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Tuesday, November 28, 2006

Will IBM buy Satyam? (2006)

Please Note: March 2009 Update: This post below is about the year 2006 rumor of IBM's Satyam acquisition plans and this post doesn't comment anything on the 2009 developments at Satyam.

Should IBM acquire Satyam? How true is the rumor related to this takeover attempt?

Genre: Mergers & Acquisitions, Hostile takeover, Indian IT business
Length: Over 2 pages

Executive summary:

Media speculations are thickening that IBM is looking into a possible acquisition of Hyderabad based Satyam Computer Services Limited (NYSE:SAY). While both companies have categorically denied any such possibility, a possibility of the same is not being ruled out by the experts. This post performs a comprehensive business analysis of such a possibility, pros and cons.


IBM blue logoDisclaimer: This post makes use of only those information available in public domain and or those information authorized for release into public domain. Views expressed here are the independent views of the author and not necessarily of the organization he works for. Readers are advised to use their discretion before taking any decision based on this post. The writer shall not accept any liability for any errors in the information or in the event of predictions not coming true. Images and logos sourced from internet, property of respective companies.

While rumors on this topic started spreading way back in January 2006, The JP Morgan India’s report titled, ‘Indian IT Services: Implications for sector if IBM were to buy Satyam management stake’ this October added fuel to speculations. Click here for a detailed view of MNC acquisition plans for India

References:
Financial Times Report
Network World

IBM’s need:
A company looks for acquisitions when they feel the need for inorganic growth. (Organic growth involves growing internally, which is a slow and steady process, while for cash rich companies, inorganic growth by acquiring an existing company which has proven competency, resources and market share makes more sense).

It appears very much natural for the "big blue" to look for a greater offshore presence, given the cost factor of Indian companies. Most of the clients who buy IBM products often outsource the implementation to Indian IT service companies, purely because of cost advantage. If IBM can have greater presence in India and emerge as a low cost end to end IT product and service company, its profits will soar. From this angle, IBM’s attempt to acquire some established company in India makes sense.

While IBM has categorically stated that rumors about its attempt to buy Satyam are merely a speculation, recent capGemini acquisition of Kanbay does justify such a probability further.

A more detailed analysis of IBM's India plans can be found here:

Satyam Computers Logo
Why Satyam?

Now, assuming that IBM is in lookout for an Indian IT services company, let’s analyze why Satyam makes itself a fine target and not some other company.

Satyam is fourth largest IT Company in India next only to Infosys, TCS and Wipro. We’ll see why the other 3 are not attractive to acquire.

Majority of Infy shares are accumulated with Infy co founders and top management, who may not entertain any attempts by an external entity to take over. Even if IBM tries, a company like Infy with 60000+ people may not be an attractive buy given that market capitalization and brand value of Infy is very high.

As far as Wipro is concerned, Azim Premji holds over 80% of company stock and without convincing him its impossible to take over the company.

Coming to TCS, Tata’s themselves are on an acquisition drive (trying to buy Corus and other companies) and its unlikely that they’ll do away with their flagship company TCS.

So next in line is Satyam, with founder chairman Ramalinga Raju having just above 14 % stake in the company and majority of investors are of foreign origin, a forced acquisition is very much probable. Cash rich IBM can afford to corner a considerable amount of shares and stake an ownership claim.

Satyam’s statement:

Though Satyam has officially denied having any talks with "Global System Integrator"(interview with CNBC-Link here) and has stated that it will continue to operate as an independent entity, which will be in the best interest of all stakeholders, this kind of statement is quite natural and very much expected from senior management due to following reason:

Acquisition talks go on for years and years (When Wipro finally bought Quantech Global in early 2006 (details here), its believed that Wipro guys were behind Quantech Global for more than 4 years) and if such a highly sensitive matter gets released to public in early stages, it’ll bring down the employee morale and will severely impact immediate deliverables as every employee shall start thinking about his/her fate post acquisition.

Negotiations might have never occurred or might be in progress or may have failed totally. Any management prefers to remain tight lipped till negotiations reach a conclusion.

Why IBM is silent?

