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By Andy McCue, 22 September 2003 15:17

NEWS Atos Origin has bought the core IT services of SchlumbergerSema in a E1.3bn cash and shares deal, as first revealed by silicon.com last week. Atos Origin will pay E400m cash and the rest in 19.3 million Atos shares, and will almost double its 28,000 headcount with 22,000 staff from SchlumbergerSema. Atos has also agreed in principle a $700m IT services agreement with Schlumberger subject to final agreement on pricing and service levels. SchlumbergerSema's existing restructuring plans will now be accelerated and Atos Origin said it plans to execute the merger quickly in order to achieve target cost savings of over E200m per year within two years. The merged group is expected to be fully operational by January 2004 and will trade as Atos Origin. Atos will gain access to key SchlumbergerSema public sector contracts in the UK, including the Metropolitan Police, a BPO deal with the Department for Work and Pensions, and the Government Gateway project. Bernard Bourigeaud, CEO of Atos Origin, said in a statement: "This transaction provides Atos Origin with critical mass in almost all of the major IT spending markets of Europe, together with strong extended support coverage on a global basis. We are acquiring excellent management at SchlumbergerSema and fresh opportunities to drive top line and cost synergies. Schlumberger's desire to offload its IT services arm just two years after buying it for $5.2bn has been widely known for over a year now, with the likes of CSC looking at and then reconsidering a bid for the Sema business. Andrew Gould, chairman and CEO of Schlumberger said the sale will allow the firm to concentrate on its core oilfield activities. Schlumberger will also retain Business Continuity Infodata – a Swedish database company – and all software products related to SchlumbergerSema telecommunications activity. Richard Holway, analyst at Ovum Holway, said in a note on his website that the integration problems are likely to be huge and compounded by the low morale of SchlumbergerSema staff. "The poor old SchlumbergerSema crew must feel like they are in a game of pass the parcel. We doubt if the music has finally stopped either. If I were a betting man I’d put a fiver on Atos Origin being bought by one of the global IT services players within a year…for somewhat less than the current price," he said.