Satyam may suffer if BankAm drops co as vendor

HYDERABAD: The turmoil in the US financial sector could impact the top-line growth of India���s fourth largest software exporter Satyam Computer Services.

Brokerage firm Merrill Lynch, which was bought over by Bank of America (BankAm), contributes around 2% of Satyam���s revenues.

The software major is likely to see a major impact on its revenues in the third quarter of this fiscal (Q3) if BankAm drops Satyam as its vendor, said an analyst. BankAm bought Merrill Lynch for $50 billion after the latter had a bad year writing down mortgage related assets.

Satyam recorded revenues of Rs 2,620.8 crore in the first quarter of FY 09. The total revenues for FY 08 stood at Rs 8,473.49 crore.

���Merrill Lynch is an eminent Satyam customer and contributes around 2% of our current revenues. While it is too early to recognise any impact on our revenue, we do not have any indication that this revenue is at risk in the near term. We are communicating closely with Merrill Lynch representatives to understand the impact of its takeover and to support the client during these challenging and volatile times,��� said Srinivas Vadlamani, CFO of Satyam Computer Services.



The company had 670 customers as on July 18, 2008. Its top ten customers accounted for 30.6% of Satyam���s revenues. Analysts, however, say the onus is now on Bank of America to choose its IT vendor.

���Bank of America has a long standing relationship with Infosys. It also has outsourced some part of its IT work to TCS. There could be chances that the bank has decided to stay with its existing vendors rather than forging new ties with Satyam,��� said an analyst.

According to him, there would not be any immediate impact on Satyam���s revenues in the second quarter of this fiscal due to the takeover of Merrill Lynch. ���If at all there is any change, it would be felt from Q3 onwards,��� he said.
But he also pointed out that most US-based companies adopt a multi-vendor strategy as part of their de-risking model, which could work in favour of Satyam.

���Besides, Satyam also has the experience of handling Merrill Lynch account for long. During the time of integration this could come in handy for the new owner,��� he said. Srinivas, however, said the recent developments at Lehman Brothers would only have a marginal impact on Satyam as they do not contribute substantially to the company���s revenues.

Redeployment of staff a point of concern

Satyam also faces challenges in terms of redeployment of its work force if it loses the Merrill Lynch account. Over 2,000 people are understood to be working on this account. Though the company is silent on how it would manage this crisis, experts say that it would not be feasible to lay off employees.

���If Satyam decides to give pink slips to them it will impact the company���s utilisation rates. Besides, most of these employees will be people with over three years of experience. The ideal way would be to redeploy them to handle other client ac-counts,��� said an analyst. Currently, Satyam���s utilisation rate stands at 73.7%.