Acquisitions help European-heritage vendors Atos and Capgemini continue expanding in North America and globally

Atos is preparing to accommodate the explosion of data across enterprises by effectively managing, storing, securing and analyzing data. Revenue and cost synergies from the Syntel acquisition will enable Atos to achieve its financial goals in 2019. Newly established relationships with technology partners, the release of new product offerings that support edge and quantum computing, and the planned acquisition of IDnomic in cybersecurity will improve Atos’ ability to deliver business outcomes to clients through next-generation technologies and  sustain the company’s growth through 2020. Atos Europe-based rival Capgemini is reaping the rewards of its strategic expansion into next-generation and industry-specific solution areas, as evidenced by sustained midsingle-digit organic revenue growth over the past several quarters and an increase in digital and cloud revenue as a percentage of total revenue, from 45% in 1H18 to 50% in 1H19. The planned acquisitions of Altran and KONEXUS Consulting Group will solidify Capgemini’s ability to deliver digital transformation to industrial and energy & utilities clients and expand its reach across clients’ C-Suite, increasing its access to budget stakeholders. Portfolio expansion and bookings growth with technology partners such as Amazon Web Services and Microsoft will enable Capgemini to maintain its digital and cloud momentum and modernize its applications development and maintenance services portfolio to sustain growth in Application & Technology, which accounted for 71.1% of revenue in 2Q19. — Elitsa Bakalova, Senior Analyst

Additional assessments publishing this week from our analyst teams

Utilizing partners and leveraging emerging technologies enabled Cisco Customer Experience to maintain profitability and generate growth in 1Q19. As the company continues to invest in its portfolio to offer a broader range of software-driven services, such as for security solutions, and leverage its partner network to support the development of emerging technologies and delivery, we expect revenue growth will improve in 2H19. — Kelly Lesiczka, Analyst

Fujitsu Services’ portfolio investments such as for cloud and hybrid IT are evolving, but an increased pace of restructuring and new branding initiative would further sustain growth. Fujitsu continues to update North America and Europe sales operations to drive productivity and adoption around new portfolio offerings, which will help the company offset challenges within its legacy business. — Kelly Lesiczka

AT&T is becoming a more profitable company despite market saturation, competitive challenges and shifting consumer trends limiting subscriber growth. AT&T’s Entertainment Group and Mobility EBITDA margins continue to improve as the company moves from promotional pricing and transitions customers to premium service plans to boost average revenue per user. Subscriber growth remains challenged, however, due to T-Mobile’s continued dominance in postpaid additions, Xfinity Mobile’s growing momentum and video customers moving to rival streaming platforms. — Steve Vachon, Analyst

T-Mobile’s strong financial and subscriber performance in 2Q19 highlights how the company’s long-term outlook remains favorable regardless of whether the proposed Sprint merger gains final approval. 600MHz network deployments are at the foundation of T-Mobile’s success as its expanded LTE coverage, which is now on par with that of Verizon and AT&T, contributed to reduced churn in 2Q19, enabling T-Mobile to increase postpaid and prepaid subscriber net additions year-to-year despite the maturing wireless market. —Steve Vachon

The federal IT earnings season concludes at TBR this week as Perspecta releases its 2Q19 fiscal results after the close of business on Wednesday, August 14. FY20 began for Perspecta in 2Q19, its second year as an independent federal IT contractor, and the company looks to build off a strong close to FY19, when it successfully defended its incumbency on several ongoing federal programs and accelerated bookings of net-new awards. TBR projects the company will realize year-to-year growth in 2Q19 of between 4% and 5% to reach revenue of between $1.08 billion and $1.09 billion, owing in part to $1.7 billion in new cybersecurity-related programs won during the quarter — much needed contract awards that will help offset the loss of the $2.9 billion NASA End-User Services and Technologies contract to Leidos in 1Q19. Federal budgets in IT and programs to support national defense priorities are expected to sustain growth into 2020. With this spending environment as a backdrop, Perspecta appears well positioned for improving growth and profitability in its FY20. — John Caucis, Senior Analyst

Apple faced another quarter of sluggish revenue as Western consumers hold out for the next generation of the iPhone. However, the company is growing its install base in China and emerging markets, which are paramount for its long-term services play, through discounting, reselling and financing iPhones and other Apple devices. — Daniel Callahan, Analyst

Lenovo has had a few stellar quarters in a row, as it consolidated premium PC market share, reaped higher ASPs as a result of the Intel silicon shortage and benefited from inorganic revenue compares from its Fujitsu PC business acquisition. As we move into 2Q19, inorganic growth will decrease (only one month will include inorganic revenue), the silicon shortage will begin to subside and PC consolidation opportunities will slow. TBR still expects Lenovo will see growth, but it will fall in the midsingle digits. Details on Lenovo’s mobile and data center business will be published this week in TBR’s 2Q19 initial response on the company. — Daniel Callahan

And this week join TBR for a webinar, “The Evolving Battleground for Winning Private Cloud Customers.”  

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