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Satyam divisions can unlock value

Even as the focus now shifts to investigation in the wake of the arrest of Ramalinga Raju, a beleaguered Satyam Computer Services awaits the constitution of a new board by the Department of Company Affairs. It will take a while for a clearer picture to emerge.

However, there is an air of anxious expectation and anticipation inside the company. The employees are edgy, sand-witched as they are between the fear of pink slips and uncertainty over their new bosses.

Inside sources say Satyam has indeed strengths in key verticals such as BFSI (banking, financial services and insurance), manufacturing, engineering services, automobile, times and logistics. Satyam has also built competence units in specific areas such as Oracle, business intelligence and SAP. Satyam as a whole may not be attractive as a takeover option in the current context. Some of its constituents, however, may be of great value to other players in complementing their own strategy.

A view is gaining ground that the company could be broken into parts and sold off. There were precedents in the IT industry, where clients have been carved out and industry practices taken over. When the financials of Silverline Technologies ran into rough weather, American Express Travel Related Services Company, a large customer of Silverline, got jittery.

American Express brought Cognizant on board to acquire some of the assets from Silverline in 2002. As part of this transaction, Cognizant offered jobs to over 300 software professionals from Silverline, about 100 in the U.S. and Europe, and another 200 in Hyderabad. Such a transaction could happen only if the client drives it hard.

Similarly, in 2005, Accenture acquired Capgemini’s North American healthcare practice. The acquisition combined Accenture’s capabilities in working with health plans, life sciences companies and government organisations with Capgemini’s strength in serving hospitals and health systems. Accenture paid $175 million in cash. Following the acquisition, about 600 Capgemini professionals joined Accenture’s health and life sciences practice in North America. In this instance, the transaction was seller-driven. What will happen to Satyam? Buying Satyam as a whole at this point would be a big risk, argue IT majors. It is up to the new board to take a complete stock of the situation and take a right call on the course of action.

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