Satyam Scandal Essay
Mahindra Satyam, formerly known as Satyam Service Company Limited, is one of the successful global business and information technology services company. This company handles industry and functional expertise relating to technology, and provides clients the best services to improve business processes and their performances. B Rama Raju, and Ramalinga Raju founded Mahindra Satyam in 1987, and is headquartered in Hyderabad, India, for providing software development and Consultancy services to large corporations. (Mahindra Satyam) Mahindra Satyam operates globally including the US, Canada, Brazil, United Kingdom, China, Singapore, Malaysia, and also many Fortune 500 companies.
That being said Mahindra Satyam provides services at General Electric, General Motors, Nestle, and the US government. This company serves automotive products, aviation, farm equipment, hospitality, information technology, real estate and the retail industries. Three main segments that the company operates are IT services, Business Process Outsourcing (BPO), and Software Products. (Mahindra Satyam) The IT service provides wide variety of services, including software development, system maintenance, packaged software integration, and engineering design services. Whereas, BPO segment provides services related to Human resource, finance and accounting, and transaction processing. Lastly, Software Products segment provides involves product development, and creation of software. http://www.mahindrasatyam.com/about-mahindra-satyam/ICT-company.asp
Mahindra Satyam has four subsidiaries that operate in India. One of those, Satyam Infoways, operates in E-commerce, and EDI, Electronic Data Interchange. Satyam Infoways is second largest Internet service provider in India, and the fourth largest outsourcing firm in India after Infosys, Tata Consulting Services (TATA), and Wipro. ( The Economic Times, 2009)
Satyam Computer Services was accused of fraud in 2009, inflating its earning and assets for years, which had adverse effects on Indian Stock markets. The chairman of the company, Ramalinga Raju, reported false accounts even though it serves one-third of the 500 fortune companies, and has more than 50,000 employees worldwide. The chairman, Raju, said that 50.4 billion rupees of cash was inflated in the balance sheet for the second quarter. Similarly, he also overstated the revenues by 76 percent, and profit by 97 percent. He confessed that he has been falsifying the accounts for years. “It was like riding a tiger, not knowing how to get off without being eaten”, he said to the media. Raju started falsifying accounts with the little amount at first but he kept making this bigger every quarter instead of trying to control when it was small. He also explained that he wanted to fill the gap by buying two construction firms but failed to do so.
The falsified amount was so high that Raju could not hide it longer, therefore confessed it to the shareholders and employees. (The New York Times) http://www.nytimes.com/2009/01/08/business/worldbusiness/08satyam.html?_r=1& Also, Satyam had been banned from World Bank contracts for serving spy software on some World Bank computers. All these scandals dropped Indian stock price and had adverse effect on stock market, which led Sensex index to fell. Satyam share fell more than 70 percent. ( The New York Times) Work Cited
Timmons, H., & Wassener, B. (2009, January 7). Satyam Chief Admits Huge Fraud. The New York Times. Retrieved April 16, 2013,http://www.nytimes.com/2009/01/08/business/worldbusiness/08satyam.html?_r=1&