No acquiring company will make its plans public in advance due to following reasons:
1. If IBM makes its interest in Satyam official, Satyam stock prices will soar and IBM will end up paying more
2. If IBM fails to buy Satyam or decides to back off at a later stage, it'll be seen as a shame on IBM's part for not being able to acquire a 10 times smaller company.

Note: I'm not saying the statement is false-Just the compulsions which might have forced such a statement deserve a consideration. For the reasons specified above certain business decisions are better kept secret. But some smart journalist might have got a tip off from a key executive in either of the company, or someone else might have just triggered a rumor. No one knows.

What Satyam Can Do to avoid a hostile takeover?

If IBM is determined to acquire Satyam by hook or crook, what options does the later have? Here are few:

Corner majority shares: Satyam promoters need to spend a fortune and corner huge number of shares so that IBM will never be able to gather controlling amount of stake.

Take investors into confidence: Take investors into confidence and hope that they’ll not fall for temptations of IBM

Create poison pill: Hire more people than needed, partner with IBM’s competition and indulge in other such activities, with a sole purpose of making the company look inattractive for a prospective buyer

Find an alternate buyer: (This is exactly what Arcelor did when Mittal attempted a hostile takeover)This will trigger a price war and either Satyam gets more money than it would have otherwise got or the buyers will back off if they feel its not worth pursuing this hunt


What if it happens?
A quick analysis on what might happen if this acquisition ever takes place:

For Satyam employees: IBM employee policies shall supersede existing policies and IBM management will bring in an organizational restructuring as per their vision and expectation. Satyam may loose its Hyderabadi touch as IBM may not have any preference/sentiments/commitments that Satyam as an Indian company had. All these might be beneficial to some, while is sure to cause inconvenience to many of the employees, as their comfort zone will be disturbed. They'll have a MNC stamping to their resume but may loose their identity as they'll get lost in the sea of IBM's 300,000 plus headcount.

IBM may or might not be interested in all of Satyam's business. Satyam’s competency and service offerings extend beyond IBM products and technologies, including IBM’s competitors. So those service offerings which involve IBM’s competitor’s products might get disintegrated. (Even if they’re retained, customers won’t trust IBM to implement a competitor product)

Will there be a lay off? Considering the knowledge crunch, that seems unlikely. But if IBM feels it's better to reduce head count, there's no reason why they'll hesitate. They've done it in past, can do it again.

Other IT service companies in India might suffer a set back as they might loose considerable business in the field of IBM products and technologies. But this impact will not be severe enough to pose any threat to these companies.

For investors of Satyam: They can either choose to make one time big money by selling their shares to IBM or may choose to hold and get better returns in the long run. Getting acquired means loosing one’s identity and reporting to someone else. So people who want to run their own show may resist an acquisition effort. All depends on their strategic vision, tactics and expectations.

For IBM: IBM will be able to provide a better range of end to end business solutions to its customers at lower price. From requirement gathering to product development to implementation to testing to support, they can boast of a full cycle business solution.

For Indian Society: For the Indian society, it's better Satyam operates as an independent entity. IBM may not contribute to social causes to the extent Satyam foundation is doing.

So will it happen?Will the big blue engulf small blue?(IBM's "On demand business" and Satyam's "what Business Demands" sync very much :-)) If not Satyam then Cognizant appears to be the next attractive target.

That’s a billion dollar question only time can answer. As this is something which will happen at boardroom level we’ll wait and see.

You have just read the most popular post on this blog. More details on takover mechanism can be found at Wikipedia

While above article is more of an Indian perspective of this takeover speculation, I found following blog post very much useful as the post and comments analyse the situation from a western perspective: Deal Architect's Blog

Other Business Posts:
Removal of Government Guarantee for LIC India
Best Employer Surveys-An analysis
Stopping Piracy-An advice
Our Education System and Industry Attrition-An Observation
The Compulsions of software people

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Sunday, November 26, 2006

Hyderabad 10K Run-First hand Report

Executive summary- This post gives first hand experience of Hyderabad 10K run organized on 26 September 2006 in Hyderabad India. The post gives overview of the event as well as writer’s experience/view on the subject.

