HYDERABAD --Six clients of fraud-hit Satyam Computer Services Ltd. (SAY) have notified the company that if uncertainty persists for 90 days they may be forced to cancel their contracts with the firm, a person familiar with the situation said Friday.
The comments came after U.S. State Farm Insurance terminated its outsourcing contract with the Indian software exporter earlier this month and after newly appointed Satyam board member Kiran Karnik said earlier this week that the company's board received termination notices from two clients.
Karnik and the person didn't identify the names of the clients.
The notices are a further blow to the beleaguered Hyderabad-based company already in turmoil after founder B. Ramalinga Raju earlier this month said in a letter to board members that he overstated profits over several years and created a fictitious cash balance of more than $1 billion.
Keeping its business intact will be Satyam's key focus in coming months. The company's clients include several Fortune 500 companies such as General Electric Co., General Motors Corp., Nissan Motor Co., Applied Materials Inc. and Citigroup Inc. Some of its clients in the Asia Pacific region include include Telstra Corp. (TLS), National Australia Bank Ltd. (NAB.AU) and Qantas Airways Ltd. (QAN.AU).
A General Electric representative said earlier this week it continues to maintain its relationship with Satyam.
A Nissan spokeswoman said earlier this week the company has no plans to cancel its outsourcing partnership with Satyam but will closely watch company developments.
Applied Materials said that Satyam is a vendor, but declined comment further, while efforts to reach officials at Citigroup were unsuccessful.
"While Satyam is having difficulty, it continues to meet its contractual obligations," a spokeswoman at National Australia Bank said, noting the company is assessing its current contract with Satyam, which is due to expire in 2011.
Melbourne-based Telstra is in the process of cutting the number of its major IT suppliers to two from four, and "will take the current issues into account," a Telstra spokesman said earlier this month.
Air carrier Qantas, which has five years left to run on a seven-year contract with the Indian firm, said it has a team monitoring the situation and will continue to do so on a daily basis until the situation is resolved.
Satyam Board Meets To Decide On Leaders
Satyam's board is currently meeting in the southern city of Hyderabad. They are discussing candidates for chief executive officer and chief financial officer. They are also expected to name a bank to help it explore options.
Raju, his brother and Satyam co-founder B. Rama Raju, and former chief financial officer S. Vadlamani are currently being held on complaints of cheating, forgery and breach of trust.
On Thursday, prosecutors said Raju used salary payments to 13,000 fictitious employees to siphon millions of dollars from the Indian outsourcer for land purchases.
Prosecutors told a criminal court that Satyam has only about 40,000 employees instead of the 53,000 it claims.
Prosecutors claimed the money, in the form of salaries paid to ghost employees, came to around $4 million a month. The money was diverted through front companies and through accounts belonging to one of Raju's brothers and his mother to buy thousands of acres of land, the prosecutors said. Prosecutors made the claims in a hearing Thursday where the state police for the state of Andhra Pradesh asked for more time to interrogate Raju and Vadlamani, who is also in custody.
S. Bharat Kumar, the lawyer for the three accused, denied all claims made by the prosecutors. Kumar, speaking to Dow Jones Newswires late Thursday, said Raju's letter to the board on Jan. 7 was a statement and not a confession of his offenses.
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