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Atos announced its plan to acquire the Information Technology Outsourcing (ITO) arm of Xerox for US$1.05 billion. With this move, the France-based Atos will have a presence in 45 countries and triple the size of its business in the North American soil.

According to Future Market Insights (FMI), this transaction paves a path of positivity for both Xerox and ATOS for the future, as it will help the two companies benefit mutually from European and North American market trends.

The Information Technology Outsourcing (ITO) unit that Atos is buying from Xerox has about 9,800 employees. The deal is likely to be completed by first half of 2015, after which ATOS will provide IT service to Xerox.

FMI’s statistics show, revenue of Xerox’s IT Outsourcing unit stood at US$3577.5 million and its IT Development and Integration Services revenue was calculated at US$397.5 million in 2013.

Thierry Breton, the Chief Executive Officer of Atos, intends to expand the geographical reach of the company and add value to its area of expertise. The main area of focus will include cloud computing, a technology that allows the users to access the data remotely through the Web.

Atos’s revenue earned from its IT Outsourcing department was US$5565 million, while its revenue from IT Development and Integration Services was US$3060.8 million in 2013.

Atos’s diversification to other regions seems essential now. The acquisition will help this European company to expand its base across the globe. It will help the company to acquire clients in both, Europe and U.S.. According to Thierry Breton, the move will also accelerate Atos’s efforts to boost its offshore footprint in regions such as Mexico, Philippines, and India.

As compared to aforementioned individual revenues of the firms, together they are likely to earn around US$649.25 million from consulting, US$9142.5 from IT Outsourcing, and US$3458.25 million from IT Development and Integration Services. Before this acquisition Atos’s regional revenue market share of Europe was 85%, North American was 7%, Latin America was 2%, and Rest of the World was 6%.

Beyond the sale and purchase, Atos and Xerox have also joined hands to work collectively at maximizing opportunities from IT services for Atos and BPO opportunities for Xerox in North America and Europe. This collaboration aims at speeding up the innovative approaches towards growth, generating incremental beneficial businesses and offering better services to customers in Europe and US.

Post acquisition, it is expected that the combined regional revenue market share will be 27.4% for North America, 2.3% for Latin America, and 4.8% for Rest of the World, and the European revenue market share is expected to witness a slight plunge at 65.5%.

Despite this acquisition, Atos will continue its inorganic growth just as it did after acquiring Origin and Siemens IT unit. With every passing day, the European market is getting increasingly difficult to thrive in. In such conditions, Atos’s move is truly creditable as it will help the company build its portfolio, grab newer markets, and create a stronger foothold for itself. This smart effort does give both Atos and Xerox an advantage ground as most European service providers are struggling to meet ends in recovering economies. For now, the North American economy does hold a promise of a brighter tomorrow for Atos as compared to the European markets.

Atos in North America will earn revenue of about US$4 billion, a figure no European provider has achieved up until now. However, FMI predicts the company will face some challenges such as integrating the new line of business. From the looks of it, Atos will have to maintain its recent purchase as a separate line of business until Xerox, as a brand, loses focuses.

FMI forecasts that Atos will surpass its European counterpart Capgemini in terms of market share, grabbing a chunk of 1.85% of total global IT services market in the near future. This also means Atos will be among the top 5 IT service providers much sooner than later.

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Future Market Insights