Paris-based services group Atos Origin joins a select list of outsourcing and services players announcing respectable results this month. For 2007, the company has announced that it is back in the black to the tune of a €48 million net profit on revenue of €5.86 billion, compared with a €264 million loss in 2006. Organic sales growth was 4.3 percent, a rate that is set to continue in 2008.

The company has partly achieved this turnaround by an improved operating margin of 5.4%. The UK arm reported a 7.3% operating margin, up from 2.3% for the previous year.

The group paid some €98 million in restructuring costs in 2007, plus a €57 million charge following the termination of an NHS diagnostics contract.

Although transformation plans are now bedding in, analysts are advising the company to err on the side of caution, given the uncertain market conditions.

One challenge is the falling profitability of the Dutch business, says Ovum principal services analyst Phil Codling. Another is the group's consulting arm, which saw revenues fall 11.2 percent year on year to €360 million.

Atos CEO Philippe Germond believes that the company has “good visibility” for 2008, being less exposed to the risk of a US recession than some of its competitors. Germond says he is also confident about the ongoing transformation of the group, which has increased staff numbers in emerging countries to 3,000.

"We have now established the foundations that will allow us to improve competitiveness, and to increase substantially our profitability. More than ever, I am determined to develop the group's full potential and accelerate value creation," said Germond.

Nevertheless, behind the scenes investment funds Centaurus and Pardus have increased their combined stake in the group to over 20 percent, and may increase their holdings further.

A likely suitor in the investors' sights would be Capgemini. Germond admitted recently that the two funds had approached the rival French services group with a proposal to take over some of Atos' activities.

Of course, in the wake of its own positive results this month, Capgemini itself remains an attractive target, principally for a number of potential Indian suitors, who may see any future deal with Atos Origin as impetus for an aggressive takeover, or as a catalyst to acquire the operations investors were using to attract Capgemini.

It's certain that the next few months will see a small number of services companies that are weathering the post sub-prime storm making some strategic acquisitions in a depressed market. Conceivably, investors could be the brokers of a marriage between east and west.