Satyam's Diversification Failure

Earlier in December, Satyam's management team made a major miscalculation that will likely haunt the company for years. The firm announced — and then quickly canceled after a shareholder revolt — plans to diversify its business and acquire 100% and 51% stakes in real estate and physical infrastructure companies Maytas Properties and Maytas Infra, respectively, for $1.6 billion. It's looking more and more likely that after the special board of directors meeting on January 10, 2009, there will be management and governance changes and even potentially the outright sale of the company. Sourcing and vendor management executives will need to review their dependence on Satyam and ensure that they have strong contingency plans and change of ownership clauses in the event that Satyam is acquired or the fallout from this serious misstep affects the firm's ability to compete long term.