What exactly are the sovereign activities of Atos that the State intends to buy and how much do they weigh in the activity of the IT group in difficulty? Bruno Le Maire declared on Sunday April 28 on LCI that he “filed this weekend a letter of intent with a view to acquiring all the sovereign activities of Atos”. This operation would allow certain strategic activities “do not pass into the hands of foreign actors”, underlined the Minister of Economy and Finance. The future of Atos had indeed become a little darker on Thursday April 25, with the publication of its first quarter results. The IT group had announced a drop in its turnover of 2.6% over one year, to 2.48 billion euros, and an erosion of its profitability, falling to 1.9% of its sales, against 3 .3% a year earlier. Increasingly critical, its situation forced it to grant an additional week, until May 3, to its financial partners. Its potential buyers – including David Layani, the boss of Onepoint, but also the businessman Daniel Kretinsky, back in action with the Canadian CGI – had until tomorrow Friday to submit new proposals to him, in the goal of getting the company back afloat.
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Atos: “We are the jokers”, fume the small shareholders
To reduce its debt of almost 5 billion euros, Atos had already asked its creditors at the beginning of the month to erase almost half of it. At the same time, the company had requested 1.2 billion in cash to cover its cash flow needs. But the rapid deterioration of its business could force it to be even more greedy.
“This decline is not surprisingestimates a former executive. Large Atos clients realize that they are no longer really the priority of management, completely focused on finances and restructuring. In outsourcing, contracts are broken and, in other sectors, they are renewed less and less. Atos has entered a phase of decline“.
Social breakdown and dry cash flow
This collapse could set off two new time bombs. The first concerns human resources. “Broken or non-renewed contracts risk causing social damage. There will be additional restructuring plans, including in France, we will not escape it », Estimates the ex-employee. The second is due to Atos’ risky cash management methods, according to him. These consist of excessively anticipating customer payments, and postponing those of its suppliers, he describes. “ This generates a completely virtual cash flow, which hides the reality of its real cash needs.“, he explains. As Atos management publicly admitted in October, this accounting technique had made it possible to artificially reduce its working capital requirements by 1.8 billion euros. The problem is that as customers break their contracts, part of this money ends up escaping, further accelerating its financial collapse.
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All this does not bode well, as suggested by the latest press release from Atos, published Thursday. The group concedes that it must once again “adjust your business plan to take into account operational performance and current business trends“. In short: he must ask the banks to cancel more debt or demand more new money. Or both. Its objective of reaching an agreement with its creditors by July therefore appears more and more compromised.
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This infernal spiral has once again relaunched the hypothesis of State intervention, made concrete by Bruno Le Maire’s announcement on Sunday. Until now, its commitment was limited to a loan of 50 million euros granted via the economic and social development fund (Fdes). In exchange, Bercy had acquired a so-called preferred share in Bull SA, the Atos subsidiary which notably controls the manufacturing and testing of supercomputers. The main interest of this action is that it gives the State a priority purchasing right. The State could exercise this by drawing on the credit line of 1.828 billion euros that it has discreetly allocated, under the 2024 Budget, to the defense of its strategic interests.
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The idea would first be to preserve Atos’ sensitive activities, which are mainly concentrated within its Eviden branch, in the Worldgrid and BDS (Big Data and security) divisions. Specializing in energy management systems, Worldgrid designs in particular the so-called control-command systems which supervise our nuclear power plants. Last summer, the company won a contract with Schneider Electric to equip the systems of the six new generation nuclear power plants that EDF plans to deploy in France within ten years.
Telephone tapping and nuclear simulation
The BDS division, which Airbus ultimately decided not to acquire, houses several other professions deemed even more sensitive. Its Mission critical systems (MCS) entity, for example, deploys various highly secure communications systems used by burst pilots, infantrymen or naval forces during combat. In addition, it designs telephone tapping systems for use by the General Directorate of External Security (DGSE). Also known to be very active in cybersecurity, BDS also markets supercomputers which are used in particular to simulate our nuclear tests. Since 1996, France has relied on computers to guarantee the reliability of its arsenal, or to develop new systems. Until 2005, the Atomic Energy Commission used American machines, before using French equipment, in this case, that of Bull purchased in 2014 by Atos.
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But what do all these sensitive activities weigh on Atos’ accounts? As the company keeps the details of its revenues and profitability in each of its businesses secret, it is necessary to rely on estimates. In October, Philippe Brun, PS deputy and special rapporteur on state participations, proposed an amendment which aimed to nationalize these activities in order to better protect them. “ On this occasion, we delved into the accounts and estimated the valuation of these assets at 372 million euros for BDS and a little less than 18 million for Worldgrid. », he recalls. If its assessment is reliable, we understand a little better why Airbus ultimately gave up on acquiring BDS. Jean-Pierre Mustier, the president of Atos, had set the sale price in a range of 1.5 to 1.8 billion euros.
In terms of revenue, activities that could be strategic for France do not weigh very heavily in Atos’ business either. According to sources, Worldgrid’s revenues range between 100 and 150 million euros. Within BDS, the specialized activities of the Mission critical systems entity and sensitive cybersecurity contracts would together generate around 150 million euros. The marketing of supercomputers would generate an annual turnover of 400 to 500 million euros. Ultimately, the supposedly strategic or sovereign professions would therefore not represent more than 7% of the group’s revenues (10.7 billion euros in 2023).
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Supercomputers are not profitable
Generally correlated with large public contracts in specialized sectors, these high-tech activities would for the most part be more or less profitable, with the exception of supercomputers, which barely break even. The average bill for each of these supercomputers may vary between 80 and 100 million euros upon delivery, but Atos is unable to turn it into a cash machine. “R&D is very expensive, this activity would also require developing more value-added services to boost margins, for example by offering artificial intelligence solutions. But Atos does not have this culture», deplores another former employee.
Despite its difficulties, the company intends to consolidate its positions in “intensive computing”, a discipline which makes our former national flagship the European number one and the world number three in the sector, according to statistics from the Hyperion Research firm. Last week, Atos even delivered a new supercomputer to the military branch of the Atomic Energy Commission at its Bruyères-le-Châtel site in Essonne. Called EXA1 HE, this supercomputer capable of executing up to a million billion operations per second is the most powerful on our soil, and one of the 15 fastest in the world.
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2024 Olympics: will Atos’ difficulties have repercussions on the Paris Games?
Moreover, this business does not stop at the French borders. Two of its digital tools respectively equip the Barcelona Supercomputing Center in Spain and the Cineca university consortium in Bologna, Italy. These two silicon monsters are in the Top 10 most powerful supercomputers in the world. The next model, which Atos is currently manufacturing for the Jülich research center in Aachen, Germany, will even be the first to exceed the exaflop milestone, a sort of wall of sound for digital computing: when it will be operational, next year, its processors will perform up to a billion billion operations per second!
Like all its supercomputers, the machine is assembled in its factory in Angers (Maine-et-Loire) which has nearly 250 employees. “ The site is in full modernization and transformation, since we have started work there to rebuild a new factoryconfides an Atos spokesperson. It’s an 80 million euro project » The investment is supported by the Pays de la Loire and Angers Loire Métropole. These communities undertake to guarantee part of the loan of 27.5 million euros taken out with the CDC. “ When this new production unit is commissioned in spring 2025, we will double our production capacity and achieve a productivity gain of 30%. Ultimately, we even plan to hire around a hundred employees », Adds the spokesperson. Given the situation of his group, his hopes may seem a tad anachronistic. But after all, it is also not excluded that the leaders of Atos will end up, perhaps one day, keeping their promises.
