Schlumberger Ltd. is morphing back into a pure oilfield-service play through its $1.5-billion agreement to sell most of its Sema information technology business, which it bought 2.5 years ago for more than $5 billion, to France's Atos Origin. Wall Street praised the deal, saying the company's stock multiples should improve going forward. Sema was viewed as an albatross around Schlumberger's neck since its purchase in February 2001. The day Schlumberger announced the purchase in 2001, its stock price plunged to $68.50 from the previous-day close of $77.76. Schlumberger hoped to capitalize on the once red-hot IT business, but Wall Street didn't appreciate the deviation from its core strategy. "Schlumberger traded at a premium to the other largest-capitalization oilfield-services companies before 2000, [when] it traded close to parity. Since 2001, the year in which Sema was acquired, Schlumberger has traded at a discount," says James K. Wicklund, an analyst with Banc of America Securities. "Since most investors thought buying and keeping Sema was negative, selling it should be positive. Ten to 15% multiple expansion could be seen over the next several quarters as the multiple punishment goes away." James D. Crandell, an analyst with Lehman Brothers (an advisor to Atos on the deal), says Schlumberger is now one of his top recommendations, with a target price of $56. "We believe that Schlumberger will now be valued as a pure oil-service company. and the company's multiple should expand to a meaningful premium to its oil service peers as the remaining asset sales in its non-oilfield operations occur." In previous deals, Schlumberger sold its NP Test semiconductor testing-equipment business for $220 million and its electricity metering business for $255 million. "With this [Sema] announcement and the sale/IPO of Schlumberger's remaining non-oilfield service assets in 2004, new CEO Andrew Gould will have accomplished the transformation of Schlumberger back to being a top-flight oil-services company...," Crandell says. Proceeds from the sale are expected to be used to pay debt. Grant Borbridge, an analyst with Prudential Financial, says Schlumberger's goal of lowering net debt to $4 billion by year-end is very attainable, and that cutting debt to $3 billion by the end of 2004 should be little problem. -Jodi Wetuski