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Atos realises future does not belong to data centre services
€1.9bn goodwill writedown, another profit warning, going to focus on cloud, digital and security from now on
The bad news keeps rolling for Atos after its third financial warning in eight months, this time accompanied by confirmation the French integrator will start to lessen its focus on "classic infrastructure services" and unified comms in favour of the cloud.
The group has revised estimates for sales to shrink 2.6 per cent in calendar 2021 to €10.8bn ($12.3bn) and operating margin to be closer to 3.5 per cent than 4 per cent due to higher than expected costs from a BPO agreement with a UK financial service client, believed to be Aegon.
Talking to analysts this morning, CEO Rodolphe Belmer – who only took office early January and days later issued a profit warning – said Atos is booking goodwill impairment charges of €1.9bn, related to prior acquisitions and assets including data centres and IT kit rentals.
The business is also to bolster reserves for "bad debts and provision for future losses up to €500m."
"We can now turn the page and look forward to a whole new chapter for Atos," said Belmer.
The restructure is around a trio of business units: the Cloud, Digital and Security. This refocus is something DXC Technology did some years back amid a declining market for traditional infrastructure services. And in 2021, IBM spun out much of its Global Technology Services biz for this reason too.
In a statement, Atos said that in the "context of an accelerated moved to the cloud" the company had decided to "reposition its activity portfolio… away from classic infrastructure services and Unified Communications & Collaboration."
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"In light of this change in strategy and the refocusing on growing services, the Group conducted a comprehensive analysis of future recoverability of assets and profitability of legacy contracts… [T]his analysis lead to impairment of assets, mainly pertaining to legacy activities."
The 21-person executive committee is being overhauled because its structure is too complex and slows decision making, Atos said. The turnaround plan devised by Belmer will be shared with investors when full year audited results for 2021 are released on 22 February.
Atos issued a profit warning in July last year amid delayed projects, particularly pertaining to HPC and Unified Comms & Collaboration sales, and a problem contract that is believed to be with Aegon.
A spokesperson for Aegon refused to comment on today's announcement from Atos but dids send us an irrelevant statement.
"We are proud of Aegon's collaborative and long-standing partnership with Atos to service both our Protection business and Existing Business customers. Atos is market-leading when it comes to business transformation expertise and we are committed to the partnership, ensuring that we continue to deliver operational and customer service excellence." ®