Demand for traditional IT system management has plummeted as firms rush to the cloud in the wake of the corona outbreak. As a result, international IT services giant Atos saw its organic revenue fell by as much as 15%, an unprecedented blow. The issues started in the first quarter already, but the downward trend has continued over the past three months. In Germany, a restructuring plan now calls for the elimination of 1,300 positions.
Listen to this story
On Monday, the Atos stock fell 18 percent to its lowest level since 2014. Currently, the cloud business provides for roughly half of Atos’ revenue, but obviously the company needs to do more about serving their clients through cloud-oriented solutions. In the next years, Atos intends to expand the cloud’s relevance beyond roughly 65 percent, mostly through acquisitions.
Atos has an international workforce of 105,000 employees. The company provides tailored end-to-end solutions for all industries in 71 countries. It has an annual turnover of more than 11 billion euros.
The international IT service provider by now recognizes that demand for ‘traditional’ IT infrastructure work is steadily declining. Restructuring plans are therefore being expedited.
Improving All its KPIs in 2022
Atos’ operating margin is shrinking as a result of its tardiness in cutting expenses in sectors where demand is declining. Although for this year Atos had anticipated a higher seasonality between the first and second semester, operating margin was lower than expected in the first semester at 5.5%. The margin objective for the entire year of 2021 will be cut to 6%, down from 9.4% to 9.8% previously projected.
After a year of transition in 2021, Atos expects to improve on all its KPIs in 2022 and maintains its mid-term targets of revenue growth at constant currency from +5% to +7%, operating margin rate from 11% to 12% and free cash flow conversion above 60%.