October 23, 2018 / 6:47 AM / a month ago

UPDATE 2-Atos pledges remedial action as shares drop on reduced growth outlook

* Company targets 2018 organic revenue growth of about 1 percent

* Growth target down from previous guidance of 2-3 percent

* Shares fall slump by more than 20 percent

* Management says it is acting to address issues (Adds detail, executive quotes, analyst)

By Alan Charlish

Oct 23 (Reuters) - French IT services company Atos is acting to address a poor commercial performance in North America and Germany, which led to a cut in 2018 revenue guidance that sent its shares down more than 20 percent on Tuesday, the company’s management said.

Atos, which offers cloud, infrastructure and automation services among others, has been hit in recent quarters by a slowdown in North America and competitive pressures.

Chief Executive Thierry Breton said that a disappointing performance by the company’s Infrastructure & Data Management division in North America and Germany, as well as an uncertain global economic climate, led to a cautious stance on the company’s guidance.

Senior Executive Vice President Eric Grall said on a conference call that Atos is “taking the necessary actions” to address shortcomings in sales and pre-sales in Germany and North America.

Breton said on the call that Atos had also lost out to competitors on some contracts.

Atos is targeting 2018 underlying revenue growth of about 1 percent, compared with previous guidance of 2-3 percent, and said its operating margin would be at the lower end of the 10.5-11 percent range it gave earlier in the year.

The company reported third-quarter revenue of 2.88 billion euros ($3.3 billion), representing underlying growth of 0.1 percent.

Revenue in Infrastructure & Data Management, the company’s largest division, fell 4.6 percent in the quarter to 1.53 billion euros, hit by termination of a contract with Marriott International in North America and contract issues with a large telecoms operator in Germany.

“There are problems that have been there for a while and are going on longer than we expected,” one analyst said.

Atos’s recently acquired Syntel is included in the 2018 guidance for the last two months of the year.

In its 2019 guidance, the company said it expects organic revenue growth at the low end of the 2-3 percent range given previously, with an operating margin of 11.5-12 percent of revenue, compared with 11.5 percent before.

The group’s payments unit Worldline on Monday reported a 6.3 percent rise in underlying third-quarter revenue to 411 million euros. ($1 = 0.8728 euros) (Reporting by Alan Charlish in Gdynia Editing by David Holmes and David Goodman)

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