Siemens and Atos Origin announced that they have combined their key IT services operations, with Atos picking up most of Siemens' ailing Internet protocol (IP) services group, in a deal that will create a European IT outsourcing powerhouse and increase pressure on market leader IBM.
Siemens, which has been shedding much of its computing and telecom assets, will obtain a board seat on the French firm as well as take a 15% stake in the combined company. Siemens has already moved to spin off its main telecom interests by shifting networking operations to Nokia Siemens Networks, clearing the way for it to concentrate on healthcare, energy, and some smaller industrial segments. The Atos Origin investment is valued at about $1.1 billion plus some future considerations.
"Today marks the start of a very solid and promising long-term industrial alliance between Atos Origin and Siemens that will create a most attractive powerhouse in IT and high-tech transactional services in Europe," said Thierry Breton, Atos Origin's CEO and board chairman, in a statement.
The pact calls for Atos Origin to receive $7.3 billion to operate Siemens' IT infrastructure and applications worldwide, the companies said. Each company will contribute about $700 million to jointly develop IT products and solutions.
Analysts at Technology Business Research (TBR) said the merger "is a move in line with overall global industry trends." TBR added that the beefed-up entity will enable the unit to better compete with IBM and HP services offerings.
"The two organizations benefit from outstanding complementarities regarding customer base, geographies, and services," noted Peter Loescher, Siemens president and CEO. "For the next seven years the new company will also be responsible for the service of the IT backbone of Siemens."