Racing against the expectation that I’ll come to office and work, I participated in Hyderabad 10k run today morning and this post is a first hand experience of my participation.

Media Report
For those of you looking for quick info on Hyderabad 10K run, here’s a summary. What follows is an elaborated post giving additional inputs and views.

Hyderabad, Nov 25: The Radha Realty Hyderabad 10K run and half Marathon were successfully completed this morning at People’s Plaza, Necklace Road, Secunderabad. Several thousand participants, from across India and abroad ran for a cause today, showing the spirit of Hyderabad. Proceeds after the event expense will be used to encourage those who lack resources and to support various social issues related to Health, Sports and Fitness. Click here for full list of sponsors. . Apollo Hospital provided medical assistance while Coca cola sponsored free drinking water. Traffic Police extended their support by closing the roads for vehicles during the run.

The run was pretty pleasant as the track had beautiful scenery of Hussain Sagar Lake and had several teams cheering runners all the way. I do not have the official winners list at this moment.

---End of media report-Additional description follows---

About a month ago, in my SMS and WIN post (http://www.enidhi.net/2006/10/sms-and-win.html), I’d commented about how SMS based contests often mislead people. But this time I’ve a good experience to share. Few weeks back as I was listening to Radio City on 91.1 Mega Hertz Frequency Modulation, the RJ asked a question: Why do you want to run? Send your answer by SMS to 7007 and win participation to Hyderabad 10k run. I had a genuine reason (which I’m not writing here as that statement is now proprietary information of Radio City), so I typed it, sent it across and forgot about it. Next Monday I got a call from Radio City and I was told “Congrats, you’ve won participation for Hyderabad 10K run and you’ll be running with Radio City team, please collect your participation kit from our office 20th November 2006 onwards”

Prior to this when I’d seen ads of 10K run in media I was considering running. Upon inquiry I learnt that participation costs Rs 200 and registration can be done at any Post Office. More details here. The kit involves a T shirt and a chest number. Now that I won an entry via Radio city, it was much more fun.

I reached the spot very early-at 5.45 AM today. The half marathon was flagged off first. People started assembling for 10K run and at around 7 AM stage was filled with filmstars, politicians and business men, who had their own interest in the crowd. While few girls behind me were struggling to get a better view of Akshaay Kumar, on stage he was blowing wistels and challenging people to do the same. Sameera Reddy openly declared she wants to hear the boys shout for her. Those on stage never bothered to run, and their way of motivating people was limited to their speeches and actions on stage.

The Radio city RJ Anuj compered the stage event and started count down for the 10K run while everyone were near the podium looking at stars. This made many people rush to starting point. (Serious runners were flagged off separately; I’m speaking of general crowd)

How not to run and yet not get caught?

Personally I’m not a professional athlete. I wanted to experience the 10K run so I was there. It was a great experience. There was no way I could run 10 KM and win. I ran for the first few KM and there after I walked, as fast as I could. All tricks of how not to run yet not get caught, which I’d mastered during my higher primary schooling (JNVC) were fully employed today after several years.I took little less than 90 mins to cover 10k, good enough.

I could see different kinds of people, such as

*Professional athletes who know what to do and what not during a marathon
*People who'll run only when there's a camera aimed at them

*People who’ll run only when there’re good looking girls around,
*People who take a break of 15 mins at a stretch but pose as if they’ve stopped only for a moment, just to tie their shoe lace.
*People who cant do without their cell phone and PDA and wanted connectivity on the run
*People busy taking photographs

*Someone who wanted to run in memory of his lost son Arun
*Children, youngsters,elders, Foreigners, software engineers, all kind of people

There were lots of people to cheer runners. Several schools had their music band playing instruments, Companies liked Deloitte had dedicated teams to cheer their employees at every milestone (As against some of the workplaces where you’ll be loaded with another deliverable and deadline as soon as you finish with one), Volunteers to provide water, glucose. Pickup vans to lift people who couldn’t run anymore, ambulances and other arrangements were good.

