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Atos CEO Exits; IT Consulting Firm Unveils Breakup Plan

Sign of divorce. Broken paper heart on blue background, top view, copy space
Rodolph Belmer, formerly CEO, Atos
Rodolphe Belmer, formerly CEO, Atos

Atos CEO Rodolphe Belmer is leaving after only five months on the job, and the IT consulting firm is now exploring a breakup plan that could organize the business into two publicly head companies.

Among the question marks: Will the Atos breakup strategy attract potential private equity, MSP or MSSP buyers for various Atos business assets focused on digital transformation, big data, cybersecurity and managed infrastructure?

Knee-jerk reaction to the breakup plan were negative: Shares in Atos on June 14, 2022 fell 27% amid investor concern about the company's strategic direction, Reuters noted.

Atos CEO Leaves After Boardroom Debate

Rumors about a possible Atos company breakup or asset sales have swirled on and off for more than a year -- even as Atos continued to acquire IT consulting firms focused on SalesforceSnowflakeServiceNowAmazon Web ServicesGoogle 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 quiet break-up and asset sale rumors. Belmer vowed to re-focus the struggling IT consulting company on a turnaround plan.

Fast forward to June 2022, and the turnaround plan has now shifted toward a breakup plan. Moreover, Atos has sold off a stake in Worldline for €220 million (roughly US$229 million).

Atos IT Consulting Business Units: One Grows, One Shrinks

Nourdine Bihmane, CEO,
Philippe Oliva, CEO

The latest effort involves 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. Ahead of the breakup, Evidian focused mostly on identity and access management (IAM) software. But it sounds like additional services -- perhaps Cloudreach, for instance -- will move into this business. The good news: The Evidian unit is growing -- generating revenue of €4.9 billion (US$5.11 billion) in 2021, up 5% organically from 2020, and delivering a 7.8% operating margin.
  • The "TFCo" or "Tech Foundations" business is the core 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 would seek to generate a "full turnaround" and restore growth, profitability and cash generation by 2026.

Private Equity - Interested in Atos? The Atos plan calls for both businesses to be publicly held. But the plan may also re-ignite bidder interest in the various Atos assets, ChannelE2E believes. Back in mid-2021, Cinven was among the private equity firms interested in acquiring Atos, Unquote reported. KKR, Advent International and Bain may have also given the IT consulting firm a look, 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. Existing Cinven investments include Spain telecom operator MasMovil, and international fiber infrastructure provider Ufinet, among others in the IT sector.

Atos and Kyndryl: Similar Challenges, Opportunities

In some ways, the Atos business evolution mirrors that of IBM. Indeed, IBM spun off its Kyndryl managed infrastructure business in late 2021. Under CEO Arvind Krishma, IBM has been acquiring faster-growth hybrid cloud consulting companies.

After becoming a standalone company, Kyndryl's stock has plummeted as investors wait for top-line revenue growth. But the building blocks for such growth are now in place. Indeed, 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'll be watching to see if The Atos/Evidian plan follows the IBM/Kyndryl breakup roadmap.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.