Deutsche Telekom’s T-Systems unit is reportedly planning to buy Atos Origin.
Such a combination would create the third-largest IT services player in the world in terms of revenue. In 2004, Atos made sales of $6.5 billion and T-Systems made $12.9 billion, though a sizable chunk of that was in network support and integration services to its parent.
However, it would also be a surprising move. If anything, T-Systems is itself considered to be an acquisition target, and in recent years Atos has built its reputation as one of the few companies that can successfully digest other large services firms. It bought Origin for $2.3 billion in 2000, and Sema for $1.8 billion in 2003, both of which were integrated successfully.
Despite its ability to absorb rivals, last week Atos ruled out a major US acquisition in the near term. Xavier Flinois, a member of its management board, told Computer Business Review: We need a foothold in America as we have major clients with projects that extend to the US, but we don’t need massive scale. Our main objective is to become the number one [IT services company] in Europe. We are ahead of Capgemini and T-Systems, but to be ahead of IBM and EDS, we need to be in the top three or four in every country.
Atos now ranks as the second largest player in France behind Capgemini, one of the top 10 in the UK, and the sixth largest IT services vendor in Germany following the absorption of retail giant KarstadtQuelle’s internal IT department as part of the two companies’ $1.4 billion outsourcing contract announced last September.
Atos is currently profitable, unlike T-Systems, which has struggled in recent years. Most rumors to date have concerned the possibility of Deutsche Telekom selling it off as a result of its huge debts, which stood at $52.1 billion at the end of last year.
