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March 1, 2024updated 22 Apr 2024 2:40pm

The fall of Atos: What went wrong? And what happens next?

With news that a planned rescue sale has collapsed, Atos’s future looks bleak. But beyond the headline drama, how did this jewel of French IT decline so fast - and how might failure impact the French state and beyond?

By Andrea Valentino

In April 2018, Donald Trump hosted his French counterpart for a state dinner at the White House. The guestlist was unsurprisingly gilded: President Macron and his ministers rubbed shoulders with Tim Cook and Henry Kissinger – and Thierry Breton. 

Breton’s presence was far from surprising. As the CEO of Atos, the executive led an icon of French business. With net income up 5.8% year-on-year, and major tech acquisitions incoming, the IT and consulting giant was thriving. As Breton confidently declared in October 2018: “Atos will create substantial value for all of its stakeholders over the next three years.”

The fall of Atos
The Atos share price has fallen by over 90% in the last two years. (Photo by Nitpicker/Shiuuerstock)

He was wrong. Burdened by debt, wracked by internal disputes, and struggling to secure buyers for flagging business areas, the Atos share price has plunged by over 90% in just two years. Notwithstanding the firm’s close links to the French state, some experts now wonder if the business can survive, especially now that a rescue deal has faltered. 

Encompassing a mix of cultural and technological factors, understanding this spectacular reversal isn’t easy. What’s clearer are the lessons the Atos debacle offers other tech firms – both around the need for flexibility in a changing market, and securing trusted, reliable talent.

Trouble at the top

He may have found favour with President Macron, but for some observers, Atos’s problems begin with Thierry Breton. Typical are the comments of Christian Nicol, co-president at UDAAC, a group of small Atos investors, who says that the former CEO acquired companies at “too expensive” a price. A good example, Nicol suggests, is Syntel. Atos snapped up the American digital services company in a deal worth $3.4bn (£2.8bn), even though it boasted revenue of less than $1bn.

Investments like these go a long way towards explaining Atos’s vast arrears: the company has net debts of €2.3bn (£1.9bn) as of June 2023. That’s echoed, says Catherine Berjal, by broader missteps. “Breton came too late to the cloud,” says the co-founder at CIAM, a hedge fund with an interest in Atos, adding that deals with firms like Siemens were mostly onshore – a far cry from rivals such as Capgemini, which focused on cheaper offshore alternatives.

All the same, it’d probably be wrong to blame all of Atos’s woes on Breton himself. For one thing, both Nicol and Berjal note the issue of short selling, whether from financiers or from competitors hoping to gobble up Atos assets cheaply. 

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Beyond Breton, experts have lamented a culture of incompetence at the top of Atos: a culture that can’t really be pinned on a specific individual. Though the former CEO landed unscathed – he became an EU commissioner in 2019 – Breton’s former company has been through four chief executives in under two years. Tenures have been rocky. Bertrand Meunier, chairman from 2019 until his resignation in October 2023, was attacked by shareholders for what the Financial Times called ‘misleading and inadequate’ disclosures.

For Berjal, this ineptitude can be explained by France’s elitist corporate ethos, with executives gliding from grande écoles to boardrooms without truly appreciating the intricacies of the companies they lead. 

Lacking leadership and vision

What’s undeniable is the impact executive instability has had on attempts to save Atos. One long-held strategy involved spinning off Atos’s legacy IT infrastructure business into an entity called Tech Foundations, which Atos had hoped to sell to a Czech businessman named Daniel Křetínský. The billionaire, for his part, was to contribute to a €900m (£770m) share issue by Atos.

The remainder of Atos – encompassing modern supercomputing, cloud, carbon accounting and cybersecurity units – is henceforth to be rebranded as Eviden. In another effort to raise funds, Atos is also trying to sell Eviden’s valuable big data and cybersecurity wing (known as BDS) to Airbus. 

In theory, these moves could do much to relieve Atos’s debt burden. Yet in practice, progress has stumbled, something that can largely be blamed on tumult at the top. 

Though Meunier and Křetínský had mostly agreed on a Tech Foundations deal, for instance, his successor as chairman tried to negotiate a higher price. At the time of writing, this tactic has apparently backfired, with Křetínský abandoning the purchase. “They’ve been quite public about the fact that those changes at the leadership and CEO level were due to disagreements internally about the direction of the business,” says Alastair Edwards, the chief analyst at Canalys, a market analysis firm. 

Atos’s problems are further compounded by the sensitive nature of its business. Even before the Křetínský plan collapsed, French policymakers were uncomfortable selling Tech Foundations to a foreign interest, not least given Atos’s role supplying France’s nuclear industry, to say nothing of its work with the country’s military.

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The end of the Křetínský option leaves Atos in serious trouble. The company immediately announced it was postponing releasing its 2023 results, and even when a deal seemed possible, the Crédit Agricole bank refused to refinance the group’s debts. Upon hearing the latest bad news, Edwards was blunt: “I’m not confident about its future in its current form.”

Nonetheless, the group seems committed to pushing ahead with a sale of some sort. As the company told Tech Monitor via email: “The sale of Tech Foundations is still part of our divestment plan and, as we announced, due diligence with Airbus on the potential sale of the BDS business is ongoing.”

Were Atos to finally become insolvent, the consequences could be severe. Apart from its work with the French state, it also runs a ‘Technology Operations Centre’ for the 2024 Paris Olympics. Across the Channel, the company boasts contracts across Whitehall: Defra and NHS England are just two of the bodies reliant on Atos for IT services. 

Reasons for hope?

Yet lifelines remain. If Atos collapsed, or else withdrew from international commitments to focus on core markets in France, Nicol suggests that other companies would snap up the leftovers, limiting disruption. In Britain, Computacenter is an obvious candidate here, particularly when it comes to managed desktop services.

Notwithstanding Atos’s antiquated Tech Foundations wing, Nicol believes that Eviden’s hightech offerings remain appealing. “The main problem of Atos,” he says, “is really a financial problem, not an operational one.” Atos, for its part, says it continues to offer an “attractive” business mix. 

Not everyone is so optimistic. Especially after the failure of the Tech Foundations buyout, Edwards suggests that Atos’s relationship with the French government could see the Élysée arrange a bailout. 

More generally, Edwards sees this solution as temporary, arguing that remaining Atos assets, potentially after securing protected receivership status, would soon be sold in a firesale – albeit to an approved group of buyers, ensuring sensitive customer data is kept safe.

Another option, likely preferred by politicians and shareholders, is for a restructured Tech Foundations to focus on growth areas like hybrid cloud management, particularly if Atos manages to offload BDS and service its debts. But though Atos is buoyed by a base of what it calls “loyal” and “understanding” customers, a revival of the glory days seems remote. “I’m really sceptical,” Edwards says, “that it’ll be able to reinvent itself to the point that it remains a substantial, successful business in the future.” 

As the Canalys analyst explains, this pessimism basically stems from the pace of change in modern tech. To give just two examples, the theoretical potential of edge computing and generative AI is immense. But to exploit these technologies, Edwards says companies must be “fast moving, adaptable and nimble” – and not weighed down by the kinds of legacy processes that have long blighted Atos.  

For that to happen, of course, you need executives to both understand innovations – and embrace them early. Berjal here returns to the question of personnel. “You cannot be just another CEO,” is how she puts it, emphasising that parachuting in from other industries, or, indeed, the world of private equity, isn’t neccessarily enough to prepare an executive for the technical rigour of IT. Having worked its way through six CEOs in an many years, it would appear to be a lesson Atos continues to learn the hard way. The question is whether even inspirational, visionary leadership will now be enough to turn the company around.

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