December 15, 2010 11:11 pm

Siemens and Atos to pursue broad alliance

Thierry Breton and Peter Löscher were in no mood to be falsely modest on Wednesday. The chief executives of France’s Atos Origin and Germany’s Siemens declared their new partnership to create a European leader in IT services was a “great day for the competitiveness of Europe”.

Unveiling details of the deal that will create Europe’s second largest IT services group by sales after IBM, and the world’s fifth biggest, they insisted the alliance was more than a financial transaction. Atos will become a key partner to Siemens, with access to its biggest account managers, and the two companies will seek common business opportunities.

“It was important that this is a strategic long-term partnership,” said Mr Löscher, who had travelled to Paris to announce the injection of Siemens’ lossmaking IT services activities into Atos. The German group will in return receive a 15 per cent stake in Atos, €186m ($247m) in cash and a five-year convertible bond of €250m.

The deal, valued at €850m, will allow Siemens to offer software products and services along the value chain for emerging and highly technical infrastructure markets, while reducing its exposure to the heavy losses its IT division has incurred over the years. Some analysts estimate the loss at a cumulative €2bn.

For Atos, the deal transforms the midsized IT services group into one with a wider European presence, operating in 40 countries, with 78,500 employees.

Mr Breton, who led the turnround of France Telecom before becoming French finance minister in 2005, said he expected synergies of some €225m, before revenue benefits from greater scale. “There were very big deals which we could not go for because we were not big enough,” he said in an interview.

Atos will now have some 30 large data centres, one of the biggest stables of data management in Europe. Mr Breton said it intended to lead the evolution to cloud computing, where clients rent out data storage according to demand.

The enlarged group will have pro forma sales of €8.7bn, against Atos’s €5.1bn last year, forecast to rise to between €9bn and €10bn by 2013. Mr Breton said the deal would be earnings-enhancing within six months and Atos would be debt free by the end of 2012.

Analysts said the deal was beneficial to both sides, though Siemens has said its earnings would be diluted. Atos shares jumped on the announcement, reaching a seven-month high.

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