represent 80 percent of Satyam’s revenue. That revenue was reported to be $2.1 billion in the year ended last March 31, after growing at a 48-percent clip. Mynampati said his companiwas communicating with its 53,000 employees, and hadn’t seen any exodus, as some in the media had been reporting this week.
But with U.S. and global outsourcing clients like General Electric, Cisco Systems, Ford Motor, Nestle, Sony, Caterpillar, and the U.S. government being identified in news accounts, the main concern shifted quickly away from India.
Satyam has about 600 clients, a third of which are for contracts worth over $1 million, according to Peter Barta, CEO of Everest Group Australasia, an advisory group that follows oursourcers globally. Barta told CFO.com in an interview that for clients, the central concern is Satyam’s cash position. Since outsourcing projects typically require a big outlay of cash by the vendor, a vendor lacking the capital can lead to projects that can’t get off the ground.