23 September 2003 Atos Origin is to acquire SchlumbergerSema, the IT services arm of Franco-US oil services group Schlumberger, after US rival CSC pulled out, concerned about the company’s continuing losses in its core French and German markets.
The transaction has been valued at €1.287 billion — a big discount on the £3.2 billion (€5 billion) that Schlumberger paid for Sema just two years ago, a deal that had raised eyebrows at the time.
However, SchlumbergerSema will be taking Atos Origin stock, rather than cash, and consumer electronics giant Philips, out of which Origin was originally spun-out, will see its shareholding in the company reduced from 44.7% to 32% as a result.
When the deal reaches completion, expected in January 2004, the Franco-Dutch services group will become Europe’s second largest IT services company with revenues of about €5 billion, just behind Cap Gemini Ernst &Young — but not by much.
However, Ovum Holway, the IT analyst group that specialises in the services sector, has expressed concern about the deal. Ovum Holway director Richard Holway believes that SchlumbergerSema is too big for Atos Origin to comfortably absorb, particularly after it acquired KPMG Consulting in the UK and Netherlands just 12 months earlier.
Merging the 22,000 staff of SchlumbergerSema with the 28,000 staff of Atos Origin will be a particular challenge and Atos Origin is also in the middle of a restructuring, following some poor financial results. “The integration problems that this will create will be huge,” said Holway.
He added: “The latest results from Atos Origin were hardly sparkling with a 6% decline on like-for-like revenues in its latest quarterly results. Indeed, the consulting and systems integration parts had dropped by 15% and outsourcing results were lacklustre too.”
- Schlumberger-Sema is expected to scoop the £150 million contract to build and manage the NHS electronic appointment booking system. The deal will be one of the first in a string of major contracts under the £2.3 billion National Programme for IT in the NHS.
Schlumberger-Sema became the sole bidder after EDS pulled out and Fujitsu’s bid was dropped — leaving the way clear for SchlumbergerSema to finalise terms with the Department of Health. The deal is one of a string of recent wins for the otherwise troubled company.