Rodolphe Belmer, former CEO, Atos
Atos CEO Rodolphe Belmer is leaving after just five months on the job, and the IT consulting firm is now exploring a breakup plan that could fix the business with two public leaders. Question marks include: Will Atos ’breakup strategy attract potential private equity, MSP or MSSP buyers for Atos’ various business assets focused on digital transformation, big data, cybersecurity and managed infrastructure?
Rumors about a possible collapse of Atos ’company or asset sale have been circulating for more than a year – though Atos has continued to acquire IT consulting firms focused on Salesforce, Snowflake, ServiceNow, Amazon Web Services, Google Cloud Platform (GCP) and Microsoft Azure.
The arrival of CEO Rodolphe Belmer in January 2022 and a massive $ 2.7 billion write-down in February 2022 were designed to silence rumors of break-ups and asset sales. Belmer promised to refocus the struggling IT consulting company on a turnaround plan.
Fast forward to June 2022, and the turnaround plan has now moved to a breakup plan. In addition, Atos sold a stake in Worldline for € 220 million (nearly US $ 229 million).
Atos IT Consulting Business Units: A Growing One, A Declining One
Nourdine Bihmane, CEO, Evidian
Philippe Oliva, CEO, Atos Tech Foundations
The latest effort includes organizing Atos into two businesses:
- A “SpinCo” known as Evidian: This business, led by Philippe Oliva, will offer digital transformation, big data and cybersecurity services. Prior to the breakup, Evidian focused mostly on identity and access management (IAM) software. But it looks like additional services – perhaps Cloudreach, for example – will move into this business. The good news: Evidian’s unit is growing – earning revenue of € 4.9 billion (US $ 5.11 billion) in 2021, up 5% in organic from 2020, and delivering a 7.8% operating margin.
- The “TFCo” or “Tech Foundations” business is the main Atos: This business, led by Nourdine Bihmane, will offer managed infrastructure services, digital workplace and professional services. The bad news: The Atos unit is shrinking -generating € 5.4 billion (US $ 5.6 billion), excluding Unified Communications & Collaboration -down 12% in 2021 from 2020, and generating a -1% operating margin. This unit will seek to generate a “full turnaround” and restore growth, profitability and money generation by 2026.
Private Equity – Interested in Atos? The Atos plan calls for both businesses to be held publicly. But the plan could also re-ignite bidder’s interest in various Atos assets, ChannelE2E believes. By mid -2021, Cinven was among the private equity firms interested in acquiring Atos, Unquote reported. KKR, Advent International and Bain may also look at the IT consulting firm, the Unquote report added in August 2021.
Cinven’s investment period for its portfolio companies is typically four to five years, according to the private equity firm’s website. Current investments in Cinven include Spanish telecom operator MasMovil, and international fiber infrastructure provider Ufinet, among others in the IT sector.
Atos and Kyndryl: Same Challenge, Opportunity
In some ways, the evolution of the Atos business reflects that of IBM. In fact, IBM broke its Kyndryl managed infrastructure business in late 2021. Under CEO Arvind Krishma, IBM is getting faster growth of hybrid cloud consulting firms.
After becoming a standalone company, Kyndryl’s stock crashed as investors waited for top earnings growth. But the building blocks for such growth are in place now. In fact, Kyndryl in recent months has pushed beyond classic managed infrastructure services to build relationships with Amazon Web Services, Microsoft Azure and Google Cloud, among other digital giants.
We will be watching to see if the Atos/Evidian plan follows the IBM/Kyndryl breakup roadmap.