Atos’ Future Will Bring a Much-Needed Restructure

R. Bhattacharyya

Summary Bullets:

  • Atos announced plans to split into two companies: one will focus on digital solutions and the other on information systems.
  • There is still much uncertainty regarding what will happen to Atos in the long term, with rumors flying of a potential acquisition by another French organization.

For France-based Atos, significant change is imminent. In mid-June 2022, the IT services provider (ITSP) announced plans to split into two companies:  SpinCo will offer high-growth solutions that support digital transformation, big data (including Atos’ computing portfolio), and cybersecurity; and TFCo (Atos’ Tech Foundations) will provide low-growth managed infrastructure services, digital workplace solutions, and professional services.  By restructuring, Atos is separating its higher-growth and higher-margin businesses from its underperforming divisions, which have been dragging the company’s overall financial performance down for several years.

Atos isn’t the only ITSP provider facing this challenge.  Most of its rivals are looking to grow the portion of revenue they bring in from what they call ‘digital solutions,’ which usually encompass a mix of cloud, automation, advanced analytics, AR/VR, and cybersecurity capabilities.  But among its major competitors, Atos has been the least successful in offsetting losses from its legacy businesses with gains in newer, ‘digital’ areas. Organic revenue contracted in 2020 and 2021 (-3% and -4.3%, respectively) while many rivals enjoyed double-digit growth.  One rival exception is IBM, which addressed its growth challenge by launching a restructuring effort very similar to the one Atos is suggesting, with its spinoff of Kyndryl.  Whether IBM’s restructuring brings about the success the company had anticipated still remains to be seen, likely contributing to the tepid response Atos is receiving to its plans.

Furthermore, although Atos’ reorganization strategy appears to be set, with Atos’ CEO announcing plans to resign in September 2022 and appointing two deputy CEOs to run the new companies, there may be more changes to come.  For several months, rumors have been flying that the company’s big data and cybersecurity businesses may be sold to Thales, a French defense company.  There could be other potential bidders as well, however; given Atos’ strong cybersecurity portfolio and relationship with the French government, suitors will most likely need to be French organizations. 

While there is still much uncertainty regarding what will happen to Atos in the long term, one thing is clear:  Atos will not continue to operate within its current structure – and that’s a good thing.  The company has been unable to turn around its performance, even with numerous acquisitions, and has struggled to implement its multi-part Transformation Plans successfully.  Atos has considerable strengths, including its cybersecurity portfolio, computing business, and the digital expertise gained from its purchase of Syntel; it now needs to put in place a framework and strategy that better leverages them.

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