Wednesday, December 17, 2008

Satyam Decides to Diversify, Then Changes Mind

Now this is a crazy story and almost a bit unbelievable. Per the PC World story Satyam Computers proceeded to buy assets in a construction company in an attempt to diversify and sail through the current economic crisis.

Diversification - I get. But in Construction?! A core IT services company getting into construction is like NASA diversifying into knitting....did not make sense to me.

But then, the WSJ in an article called "The truth about Satyam"came up with a much better explanation - and more details:
  • The construction company that was the target was called Maytas - get it? Satyam spelt backwards
  • The owners were already shareholders in this firm
  • The diversification is power play by the owners who wanted to use company capital (of up to $1.6B USD) to but this up
  • Investors are unforgiving to family owned businesses that have eventually gone public albeit that the company carries the name of the founder
This is a wake up call for all firms that believe that different rules apply simply because they carry their last name - after being traded in global markets. You serve a new master now - the shareholders. They may be a minority, but ignore them at your own risk... and implement your world domination plans on your own dime.

SAY chart.

No comments: