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Atos bluntly tells world it is in the sh*t, lacks skills, sets shares crashing

Firm touts its own "low productivity and inadequate skill-set"

French IT services multinational Atos has proposed splitting in two and admitted it is facing a critical array of issues ranging from contracts in the red to "low productivity and inadequate skill-set" in a decision that has sent its shares diving and its CEO walking from the job after just nine months amid a boardroom row.

The chaos is likely to be warmly welcomed by rivals like a resurgent DXC Technologies and newly independent Kyndryl, spun off from IBM in November 2021; customers meanwhile may be concerned at what a warts-and-all investor presentation exposes about a key partner's self-flagellating view of its own capabilities.

Atos blamed "structural issues" like a fragmented portfolio, "high exposure to high-cost countries and high use of subcontractors", a "significant number of red contracts", inflation affecting staff costs, and "low productivity and inadequate skill-set of commercial resources" for its troubles. The proposal comes just 16 months after rival DXC walked away from a buyout proposal by Atos widely rumoured to have been priced at $10 billion.

Under the proposals announced today (June 14), the Atos split would see a company dubbed Evidian (aka SpinCo) take the profitable, growing big data and security (BDS) section of the business, and the rump of Atos be left with the unprofitable and declining IT services division, the Tech Foundations (Atos aka TFCo) section.

Atos shares have fallen 73% in the past 12 months.

atos split sends atos shares crashing

Quite why the company has decided to give its new planned new entities two names apiece was not immediately clear.

The sections of the business that would fall under Evidian after the split grew revenue 5% last year to €4.9 billion, with a 7.8% profit margin. The post-split Atos division shrank by 12% to €5.4 billion in revenue, and made a 1% loss.

“Separating these two businesses would create two companies, leaders in their respective segments with proven and recognized track records: Tech Foundations is a trusted partner of choice for managing and modernizing mission critical systems, broadly recognized by the market for leading positions in Digital Workplace and Hybrid Infrastructure; and SpinCo would be strategically positioned on the data & security markets, recognized as the worldwide leader in managed security and #3 in supercomputing,” said current Atos CEO Rodolphe Belmer in a press release.

Belmer himself will depart by the end of September, having only joined Atos in January 2022.

Evidian would be run by Philippe Oliva, currently CCO at Atos, while Atos would see Nourdine Bihmane, CEO of Tech Foundations, take the reins.

See also: DXC declines “inadequate” Atos offer; French firm walks

Not a pretty picture...

At time of writing, the Atos split had driven its shares down below €14 – a level they last saw in 2008.

Reuters reported the French finance ministry was monitoring the situation, as Atos is regarded as a strategically important company to the French state.

Officially the Atos split is only being “studied” by its board of directors, but is stated to be the preferred option for the future of the group. If the split goes ahead, Atos said it would aim to complete the spin-off of Evidian by the second half of 2023, and distribution of Evidian shares by the end of that year.

“In the preferred scenario at this stage, Atos’ shareholders would retain their current shares of Atos and would receive SpinCo shares as in-kind distributions. SpinCo would be listed on the Euronext Paris stock exchange. After completion of the envisaged transaction, it is currently contemplated that Atos shareholders would hold 100% of TFCo and 70% of Spin Co. The remaining 30% stake in Spin Co would be held by TFCo and monetized over time to refinance TFCo’s turnaround costs,” said the press release.

To finance the Atos split the company estimated it would need around €1.6 billion in funding. It is currently in the process of selling €700 million in assets, including its €220 million stake in payment provider Worldline.

Atos has had a challenging few years, and seen its share price fall from a 2016 peak of nearly €100 to less than a fifth of that even before news of the Atos split broke. Last year it made a failed $10 billion bid for DXC and had to endure an audit into two of its US subsidiaries, which hit investor confidence significantly.

In the UK Atos remains the sometimes-controversial provider for many government IT services, and has recently signed deals with the Student Loans Company and the BBC. It also lost its 20-year contract with NS&I, with the state savings bank moving towards “off the shelf” solutions.

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