I left the scene at around 9.15 and started back. Some more stage shows were going on and winner’s list was coming up. My first long run after several years has thus ended. The fatigue in legs will take some time to heal.

The event is only an excuse. If you wish to run, you can run anytime, anywhere. But running in an exclusive environment has its own advantages.

Friday, November 24, 2006

A driver's instincts

Driver’s Instincts

In this post I’ll tell you something about driver’s instincts.

Few of us enjoy driving while most of us prefer to sit in the back seat. In present Indian roads driving isn’t much of a pleasure; hence many prefer to avoid it.

If you’re a driver, you’ll learn lots of things other than just how to drive your vehicle.

Here are some of them.

1. A driver might not have studied vectors at school or might not have much knowledge on laws of motion. But if someone is crossing the road, driver’s mind works faster than a super computer and by analyzing the direction and speed of the moving object the driver will determine whether he can proceed with present speed, or should he slow down.

2. Driving is one job where one can take hundreds of independent decisions every minute, however small it is. Every second driver has to decide-should he speed up or slow down, when to change the lane, when to use horn, indicator, to overtake or not to over take, should he ignore the cop who’s trying to stop him or should he pull over. You don’t get to take so many decisions in any other job!

3. A driver knows exactly how many milliseconds he can afford to spend on “Something beautiful” on the roadside.

By observing for few seconds how the other vehicle is run a professional driver can come to a conclusion about the other driver-is that driver skilled and professional? Is he rash and negligent and may make some unpredictable move? Is he amateur and needs some consideration.

Good drivers will have good memory-One should be able to remember the route between two places after first journey. If you keep asking how to go to a place again and again, you can’t be a good driver.

If you’re using same vehicle since long time, you might have noticed that your vehicle and your body get synchronized. Your hands and legs respond to a situation before the brain issues a specific command to that effect. This helps you develop a strong emotional bond with your vehicle and is mutually beneficial.

Why accidents happen?

Youngsters are often blamed for driving at high speed. Speeding is not wrong, provided the driver maintains the safe braking distance (SBD). The safe braking distance is the distance traveled between the time driver senses a danger (and applies brake) and the vehicle is brought to complete halt. Safe Braking Distance varies depending on the speed, speed of vehicles in front of and behind you, nature of road surface,available vision and braking abilities of the vehicle. SBD needs to be maintained both between the vehicle in front of you and the vehicle behind you. If you don’t maintain SBD you won’t be able to stop the vehicle in time, hence accidents happen. Simple.

Universally known, a driver shouldn’t be under the influence of alcohol, as it reduces judgment abilities and vision.

Similarly avoid driving if you’re not in sound state of mind. If you had a heated argument with your boss or a fight with your wife, driving with a disturbed state of mind can be fatal.

Failure to anticipate disaster and being in a state of unpreparedness:
Drivers should always keep an eye open for potential dangers. He/She should keep himself/herself prepared for various eventualities. Most often its not Speeding that kills people-it’s the drivers lack of alertness that causes problem. For example, if I’m alert and responsive to other vehicles on the highway, I can drive at 100kmph and reach home alive, while on the other hand, even if you’re driving at 20 kmph, if you fail to notice the right turn indicator of the vehicle ahead of you, you may invite trouble.

Risk Mitigation:
A sensible driver comes up with risk mitigation strategies as and when he anticipates a mishap. It may not be possible to avoid a danger all the time. A driver’s judgment decides what best can be done with remaining time and distance so as to reduce the damage to the life of himself and the passengers. It’s a split second decision which makes or ends a life.

These are some of the reason why I enjoy driving-bigger the vehicle more the fun.

While a driver's job is attributed with a low profile semi skilled labor, he certainly deserves a thanks when he safely drops you at your place.


Let me know what you think of this topic.
__________________________________________________________________
Below is the slideshow of photos taken during my visit to Golconda fort. The post on this can be found here:




(Tried to add this slideshow in that post itself but facing some technical issues)
Related:
Tips and Tricks for minimizing inconvenience with traffic cops * Chennai-Bangalore-Mysore on Self drive * eNidhi drives tractor

Sunday, November 19, 2006

Anantagiri Hills: Trekking Expedition

On November 12, I was on a trekking expedition along with few of my colleagues and their friends- Anantagiri Hills off Hyderabad.

