Atos Prepares for Government Spending Cuts as Profit Triples
Net income climbed to 60 million euros
Tatiana Grigorenko/Bloomberg
The exterior of the Atos Origin headquarters.
The exterior of the Atos Origin headquarters. Photographer: Tatiana Grigorenko/Bloomberg
Atos Origin SA, France’s second- biggest provider of computer services, said first-half profit more than tripled as it cut costs, beating analysts’ estimates.
Net income climbed to 60 million euros ($78 million) from 18 million euros a year earlier, the Paris-based company said in a statement today. Analysts predicted profit of 46.8 million euros, according to the average of five estimates compiled by Bloomberg.
Computer-services providers are looking to increase sales as clients complete upgrades they delayed during the global recession. Worldwide revenue from selling software as a service to businesses will rise about 14 percent this year to more than $8.5 billion as companies shift to so-called cloud computing, with their software hosted remotely by third parties and accessed online, research firm Gartner Inc. said on July 22.
Atos may experience a “progressive return to growth, I think, at the start of next year,” Senior Executive Vice President Gilles Grapinet said on a conference call with reporters.
Atos shares fell 3.4 percent to 32.42 euros as of 12:59 p.m. in Paris, valuing the company at 2.26 billion euros.
The company is working with European governments, including in the U.K., to minimize the impact of budget cuts, Grapinet said. “Clearly, compared with 2009, when the public sector was a growing area, things are changing,” he said.
Improved Margin
Operating margin in the first six months rose to 6 percent from 4.6 percent, led by gains in the managed services unit. In France, Atos’s largest market by revenue, operating margin fell to 3.1 percent from 3.9 percent, compared with an increase to 9.3 percent from 6.7 percent in the Benelux countries.
Atos reduced maintenance costs by 17 percent and paid 5 percent less for office space in the period, it said.
In terms of margin, “France was clearly disappointing,” Kepler Capital Markets analyst Laurent Daure said in a note to clients. In general, “we don’t see a significant uptick in sales short term,” said Daure, who has a “hold” rating on the stock.
Sales declined 4.6 percent to 2.49 billion euros, though Asian business and the Vancouver Olympics, for which Atos provided computing services, helped boost sales in the international segment by 7 percent. Chief Executive Officer Thierry Breton reiterated full-year targets.
Atos is betting on upgrades to energy and environmental infrastructure to help drive revenue growth. The company announced a contract this month to maintain nuclear power plant simulators for Electricite de France SA, the operator of the country’s atomic facilities.
CEO Breton has also advocated the development of a trans- Mediterranean energy grid capable of transporting as much as five gigawatts of electricity between Europe and Africa.
Cap Gemini SA is the largest French and European provider of computer services.
To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net.
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