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CompuCom: Up for Sale

Office Depot parent ODP Corp. is exploring strategic options for CompuCom, including the potential sale of the IT solutions provider and MSP business, CFO Anthony Scaglione’s quarterly earnings call presentation indicated today.

Update March 4, 2021: CompuCom suffers malware attack; DarkSide ransomware reportedly involved.

Office Depot acquired CompuCom for $1 billion — a lofty 10 times earnings — in October 2017. The IT services business unit has generated mixed performance under ODP’s ownership — though CompuCom President Mick Slattery described key business progress to ChannelE2E in June 2020.

Despite that apparent progress,  Office Depot was exploring the potential sale of CompuCom by November 2020, ChannelE2E reported at the time.

CompuCom: Weak Q4 Sales, Operating Income

Fast forward to today’s earnings report, and CompuCom’s business has been shrinking while many rival IT solutions providers are either holding steady or accelerating growth in the cloud and managed services market.

For Q4 2020, CompuCom reported:

  • Sales of $207 million, down from $237 million in Q4 of 2019.
  • Operating income of $4 million, down from $9 million in Q4 of 2019.

For overall 2020, CompuCom generated:

  • Sales of $854 million, down from $994 million in 2019.
  • Operating income of $14 million, which is significantly better than a $2 million operating loss in 2019.

Exploring Potential CompuCom Sale

As part of the earnings presentation, Office Depot said it was “evaluation strategic options” for the CompuCom business, including a “potential sale of the business.”

Scaglione stated:

“As we recently reported, our Board of Directors announced that as a result of business review of CompuCom, management has initiated a process to explore a value maximizing sale of our CompuCom division to help maximize CompuCom full potential and drive forward its future value and success. We are still in the early stages of that process and the interest thus far has been high. We plan to further communicate our progress as appropriate.”

In an SEC filing, ODP said CompuCom has more than 6,500 employees who specialize in technical support. Key IT services, the filing says, include technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions.

Big Box Retailers and SMB IT Services: MSP Experiments Struggled

Big retail companies have stumbled multiple times in the MSP and IT services markets. In addition to the struggling Office Depot-CompuCom business combination, Staples once owned Thrive Networks and Best Buy once owned mindSHIFT. Both MSPs were ultimately sold off and have generally performed better outside of retail business ownership.

M/C Partners currently owns Thrive, and Ricoh now owns mindSHIFT. Thrive, in particular, has been thriving under private equity ownership.

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