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Given the sheer scale of the challenge for Atos of absorbing Siemens IT Solutions & Services (SIS), the fact that the combined organisation held revenues broadly flat in Q3 on a pro forma basis must be considered quite a result. Consolidated revenues for the quarter ended 30th September, the first full quarter for the new organisation, trimmed by just 0.3% like-for-like to €2.1b. No comment on margins (as usual for ‘odd quarter’ reporting) but Atos chairman and CEO, Thierry Breton, reaffirmed their 6.2% FY operating margin target, just 50bps below Atos’ FY10 stand-alone margins. If achieved, this ought to be considered remarkable under the circumstances.
Atos’ expanded UK business grew faster than the group. Q3 revenues rose by 4.3% yoy like-for-like to €349m (around £305m by our estimates). This is about £120m more than Atos UK reported in Q3 10; the vast majority of the difference would be due to SIS. We estimated (see UK SITS Rankings 2011) that SIS generated UK revenues of £434m in 2010, of which almost half came from the public sector (see Atos and Siemens in UK public sector: what will be its strength?).
The new Atos now employs just over 74k people, but we don’t know where! Other than alluding to a doubling of offshore headcount in its Systems Integration business due to SIS, we don’t yet know the size of Atos’ global delivery workforce. Given that over one-third of Atos’ revenues derive from highly ‘offshore-amenable’ geographies (UK, Benelux, North America) – and that many India-based players are growing revenues on the Continent at double-digit rates – we would want to see at least 15% of Atos’ headcount in its global delivery network to give us any degree of confidence that they can remain competitive on pricing.
Meanwhile, and it has to be said – so far, so good! I will be speaking to Atos UK management later this week.
