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Atos CEO’s Profit Warning Shocker: Five Things To Know

New Atos CEO Rodolphe Belmer issued a profit warning Monday that led to a 16.8 percent drop in the company’s per-share price to 32.10. Atos stock fell to a 52-week low of 31.26 euros per share today in early trading, down almost 19 percent from its previous close of 38.59 euros per share. Here are five things you need to know about the profit slide that was an unwelcome surprise for the new CEO.

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A Long Term Outsourcing Agreement With A United Kingdom Financial Institution Hits A Snag

An “unexpected reassessment” of a business process outsourcing (BPO) agreement with a large United Kingdom financial institution will result in a 70 basis point hit in full-year revenue.

Atos said the deal with the UK financial institution, which was originally signed in 2018 for 15 years, had undergone a cost reassessment in December that has led to a “major revision” of the completion date for the project.

Atos said the reduction of revenue booked for 2021 for the UK financial institution deal along with additional costs would result in a 90 basis point hit to operating margins.

As a result of the cost reassessment, Atos said the “run phase” of the BPO contract for the remaining 12 years requires the provision of 65 million euros for “future losses” under what it called “other operating income and expenses.”

The CEO for a large system integrator, who did not want to be identified, said Atos is one of the old-school IT outsourcing providers that has failed to make the transition to the cloud computing era.

“The traditional long-term, IT-outsourced model is over,” said the CEO. “That model is no longer profitable for the large organizations that once entered into these deals. Companies like Atos are dinasouars. The old IT outsourcing model is dead. These are companies that are trying to hold on to the past. They need to reinvigorate themselves, but it is very difficult to do when you have so many old-school horses in your stable.”

The CEO predicted that old-school IT outsourcers like Atos are going to be forced to restructure as they move to provide more IT services under the pay-per-use cloud computing model.

 

 
 
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