Atos Enters UC Fray With $371M Unify Bid

French IT services player Atos has agreed to pay €340 million (US$371 million) to acquire unified communications specialist Unify and bolster its portfolio of services for enterprise customers.

Atos Origin S.A. said the takeover would allow it to expand its range of digital offerings so that it can bridge the gap between IT and communications services.

Following news of the deal late Tuesday, shares in the company had risen by nearly 6% during trading in Paris Wednesday afternoon.

The move and market reaction points to the growing demand for unified communications offerings and comes as traditional technologies face a strong challenge from over-the-top alternatives such as Microsoft Corp. (Nasdaq: MSFT)'s Skype for Business service, which appears to have proven popular among small and midsized enterprises in particular.

Unify is currently a joint venture between Germany's Siemens AG (NYSE: SI; Frankfurt: SIE) and The Gores Group, a private equity player based in California, with Siemens holding a controlling 51% stake in the business.

The deal will see Atos take on Unify's pension deficit of €200 million ($219 million) as well as a net debt of €50 million ($55 million), giving Unify an enterprise value of €590 million ($645 million).

Atos believes the takeover will allow it to realize cost savings of about €130 million ($142 million) by 2017, but says Unify will need to complete a €267 million ($291 million) restructuring plan to make this possible.

It expects the deal to be "slightly" earnings accretive next year and to boost earnings per share by 15% in 2017.

Atos reported basic earnings per share of €2.67 ($2.91) in 2014 and had an operating margin of 7.8% on revenues of about €9.1 billion ($9.9 billion), while Unify made about €1.2 billion ($1.3 billion) in sales.

As Siemens owns 12% of Atos, the German technology giant will retain a small indirect stake in Unify as a result of the transaction, which the companies expect to conclude in the first quarter of 2016, subject to regulatory approvals.

Siemens' involvement in both companies may have influenced an Atos decision to acquire Unify rather than another unified communications player, but Atos was quick to note the various attractions of Unify.

They include Unify's Circuit-branded technology, a WebRTC-based software-as-a-service offering launched in late 2014 that allows customers to access voice, video and messaging services from a single interface.

Circuit also includes support for contextual search, giving users easy access to details of previous conversations and interactions with third parties, for example.

Siemens is already using the WebRTC technology and Atos sees potential to provide Circuit to some of its existing clients, according to a spokesperson for the company.

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Active in about 60 countries, Unify currently holds more than 3,000 technology patents and has around 5,600 employees, generating about two thirds of its revenues from services and the rest from the sale of software and platforms.

With a headcount of about 86,000 in 2014, Atos makes about half as much as Unify in terms of revenues per employee.

It has indicated that a part of Unify's services business generating annual revenues of around €400 million ($436 million) will be integrated with its Atos Managed Services division.

It might also look for a strategic partner to help it with the sale and marketing of Unify's software and platforms, especially when it comes to indirect sales and what it calls "non-core countries."

"The contemplated acquisition of Unify will increase our offerings for the digital transformation for our customers," said Thierry Breton, the chairman and CEO of Atos, in a statement. "They are looking for seamless services solutions for their entire digital portfolio that can service their needs end-to-end."

Other players have also recently been making waves in the market for unified communications services.

Late last month, BroadSoft Inc. pitched a new cloud-based version of its unified communications technology as a way for service provider customers to counter the OTT threat coming from the likes of Microsoft. (See BroadSoft Offers Telcos a UC Weapon to Fight Microsoft.)

Broadsoft claimed that its "contextual intelligence engine," which allows enterprise users to pull together information from various sources, is unrivalled in the market. "Pretty much no one else is working on something like that," said Mike Wilkinson, Broadsoft's vice president of market offers, in a conversation with Light Reading.

— Iain Morris, , News Editor, Light Reading