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Office Depot Buying CompuCom, Pivoting to IT Services

M&A

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from August.**

Many people in the channel were curious when Office Depot hired Verizon’s Janet Schijns to lead its services division.

Things make a lot more sense now that Office Depot has announced plans to acquire CompuCom for approximately $1 billion. The company says the purchase of the IT services provider represents a first step in branding the company as a “business services and technology products platform.”

Office Depot's Gerry Smith

Office Depot’s Gerry Smith

“Technology is the office supply of the future,” said Gerry Smith, chief executive officer of Office Depot. “Today marks a significant milestone as we move to provide a unique business services platform for our current and future customers. Acquiring CompuCom is the first step in this new strategic direction. 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. The company will create value for shareholders from a diversified revenue base with a clear opportunity to grow higher value services and business-to-business revenues.”

Smith, a former Lenovo CEO, joined Office Depot earlier this year. The company says he brings significant technology knowledge to the table.

Forrester's Jay McBain

Forrester’s Jay McBain

“It was kind of an odd thing for a retailer to get a supply chain guy to be CEO, until yesterday’s announcement. It makes a lot of sense now,” said Jay McBain, who serves as principal analyst of global channels for Forrester Research.

Schijns, whom McBain considered one of the most visible and influential channel chiefs, was one of many recent leadership appointments by Office Depot that will manage the effort of delivering IT services to small and medium-size businesses (SMBs).

“[Schijns] is a dynamo when it comes to channels and partnerships and running mobility and IT,” McBain told Channel Partners.

The companies say CompuCom’s “Tech-Zone” SMB offering will go inside of Office Depot retail locations. The company said Tuesday that it and CompuCom are looking at a $25 billion opportunity.

“Together with Office Depot we can create a distinctive offering for our enterprise and SMB customers and accelerate our growth,” said Dan Stone, chief executive officer 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.”

McBain writes that Office Depot isn’t the first large retailer to try to pivot into IT services. Staples and Best Buy made acquisitions in 2007 and 2011, respectively, but the companies they purchased lacked the size of CompuCom. There are 11,500 new employees coming to Office Depot as a result of the new acquisition. While Best Buy and Staples made “ancillary” purchase, Office Depot’s move represents something much larger, McBain said.

“This is a colossal acquisition, and it goes to Office Depot’s announcement that they’re basically becoming a technology company first, retailer second,” McBain said.


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