Office Depot to transform into IT service giant after $1B deal
Office Depot last week agreed to acquire CompuCom Systems for $1 billion, thereby incorporating a sizable tech-assistance platform into its traditional office products retail operation.
Founded in 1987, CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers and on-site IT professionals. It has over 5.1 million unique end users and approximately 6,000 licensed technicians, the largest in the country.
CompuCom is expected to bring IT support services to all of Office Depot’s customers, particularly underserved small- and medium-sized businesses (SMBs), near its approximately 1,400 retail stores.
“Technology is the office supply of the future,” said Gerry Smith, CEO of Office Depot, in a statement. “The combination of CompuCom’s enterprise IT services with our millions of customers and approximately 1,400 distribution points gives us the credibility and scale to build a sustainable platform and stand apart from the competition.”
CompuCom’s Tech-Zones will be placed inside Office Depot’s locations to also help drive traffic into stores. Added services revenue and increased foot traffic is expected to improve per-store profitability.
Office Depot sees minimal customer overlap and expects to quickly begin cross-selling a full suite of products and services, with an incentive structure focused on driving services revenue. Office Depot also hopes to be valued by Wall Street as more of a services provider than a retailer.
Said Dan Stone, CEO of CompuCom, “The workplace has truly moved to a digital environment with the average worker having over four connected devices. Office Depot’s established brand and large national footprint will help to drive the expansion of our offerings to more markets and build on our client-focused success to welcome new customers seeking high-quality technology services and solutions.”
Office Depot announced the acquisition while lowering its earnings guidance for the year due to the impact the recent hurricanes, poor back-to-school sales and higher short-term supply chain costs. Shares of Office Depot fell 18 percent last Wednesday on the news.
DISCUSSION QUESTIONS: What do you think of Office Depot’s CompuCom acquisition and shift to a business services platform model? Do you see IT services and Office Depot’s retail business complementing one another?