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Atos CEO resigns after board proposes splitting the company

Digital, Big Data, and Security units to be known as 'Evidian', less profitable parts as 'Tech Foundation Co'

Atos's share price tumbled this morning on confirmation it is exploring a two-way split of operations, a decision that made the position of recently installed CEO Rodolphe Belmer untenable.

In early morning trades on the Paris stock exchange, Atos stock plunged 27 percent, the steepest fall on record, after it outlined a blueprint to progress the business – one that clearly didn't have CEO backing.

The proposal "following preliminary strategic review work" is to spin out the Digital, Big Data, and Security businesses into a separately traded entity called Evidian, also listed on the Paris exchange. These units turned over $5.12 billion (€4.9 billion) in sales during 2021 and are the growing parts of Atos. It would be run by Philippe Oliva and employ 59,000 people.

Tech Foundation Co (TFCo) is the other half of Atos comprised of Data Centre and Hosting, Digital Workplace, Unified Comms, and Business Process Outsourcing. This area, which reported a 12 percent decline in turnover in 2021 to $5.65 billion (€5.4 billion), will continue to be led by Nourdine Bihmane who will be charged with restoring growth, profitability, and cashflow by 2026. Headcount is 48,000 worldwide.

"In order to adapt to the shifting market trends," Atos said, "TFCo would implement an ambitious turnaround plan that would ultimately reposition the business for growth, profitability and cash generation. This plan, for a total cost of $1.15 billion (€1.1 billion) over the 2022-2026 period, is articulated around three key steps."

  • Refocus: rationalizing the activity portfolio to pave the way for transformation, by exiting non-strategic businesses and turning around or exiting negative margin accounts;
  • Recover: resetting the cost structure by addressing structural issues across right shoring, age pyramid, reducing third-party spending and consolidating data centers and facilities to drive cost savings;
  • Rebound: stabilize revenue and then pivot to growth, thanks to the development of next generation offerings and investments in sales capabilities.

Atos expects to generate $5.2 billion (€5 billion) in revenue from TFCo this year and anticipates this will fall to $4.3 billion (€4.1 billion) by the end of 2024 before stabilizing and growing 5 percent plus by 2026.

Rodolphe said on a call with journalists this morning that it was the board's decision to restructure.

The company added: "Taking note of this evolution, Mr Bellmer considered that he had no choice but to resign."

The exit of the CEO, who only took office in January, will take effect on September 30.

The "contemplated separation," added Atos, "leads to a reorganization of the Atos group resulting in a significant reduction in the scope of the functions and a redefinition of the mission of the Atos Chief Executive Officer."

Clouds gathering

The signs were there for all to see in February when Atos issued its third profit warning in eight months, blaming a focus on "classic infrastructure services" and vowing to jump into the cloud with both feet.

This is path well trodden by bigger rivals. IBM finally offloaded its Technology Services division last year, and in 2017 HPE's Enterprise Services and CSC merged to create DXC Technologies in the hope that greater economies of scale would help, but in truth revenues just fell as fast. Atos itself tried to buy DXC last year but failed.

2021 wasn't a good year for Atos. It included the discovery of accounting errors in two of its US units, Atos IT Solutions and Services and Atos IT Outsourcing Services LLC; two profit warnings; and a set of financial results [PDF] that were memorable for all the wrong reasons. Turnover fell to $11.3 billion (€10.839 billion) from $11.7 billion (€11.181 billion) and net loss was $3.1 billion (€2.962 billion) versus a profit of $575 million (€550 million).

The good news? Atos today completed the sale of its entire 70 million shareholding on Worldline for $230 million (€220 million). ®

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