BANGALORE: Satyam Computers is available at a bargain. A controlling 26% stake in the company can be acquired for $520-million, given that the company's market cap is around $2-billion. Then, of course, the cherry on the cake: $1.2-billion in cash.
Though the company looks attractive, the three top Indian IT services companies are unlikely to bite. According to market sources, the Big 3: TCS, Infosys and Wipro are most definitely not going to make a bid for Satyam. The reasons are simple. The foremost being acquiring Satyam would be "more of the same." Same suite of businesses, technologies and clients. Market participants also believe that considering the cash one would have to fork out, the only thing assured are 53,000 employees. The big 3 don't necessarily want those number of additional people at the moment.
As an industry source pointed out, "If all the acquisitions made by entire Indian IT industry is put together, I don't think it adds upto 50,000 people brought on board." Hence, one big bang acquisition with 50,000 people looks remote, especially in the current environment.
As for the business that Satyam would bring to the table, industry observers believe that Satyam has fought the leaders mainly on price. "Quality of revenues," is an issue, they said. Satyam is thought to have bagged business by quoting 10-12% lower rates than its competitors at the top. Hence, "these businesses can be squeezed very easily." As for the client list, the feeling again is that Satyam's clients are very cost conscious; Clients who might flee if there are signs of upward price revision. ‘Jittery' clients who might bail out even otherwise given the current fracas.
While there has been market speculation that IBM or Accenture might emerge as strategic buyers, the general perception within the industry seem to be that they might also stay out. Both the companies have hugely grown their local operations and today have 74,000 IBM) and 37,000 (Accenture) employees in India. Adding more people through acquisition might not be a priority while they can be grown organically especially in the current environment where quality people are available at reasonable prices.
Satyam is a company that has been in play for years now. In the early 2000s merchant bankers were hawking the company to the big Indian players. EDS, then the world's second largest IT services company after IBM was said to have been an interested party until it got caught in its own internal owes and deferred an India acquisition to a later date. Satyam has consistently denied over the years that it was ever an acquisition target.
Cognizant interested?
Bangalore: As speculation mounts on who could be a potential ‘buyer' of Satyam Computer Services, the one name repeatedly touted as a very interested party is Cognizant Technologies. The Teaneck, New Jersey-based, Nasdaq-listed company with a huge India back-end has not hid its ambitions of wanting to be in the big league. The company that has clocked very aggressive top line growth in the last few years grew 50% in 2007 with revenues at $2.13 billion.
If it were to buy Satyam which had revenues of $2.14-billion last fiscal, then Cognizant with has 59,000 employees would easily pip Wipro to emerge as the third largest IT services company. Wipro's IT services business closed last fiscal with a topline of $3.41-billion. Cognizant and Satyam with combined revenues in excess of $4-billion would easily move Wipro to the fourth slot among the top Indian IT service providers. When contacted Cognizant Technologies' spokesperson R Ramkumar, said, "As a policy, we do not comment on market speculation."
Source: http://timesofindia.indiatimes.com/Business/India_Business/Big_3_not_keen_on_acquiring_Satyam/articleshow/3915972.cms
