Atos Origin Snaps Up Siemens IT Services in Bid to Become Bigger Player on World Stage

Event Summary

December 14, 2010 -- Atos Origin has announced its entrance into an agreement with Siemens to acquire Siemens IT Solutions and Services for EUR 850 million with the intention of extending its presence across Europe. The transaction will create an IT services company with pro forma 2010 revenues of approximately EUR 8.7 billion and 78,500 employees worldwide. As part of the transaction, Siemens concluded a seven-year outsourcing contract worth around EUR 5.5 billion, under which Atos Origin will provide managed services and systems integration to Siemens. The new company will deliver a broad portfolio of managed services. As part of the deal, Siemens picks up a 15% stake in Atos Origin and lands a seat on the company’s board of directors.

Quick Take

Analytical Summary

• Current Perspective: Moderate on Atos Origin’s planned SIS acquisition, because by buying the IT services company from parent Siemens, the French provider gains a complementary set of services with minimal geographic overlap that will help the company expand its reach into growth regions and achieve greater scale. However, Atos Origin will also pick up a number of nagging issues, including ongoing executive leadership and organizational problems that have yet to be resolved.

• Vendor Importance: High to Atos Origin, because the company needs the resources to expand beyond its traditional market boundaries and the pending SIS acquisition supplies it with a fast way to accomplish that task.

• Market Impact: Moderate on the data center and security markets, because while the sum total of the two companies creates a potentially formidable new rival, realizing that potential is by no means assured. IT service revenues are flat, particularly within Europe, and competition is very tough. Atos Origin will possess significantly greater resources to pursue customers across the continent, but the company will find it very hard to maintain 7-8% profit margins. After the merger, Atos Origin would be the fifth largest IT services provider in the world.

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