By ROMIT GUHA and DEEPALI GUPTA
MUMBAI -- The United Nations has said it has decided to have "no further dealings" with Satyam Computer Services Ltd., becoming the second client known to have canceled its outsourcing contracts with the Indian software exporter.
"Throughout the system, the various bodies of the UN will wrap up the contracts. The details of that may need some fine-tuning, it may need to be worked out in the coming months," the UN's associate spokesperson said at a press conference in New York on Monday. The transcript of the briefing was seen by Dow Jones Newswires Tuesday.
A Satyam spokeswoman declined to comment.
Hyderabad-based Satyam, once India's fourth-largest software exporter by revenue, has been in turmoil after its founder B. Ramalinga Raju revealed in January he overstated its profits over several years and created a fictitious cash balance of more than $1 billion. It is now scouting for a buyer who will infuse funds and help revive the firm.
Since the fraud was revealed, one of the main tasks of the new government-appointed board at Satyam has been to retain clients. U.S. State Farm Insurance is the only company known to have terminated its outsourcing contract with Satyam.
Satyam Chairman Kiran Karnik had said in January that the company has received notices for terminating technology outsourcing contracts from two clients, without giving details.
Satyam'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 Telstra Corp., National Australia Bank Ltd. and Qantas Airways Ltd.
A Mumbai-based analyst, who asked not to be named, said Satyam's UN contract was "miniscule" and that the cancellation wouldn't have "any material impact" on the company's revenue, but could have "sentimental impact."
Indian software exporters' revenue growth has been slowing as their global clients - under pressure to cut costs - have reduced spending on information technology.
"The rate of growth (for the industry)...is half of what it used to be in the past few years" - around 20% this year compared with 40% in the past, according to a letter from the company to new hires. "Added to this was an unprecedented set of events in the organization over the past few weeks."
The company has, therefore, decided to defer until further notice the joining dates of about 9,000 fresh graduates to whom it had offered jobs, according to the letter, seen by Dow Jones Newswires Tuesday.
"This scenario, combined with the continuing volatility in the business environment, necessitates that we optimize available resources internally and critically reexamine additional requirements on an ongoing, quarterly basis," the letter, dated March 23, said.
Satyam, which has more than 50,000 employees, and its Indian rivals have almost stopped hiring experienced staff in a bid to reduce costs and protect operating margins.
They are mostly recruiting fresh graduates who are hired at much lower salaries, but the global situation has forced them to curtail even such hiring.
"While unfortunate, it has also been unavoidable," said the letter from Satyam's global head of human resources, S. V. Krishnan. The decision was taken after "extensive deliberations and only after all other practical options were exhausted," it added.
A Satyam spokeswoman declined to comment on the letter.
The graduates were to join the company from late December 2008 to early 2009, a person familiar with the matter told Dow Jones Newswires, asking not to be named.
"The offer letters were given during December 2007 to June 2008," the person said.