A better description of Ananta Giri Hills trekking expedition is available in this blog: (Link courtesy Pavan)

Its very essential that we take a break once in a while from the intellectual (??) work at office where there'll be no physical activities. This trekking expedition did provide that necessary refreshment.

The link given above gives almost full description of Anantagiri Hill and related information. Instead of repeating the same I'll only give some key useful points regarding this expedition
1. If you're starting from Hyderabad Anantagiri Hill can be scheduled as a one day program. Around 2 hours of travel one way. If you can start pretty early, you can cover Ananta Padmanabha Temple, and few other places as well (Such as Golconda) on the same day.
2. Carry enough water and food. There's no provision for food and water nearby (Vikarabad is the nearest town, 6kms from here). There's an Inspection Bungalow owned by Andhra Pradesh Forest Department, which is totally abandoned. The day we went we were lucky as one of the local MLA had come to this IB to celebrate something and his servant gave us drinking water which they'd bought.
3. Don't expect any wild life or consumable food items on trees. The forest is not dense enough (in comparison to western ghats and Neelgiri hills I'd been to). This one is pretty simple, lots of grass and thorny bushes and known for medicinal plants. You'll not get lost. Finding the right direction is pretty easy as there're open areas and roads which can be spotted easily as you climb up the hill. As this place has become a weekend destination, components left behind by others will also guide you.
4. This place is some 100kms off Hyderabad, on a state highway that leads to Bijapur, Karnataka. Government buses are available from Hyderabad till Vikarabad, from where autos can be taken. Bikes or private vehicles would be best.
5. Mobile signal is pretty good, for both Airtel and Hutch (now Vodafone). No worries on that front
6. Avoid smoking. The grass being at very low ignition temperature can catch fire at slightest provocation and can cause a disaster.
7. There're companies which provide professional guidance and support for trekking expedition. But this one is pretty simple enough and even amateurs can handle on their own. Be sure to carry basic equipment like good shoes and some supply of food and first aid.

Thanks for all those who participated and or provided strategic and operational support.

Related: Trekking at Skanda Giri Hills (Near Bangalore) * TADA (in AP, 100 kms off Chennai) * Javadhu Hills * Yelagiri bike trip * Deep forest trekking- Experience and precautions * Nagala, Parvathamalai, Nagari *

Shilparamam (Madhapur Hyderabad)


Shilparaamam is a village like environment cum good relaxation centre next to Cyber tower, Hitech City, Hyderabad.

Shilparaamam contains following:

Shopping section-Handicrafts, Dress materials and other village made products are sold here at below market price. Mysore Sales International Limited (MSIL) has a permanent stall here which sells several items ranging from Mysore Sandal soap to pure sandalwood dining table worth several lakh rupees.

You'll also find food stalls, artists specializing in Mehandi, drawing etc.

Amphitheater: Lot of cultural activities keep happening here during weekends.

Lake: Small lake with boating facility (2 and 4 seaters, self peddle)

Rock Garden: Natural rocks which represent various shapes-such as lord Ganesha, fish, frog, mother feeding a baby etc are on display

Heritage Village-You can see villagers (clay made models) in action-blacksmith, potter, etc.

The village environment and scenery are carefully replicated here

Needless to say there’re lots of trees and shadow and a nice environment to spend time in peace. Entry fee: Rs 10, Boating: Rs 10 extra. Worth it. Wish they could give me a monthly pass…

Don’t forget to spend some time at this place when you come to Hyderabad.
This place is at a walkable distance from my office (as well as home).



Aug 2007 Updates:Shilparamam is currently undergoing renovation and is not all that convenient to visit at this moment.

Other places around Hyderabad: Anantagiri Hills | Durgam Cheruvu |Golconda Fort| Ramoji Film City |

Do you like Pepsi?

Yesterday evening I tasted Pepsi for the first time and didn't like it at all.

