In its first significant move away from traditional retail, Office Depot has purchased CompuCom, an IT services provider owned by private equity firm Thomas H. Lee Partners, for approximately $1 billion. The acquisition marks Office Depot’s pivot to becoming a broader business services and technology products platform, and the announcement came with a lowered outlook for Office Depot’s business for 2017.
“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-Zone SMB offering will be placed within Office Depot stores nationwide. The company employs a team of approximately 6,000 licensed technicians, making it among the largest employee field tech workforces in North America. CompuCom provides IT services to businesses with more than 5.1 million unique end users. Clients include six of the top 10 Fortune 500 companies as well as numerous SMBs and local franchises of national brands.
Service offerings can give retailers a clear differentiator from their competitors, as the Best Buy Geek Squad does quite effectively. The ability to provide installation and repair expertise is likely to give the retailer a leg up as the Internet of Things gains momentum. One mark of these services’ popularity is that Amazon announced in July that it would launch its own Geek Squad-style offering — a move that sent Best Buy stocks tumbling 7.5% at the time, according to CNBC.
“Together with Office Depot we can create a distinctive offering for our enterprise and SMB customers and accelerate our growth,” said Dan Stone, CompuCom CEO in a statement. “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.”
Office Depot has struggled since its failed merger with rival Staples in May 2016. The retailer’s woes apparently are ongoing: preliminary results of its Q3 financial results project a 7% to 8% overall sales decline, with a 5% to 6% drop in comparable store sales. The retailer has lowered its outlook for 2017, with adjusted operating income of $400 to $425 million, excluding the impact of the CompuCom transaction, compared to a previous estimate of $500 million.