Satyam returns to loss because of U.S. settlement

The Indian outsourcer took a charge to settle a class-action lawsuit

Indian outsourcer Satyam Computer Services went into loss again in the quarter ended March 31, after the company took a charge to settle a class-action lawsuit in the U.S., the company said Monday.

Excluding the charge of 5.72 billion rupees (US$126 million at the exchange rate on the last day of the quarter) the company posted a profit of about 2.5 billion rupees.

Satyam is recovering from a financial scandal dating to January 2009, when co-founder B. Ramalinga Raju confessed to inflating the company's revenue and profit figures for several years. The class-action suit, filed by investors in the company's securities, relates to that period.

The company's key shareholder is now another Indian outsourcer, Tech Mahindra, and the company has adopted a new "Mahindra Satyam" brand for its services.

On Monday, Satyam reported a net loss of 3.3 billion rupees for the quarter ended March 31. It had posted a net profit of 590 million rupees in the previous quarter. Revenue, at 13.75 billion rupees, was also higher by 7.5 percent than in the previous quarter. The results are in accordance with Indian accounting rules.

It is not possible to compare the company's revenue and profit figures with the same quarter in the previous year as the company was exempted by India's Company Law Board from publication of financial results for a number of quarters up to the one ending March 31, 2010.

Satyam saw some customers leave during the crisis, but said it had 230 active customers in the last quarter. It added 434 staff during the quarter, taking its total on March 31 to 29,266.

A large majority of Satyam's clients believe the firm is out of the grave situation it was in two years ago, said Sudin Apte, principal analyst and CEO of Offshore Insights, in a report released Monday. Customers are generally willing to explore giving Satyam more work, including renewing current contracts, he added.

But the company has not been completely successful in converting the client mood into revenue. "We believe Mahindra Satyam needs to get out of the past, get much more proactive, and upgrade its value proposition and differentiation," Apte said.

Offshore Insights surveyed Satyam's customers in February and March this year.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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John Ribeiro

IDG News Service
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