Was trying some chat items at a stupid restaurant downtown Panjagutta (A place in Hyderabad) and Pepsi came along in the combo offer.

I'm wondering how Indra Nooyi and team managing billion dollar business selling an aerated drink like pepsi... I'll be thankful to anyone who have been drinking these drinks for long time and can answer these questions:

1. What is that you like in soft drinks? Sweetness/Taste/Chill/flavor ?
2. After drinking do you really feel refreshed/energetic?
3. Any improvements in your health after drinking them long term?
4. Why do you think people prefer these drinks in comparison with other juices/drinks of same price? Is it just advertisements and brand name? Or anything else?

In todays world it takes lots of guts to say I dont drink soft drinks. I'm just unable to figure out what value these drinks add... Please leave behind your thoughts...

Saturday, November 11, 2006

Best Employer: Best way to Survey…

Genre: HR/Companies/Workspace
Length: Less than 800 words (2 Pages)

I’m nearly one month late in coming up with this post. The November 5, 2006 issue of Business Today speaks of Best companies to work for in India. A BT-TNS-Mercer survey tries to find out India’s best employers.

I won’t replicate the entire survey here. I have made some observations which I wish to share.

Disclaimer: Contents of this post are derived from public domain and/or information meant for release to public domain. No company specific confidential data has been compromised and the views expressed here are that of the writer as an individual, not necessarily of the organization he works for.

1. The survey compares all companies irrespective of headcount under one umbrella. There’s a huge difference in terms of complexity involved in managing people, at a company which has 200 employees compared to one which has 20000 employees.


2. The number of companies covered are very very few. Companies interested in participation were expected to register online, only 131 choose to participate (Page 78 of the magazine). The number of companies in India (with headcount 200+) are several thousand times this number, so several potential best employers were not covered in the survey

3. The contact details of employees who were surveyed, was obtained from the company itself. (Though respondents were chosen randomly out the list given by HR) Now, consider this: If you ask the HR manager of a company:”Give me a list of employees whom I can contact to conduct survey”, any HR Manager who’s sensitive to the importance and impact of such surveys will be careful enough to give contact details of only those employees who are guaranteed to give a positive feedback. (Or he might exercise influence/tempt these employees to give positive feedback). If you need a true opinion, you should ensure that the person being asked for opinion is giving his true opinion, without being under the influence/temptation/fear.

4. Those who are operational for less than 4 years in India are left out of survey. Because they need criteria to eliminate participants this can be justified, but I personally doesn’t believe a company shouldn’t/can’t be in top slot within 4 years.

5. I’m not sure what percentages of employees were covered under the survey. Unless you survey a reasonable percentage of employees (say min 10-15%) you shouldn’t reach to a conclusion about the company which employs 30000 to 60000 people. This rationale is explained below

When working in large organizations, an employee’s perception of the company is framed by his immediate management and his team member. Except a few like HR and Marketing people whose very job involves meeting several people a day, most of the employees work in a small group, with a manager or team above him, few team members and subordinates. How his manager treats him and how comfortable he is within his team will have more importance than what rest of several thousand employees of the company are doing. For example, hardly 10% of the decision the CEO takes in board meeting will have a direct impact on my day to day activity, while over 90% of decisions my manager takes in the team meeting will affect me directly. So if an employee is happy with his immediate management, comfortable with his team and subordinate, he’s happy. If not, if his immediate environment is suffocating, he'll look for a change, irrespective of company reputation or salary.

So within a same company, an individual (say A) who’s got all possible benefits, considerations and courtesies will give a positive opinion, while another one (say B) who didn’t get even the elementary courtesies will give negative opinion. So if you join a company listening to A’s words and happen to get into B’s team, you may not get what you expected. Either you ask several people and take an average opinion or dig deep and find out why an individual is happy/ unhappy.

While getting a rank in top 10 will increase employee morale and spirit, and company can use this survey result to attract and retain talent saying they’re the best employers in the country, I do not believe these surveys are not reliable enough to take a career decision, given the limitations (as listed above). A prospective employee should use his/her own discretion before taking a decision.

Also read- How to leave your foot prints and make others follow it (Humor)