IT specialist Atos makes bid for DXC

IT outsourcing giant Atos has put in a bid to acquire DXC Technology, which would give the French IT giant a big foot in the door to the U.S. market.

The rumor first ran last week on Reuters, which put the purchase price at $10.1 billion. Atos issued a rather short statement confirming the talks, but did not confirm the rumored price. It said there was no certainty of an outcome and further announcements would be made “when appropriate.”

For its part, DXC said it had indeed received an offer from Atos, again without mentioning the price, and said it would be “evaluating the proposal.”

DXC has been struggling for some time. It was born in April 2017 out of the merger of Hewlett Packard Enterprise Services, formerly known as Electronic Data Systems (EDS), and Computer Sciences Corp (CSC). After the merger, DXC had 150,000 staff and revenues of $24.5 billion in fiscal 2018. By fiscal 2020 it was down to 138,000 employees and $19.6 billion in revenue. There were significant writedowns for goodwill, depreciation, and amortization, but those are paper losses.

DXC has been selling off business it considers legacy and non-essential. Its most recent sale is its healthcare-provider business, which it is selling to Italy’s Dedalus for $525 million. It is also selling its Fixnetix financial-services business to Options Technology, an IT infrastructure provider in London.

For its part, Atos has been on an acquisitions tear. It has purchased more than a dozen IT consulting and outsourcing firms in the past year alone. Earlier big purchases  include Siemens IT in 2011, Bull in 2014, Xerox’s IT-outsourcing unit in 2015, cloud-services provider Syntel in 2018, and Maven Wave in 2019.

DXC would certainly boost Atos’s North American presence, although both firms have a global reach. For their most recent fiscal years, Atos saw North American revenue of approximately $3.3 billion while DXC reported North American revenue of approximately $7.4 billion.

A lot of DXC’s business is legacy on-prem IT services which are falling out of favor as more and more enterprises migrate to the cloud. Accenture, for example, launched a $3 billion cloud-first initiative last year, and Atos in November announced it was committing $2.4 billion over five years to a new service called Atos OneCloud, designed to accelerate digital transformation.

Sad to see such a fate for two venerable outsourcing firms, but they failed to adapt to the times and Atos did. It’s a story told a thousand times over.